Federal Register, Volume 75 Issue 133 (Tuesday, July 13, 2010)

[Federal Register Volume 75, Number 133 (Tuesday, July 13, 2010)]
[Proposed Rules]
[Pages 40040-40709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-15900]

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Part II

Book 2 of 2 Books

Pages 40039-40718

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 405, 409, et al.

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

Federal Register / Vol. 75, No. 133 / Tuesday, July 13, 2010 /
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

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

[CMS-1503-P]
RIN 0938-AP79

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

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule addresses proposed changes to the physician
fee schedule and other Medicare Part B payment policies to ensure that
our payment systems are updated to reflect changes in medical practice
and the relative value of services. It also addresses, implements or
discusses certain provisions of both the Affordable Care Act and the
Medicare Improvements for Patients and Providers Act of 2008. In
addition, this proposed rule discusses payments under the Ambulance Fee
Schedule, Clinical Laboratory Fee Schedule, payments to ESRD
facilities, and payments for Part B drugs. Finally, the proposed rule
includes a discussion regarding the Chiropractic Services Demonstration
program, the Competitive Bidding Program for Durable Medical Equipment
and Provider and Supplier Enrollment Issues associated with Air
Ambulances. (See the Table of Contents for a listing of the specific
issues addressed in this proposed rule.)

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on August 24, 2010.

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

FOR FURTHER INFORMATION CONTACT:
Rebecca Cole, (410) 786-4497, for issues related to physician payment
and for all other issues not identified below.
Cheryl Gilbreath, (410) 786-5919, for issues related to payment for
covered outpatient drugs and biologicals.
Roechel Kujawa, (410) 786-9111, for issues related to ambulance
services.
Glenn McGuirk, (410) 786-5723, for clinical laboratory issues.
Randall Ricktor, (410) 786-4632, for Federally Qualified Health Center
Issues.
Pauline Lapin, (410) 786-6883, for issues related to the chiropractic
services demonstration BN issue.
Troy Barsky, (410)786-8873, or Kristin Bohl, (410)786-8680, for issues
related to physician self-referral.
Troy Barsky, (410)786-8873, or Fred Grabau (410)786-0206, for issues
related to timely filing rules.
Henry Richter, (410)786-4562, or Lisa Hubbard, (410)786-5472, for
issues related to renal dialysis provisions and payments for end-stage
renal disease facilities.
Diane Stern, (410)786-1133, for issues related to the physician quality
reporting initiative and incentives for e-prescribing.
Sheila Roman, 410-786-6004, or Pamela Cheetham, 410-786-2259, for
issues related to the Physician Resource Use Feedback Program and
value-based purchasing.
Joel Kaiser, (410)786-4499, for issues related to the DME provisions.
Jim Bossenmeyer, (410)786-9317, for issues related to provider and
supplier enrollment issues.

SUPPLEMENTARY INFORMATION:
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 discussed exclusively in section V. of
this proposed rule.

I. Background
A. Development of the Relative Value System

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1. Work RVUs
2. Practice Expense Relative Value Units (PE RVUs)
3. Resource-Based Malpractice (MP) RVUs
4. Refinements to the RVUs
5. Adjustments to RVUs Are Budget Neutral
B. Components of the Fee Schedule Payment Amounts
C. Most Recent Changes to Fee Schedule
II. Provisions of the Proposed Rule for the Physician Fee Schedule
A. Resource-Based Practice Expense (PE) Relative Value Units
(RVUs)
1. Overview
2. Practice Expense Methodology
a. Direct Practice Expense
b. Indirect Practice Expense per Hour Data
c. Allocation of PE to Services
(i) Direct Costs
(ii) Indirect Costs
d. Facility and Nonfacility Costs
e. Services with Technical Components (TCs) and Professional
Components (PCs)
f. Alternative Data Sources and Public Comments on Final Rule
for 2010
g. PE RVU Methodology
(i) Setup File
(ii) Calculate the Direct Cost PE RVUs
(iii) Create the Indirect Cost PE RVUs
(iv) Calculate the Final PE RVUs
(v) Setup File Information
(vi) Equipment Cost per Minute
3. Proposed PE Revisions for CY 2011
a. Equipment Utilization Rate
b. HCPCS Code-Specific PE Proposals
(1) Biohazard Bags
(2) PE Inputs for Professional Component (PC) Only and Technical
Component (TC) Only Codes Summing to Global Only Codes
(3) Equipment Time Inputs for Certain Diagnostic Tests
(4) Cobalt-57 Flood Source
(5) Venom Immunotherapy
(6) Equipment Redundancy
(7) Equipment Duplication
(8) Establishing Overall Direct PE Supply Price Inputs Based on
Unit Prices and Quantities
c. AMA RUC Recommendations in CY 2010 for Changes to Direct PE
Inputs
(1) Electrogastrography and Esophageal Function Test
(2) 64-Slice CT Scanner and Software
(3) Cystometrogram
(4) Breath Hydrogen Test
(5) Radiographic Fluoroscopic Room
d. Referral of Existing CPT Codes for AMA RUC Review
e. Updating Equipment and Supply Price Inputs for Existing Codes
B. Malpractice Relative Value Units (RVUs)
1. Background
2. Malpractice RVUs for New and Revised Services Effective
Before the Next 5-Year Review
3. Revised Malpractice RVUs for Selected Disc Arthroplasty
Services
C. Potentially Misvalued Codes Under the Physician Fee Schedule
1. Valuing Services Under the PFS
2. Identifying, Reviewing, and Validating the RVUs of
Potentially Misvalued Services Under the PFS
a. Background
b. Progress in Identifying and Reviewing Potentially Misvalued
Codes
c. Validating RVUs of Potentially Misvalued Codes
3. CY 2011 Identification and Review of Potentially Misvalued
Services
a. Codes on the Multi-Specialty Points of Comparison List
b. Codes With Low Work RVUs Commonly Billed in Multiple Units
Per Single Encounter
c. Codes With High Volume and Low Work RVUs
d. Codes With Site-of-Service-Anomalies
e. Codes With ``23-hour'' Stays
4. Expanding the Multiple Procedure Payment Reduction (MPPR)
Policy to Additional Nonsurgical Services
a. Background
b. Proposed CY 2011 Expansion of the Imaging Technical Component
MPPR Policy to Additional Combinations of Imaging Services
c. Proposed CY 2011 Expansion of the MPPR Policy to Therapy
Services
5. High Cost Supplies
a. Background
b. Future Updates to the Prices of High-Cost Supplies
D. Geographic Practice Cost Indices (GPCIs)
1. Background
2. GPCI Update
a. Physician Work GPCIs
b. Practice Expense GPCIs
(1) The Affordable Care Act Requirements for PE GPCIs
(2) Summary of CY 2011 Proposed PE GPCIs
c. Malpractice GPCIs
d. General GPCI Update Process
3. Payment Localities
E. Physician Fee Schedule Update for CY 2011
1. Rebasing the Medicare Economic Index (MEI)
a. Background
b. Use of More Current Data
c. Rebasing and Revising Expense Categories in the MEI
(1) Developing the Weights for Use in the MEI
(2) Physician's Own Time
(3) Physician's Practice Expenses
(A) Non-Physician Employee Compensation
(B) Office Expenses
(C) Professional Liability Insurance (PLI) Expense
(D) Medical Equipment Expenses
(E) Medical Supplies Expenses
(F) All Other Professional Expenses
d. Selection of Price Proxies for Use in the MEI
(1) Expense Categories in the MEI
(A) Physician's Own Time (Physician Compensation)
(B) Nonphysician Employee Compensation
(C) Utilities
(D) Chemicals
(E) Paper
(F) Rubber and Plastics
(G) Telephone
(H) Postage
(I) All Other Labor-Intensive Services
(J) Fixed Capital
(K) Moveable Capital
(L) Professional Liability Insurance
(M) Medical Equipment
(N) Other Professional Expenses
(2) Productivity Adjustment to the MEI
e. Results of Rebasing
f. Adjustments to the RVU Shares to Match the Proposed Rebased
MEI Weights
III. Code-Specific Issues for the PFS
A. Therapy Services
1. Outpatient Therapy Caps for CY 2011
2. Alternatives to Therapy Caps
a. Background
b. Current Activities
c. Potential Short-Term Approaches to Therapy Caps
B. Diabetes Self-Management Training (DSMT) Services (HCPCS
Codes G0108 and G0109)
1. Background
2. Proposed Payment for DSMT Services
C. End-State Renal Disease Related Services for Home Dialysis
(CPT Codes 90963, 90964, 90965, and 90966)
1. End-Stage Renal Disease Home Dialysis Monthly Capitation
Payment Services (CPT Codes 90963, 90964, 90965, and 90966)
2. Daily and Monthly ESRD-Related Services (CPT Codes 90951
Through 90970)
D. Portable X-Ray Set-Up (HCPCS Code Q0092)
E. Pulmonary Rehabilitation Services (HCPCS Code G0424)
F. Application of Tissue-Cultured Skin Substitutes to Lower
Extremities (HCPCS Codes GXXX1 and GXXX2)
G. Canalith Repositioning (CPT Code 95992)
H. Intranasal/Oral Immunization Codes (CPT Codes 90467, 90468,
90473, and 90474)
I. Refinement Panel Process
J. Remote Cardiac Monitoring Services (CPT Codes 93012, 93229,
93268, and 93271)
IV. Medicare Telehealth Services for the Physician Fee Schedule
A. Billing and Payment for Telehealth Services
1. History
2. Current Telehealth Billing and Payment Policies
B. Requests for Adding Services to the List of Medicare
Telehealth Services
C. Submitted Requests for Addition to the List of Telehealth
Services for CY 2011
(1) Individual KDE Services
(2) Individual DSMT Services
(3) Group KDE, MNT, DSMT, and HBAI Services
(4) Initial, Subsequent, and Discharge Day Management Hospital
Care Services
(5) Initial, Subsequent, Discharge Day Management, and Other
Nursing Facility Care Services
(6) Neuropsychological Testing Services
(7) Speech-Language Pathology Services
(8) Home Wound Care Services
D. Summary of CY 2011 Telehealth Proposals
V. Provisions of the Patient Protection and Affordable Care Act of
2010
A. Section 3002: Improvements to the Physician Quality Reporting
System

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B. Section 3003: Improvements to the Physician Feedback Program
and Section 3007: Value-Based Payment Modifier Under the Physician
Fee Schedule
1. Background
2. Effect of the Patient Protection and Affordable Care Act on
the Program
3. Implementation of Sections 3003 and 3007 of the Affordable
Care Act
4. Comments Sought on Specific Policy Topics Related to Both
PPACA Sections 3003 and 3007
a. Risk Adjustment
b. Attribution
c. Benchmarking and Peer Groups
d. Cost and Quality Measures and Composite Measurement
C. Section 3102: Extension of the Work Geographic Index Floor
and Revisions to the Practice Expense Geographic Adjustment Under
the Medicare Physician Fee Schedule, and Protections for Frontier
States as Amended by Section 10324 of the Affordable Care Act
D. Section 3103: Extension of Exceptions Process for Medicare
Therapy Caps
E. Section 3104: Extension of Payment for Technical Component of
Certain Physician Pathology Services
F. Section 3105: Extension of Ambulance Add-On
G. Section 3107: Extension of Physician Fee Schedule Mental
Health Add-On
H. Section 3108: Permitting Physician Assistants to Order Post-
Hospital Extended Care Services
I. Section 3111: Payment for Bone Density Tests
J. Section 3114: Improved Access for Certified Nurse Midwife
Services
K. Section 3122: Extension of Medicare Reasonable Costs Payments
for Certain Clinical Diagnostic Laboratory Tests Furnished to
Hospital Patients in Certain Rural Areas
L. Section 3134: Misvalued Codes Under the Physician Fee
Schedule
M. Section 3135: Modification of Equipment Utilization Factor
for Advanced Imaging Services
1. Adjustment in Practice Expense to Reflect Higher Presumed
Utilization
2. Adjustment in Technical Component ``Discount'' on Single-
Session Imaging to Consecutive Body Parts
N. Section 3136: Revision for Payment for Power-Driven
Wheelchairs
a. Payment Rules for Power Wheelchairs
b. Elimination of Lump Sum Payment for Standard Power
Wheelchairs
c. Revision of Payment Amounts for Power Wheelchairs
O. Section 3139: Payment for Biosimilar Biological Products
P. Section 3401: Revision of Certain Market Basket Updates and
Incorporation of Productivity Improvements Into Market Basket
Updates That Do Not Already Incorporate Such Improvements
1. ESRD Market Basket Discussion
2. Productivity Adjustment Regarding Ambulance and Clinical
Laboratory Fee Schedules
a. Ambulatory Surgery Centers (ASCs)
b. Ambulance Fee Schedule (AFS)
c. Clinical Lab Fee Schedule
Q. Section 4103: Medicare Coverage of Annual Wellness Visit
Providing a Personalized Prevention Plan
1. Background
a. Medicare Coverage of Preventive Physical Examinations and
Routine Checkups
b. Requirements for Coverage of an Annual Wellness Visit
2. Proposed Revisions
a. Proposed Revisions to Sec. 411.15, Particular Services
Excluded From Coverage
b. Proposed Revisions to Part 410, Subpart B--Medical and Other
Health Services
(1) Definitions
(2) Requirements of the First Visit for Personalized Prevention
Plan Services
(3) Requirements of Subsequent Visits for Personalized
Prevention Plan Services
3. Payment for the Annual Wellness Visit Providing Personalized
Prevention Plan Services (PPPS)
R. Section 4104: Removal of Barriers to Preventive Services in
Medicare
1. Definition of ``Preventive Services''
2. Deductible and Coinsurance for Preventive Services
3. Extension of Waiver of Deductible to Services Furnished in
Connection With or in Relation to a Colorectal Cancer Screening Test
that Becomes Diagnostic or Therapeutic
S. Section 5501: Expanding Access to Primary Care Services and
General Surgery Services
1. Section 5501(a): Incentive Payment Program for Primary Care
Services
a. Background
b. Proposed Primary Care Incentive Payment Program (PCIP)
2. Section 5501(b): Incentive Payment Program for Major Surgical
Procedures Furnished in Health Professional Shortage Areas
a. Background
b. Proposed HPSA Surgical Incentive Payment Program (HSIP)
3. Sections 5501(a) and (b) of the Affordable Care Act and
Payment for Critical Access Hospital Professional Services Under the
Optional Method
T. Section 6003: Disclosure Requirements for In-Office Ancillary
Services Exception to the Prohibition on Physician Self-Referral for
Certain Imaging Services
1. Background
2. Proposed Disclosure Requirement
U. Section 6404: Maximum Period for Submission of Medicare
Claims Reduced to Not More Than 12 Months
1. Background
2. Provisions of Affordable Care Act
V. Section 6410 and MIPPA: Adjustments to the Medicare Durable
Medical Equipment, Prosthetics, Orthotics, and Supplies Competitive
Acquisition Program
1. Background
2. Subdividing Large MSAs Under Round 2
3. Exclusions of Certain Areas After Round 2 and Prior to 2015
4. Expansion of Round 2
W. Section 10501(i)(3)--Proposed Collection of HCPCS Data for
Development and Implementation of a Prospective Payment System for
the Medicare Federally Qualified Health Center Program
VI. Other Provisions of the Proposed Regulation
A. Part B Drug Payment: Average Sales Price (ASP) Issues
1. ``Carry Over'' ASP
2. Partial Quarter ASP Data
3. Determining the Payment Amount for Drugs and Biologicals
Which Include Intentional Overfill
4. WAMP/AMP
5. Price Substitutions
a. AMP threshold
b. AMP Price Substitution
B. Ambulance Fee Schedule: Proposed Policy for Reporting Units
When Billing for Ambulance Fractional Mileage
1. Policy for Reporting Units When Billing for Ambulance
Fractional Mileage or Other Services
a. History of Medicare Ambulance Services
(1) Statutory Coverage of Ambulance Services
(2) Medicare Regulations for Ambulance Services
b. Mileage Reporting
(1) Background and Current Process for Reporting Ambulance
Mileage
(2) Potential for Inaccuracies in Reporting Units and Associated
Risks
(3) Billing of Fractional Units for Mileage
C. Clinical Laboratory Fee Schedule: Signature on Requisition
D. Discussion of Chiropractic Services Demonstration
E. Provisions Related to Payment for Renal Dialysis Services
Furnished by End-Stage Renal Disease (ESRD) Facilities
1. CY 2005 Provisions
2. CY 2006 Provisions
3. CY 2007 Provisions
4. CY 2008 Provisions
5. CY 2009 Updates
6. CY 2010 Updates
7. Proposals for CY 2011
a. MIPPA Provisions
b. Affordable Care Act Provision
8. Proposed Update to the Drug Add-On Adjustment to the
Composite Rate
a. Estimating Growth in Expenditures for Drugs and Biologicals
for CY 2010
b. Estimating Growth in Expenditures for Drugs and Biologicals
in CY 2011
c. Estimating Per Patient Growth
d. Applying the Proposed Growth Update to the Drug Add-On
Adjustment
e. Proposed Update to the Drug Add-On Adjustment
f. Proposed Update to the Geographic Adjustments to the
Composite Rate
g. Proposed Updates to Core-Based Statistical Area (CBSA)
Definitions
h. Proposed Updated Wage Index Values
i. Reduction to the ESRD Wage Index Floor
j. Proposed Wage Index Values for Areas With No Hospital Data
k. Budget Neutrality Adjustment
l. ESRD Wage Index Tables
F. Issues Related to the Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA)
1. Section 131: Physician Payment, Efficiency, and Quality
Improvements--

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Physician Quality Reporting Initiative (PQRI)
a. Program Background and Statutory Authority
b. Incentive Payments for the 2011 PQRI
c. Proposed 2011 Reporting Periods for Individual Eligible
Professionals
d. Proposed 2011 PQRI Reporting Mechanisms for Individual
Eligible Professionals
(1) Proposed Requirements for Individual Eligible Professionals
Who Choose the Claims-Based Reporting Mechanism
(2) Proposed Requirements for Individual Eligible Professionals
Who Choose the Registry-Based Reporting Mechanism
(3) Proposed Requirements for Individual Eligible Professionals
Who Choose the EHR-Based Reporting Mechanism
(4) Proposed Qualification Requirements for Registries
(5) Proposed Qualification Requirements for EHR Vendors and
Their Products
e. Proposed Criteria for Satisfactory Reporting of Individual
Quality Measures for Individual Eligible Professionals
f. Proposed Criteria for Satisfactory Reporting Measures Groups
for Individual Eligible Professionals
g. Proposed Reporting Option for Satisfactory Reporting on
Quality Measures by Group Practices
(1) Group Practice Reporting Option--GPRO I
(2) Process for Physician Group Practices to Participate as
Group Practices and Criteria for Satisfactory Reporting
h. Statutory Requirements and Other Considerations for 2011 PQRI
Measures
(1) Statutory Requirements for 2011 PQRI Measures
(2) Other Considerations for Measures Proposed for Inclusion in
the 2011 PQRI
i. Proposed 2011 PQRI Quality Measures for Individual Eligible
Professionals
(1) Proposed 2011 Individual Quality Measures Selected From the
2010 PQRI Quality Measures Set Available for Claims Based Reporting
and Registry-Based Reporting
(2) Proposed 2011 Individual Quality Measures Selected From the
2010 PQRI Quality Measures Set Available for Registry Based
Reporting Only
(3) New Individual Quality Measures Selected for Proposed for
2011
(4) Proposed 2011 Measures Available for EHR-Based Reporting
(5) Measures Proposed for Inclusion in 2011 Measures Groups
j. Proposed 2011 PQRI Quality Measures for Physician Groups
Selected to Participate in the Group Practice Reporting Option
k. Public Reporting of PQRI Data
l. Affordable Care Act Extension of Incentive for PQRI Program
m. Affordable Care Act Timely Feedback Reports
n. Affordable Care Act Informal Appeals Process
o. Affordable Care Act Maintenance of Certification Program
p. Affordable Care Act Physician Compare Web Site
q. Affordable Care Act Integration of PQRI EHR Measures and
HITECH Measures in Years After 2011
2. Section 132: Incentives for Electronic Prescribing (eRx)--The
Electronic Prescribing Incentive Program
a. Program Background and Statutory Authority
b. The 2011 Reporting Period for the eRx Incentive Program
c. Proposed Criteria for Determination of Successful Electronic
Prescriber for Eligible Professionals
(1) Reporting the Electronic Prescribing Measure
(2) The Reporting Denominator for the Electronic Prescribing
Measure
(3) Qualified Electronic Prescribing System--Required
Functionalities and Part D eRx Standards
(4) The Reporting Numerator for the Electronic Prescribing
Measure
(5) Criteria for Successful Reporting of the Electronic
Prescribing Measure
d. Determination of the 2011 Incentive Payment Amount for
Individual Eligible Professionals Who Are Successful Electronic
Prescribers
e. Proposed Reporting Option for Satisfactory Reporting of the
Electronic Prescribing Measure by Group Practices
(1) Definition of ``Group Practice''
(2) Process for Group Practices to Participate as Group
Practices and Criteria for Successful Reporting of the Electronic
Prescribing Measure by Group Practices
f. Public Reporting of Names of Successful Electronic
Prescribers
G. DMEPOS Competitive Bidding Program Issues
1. Implementation of a National Mail Order Competitive Bidding
Program for Diabetic Testing Supplies
a. Revision of the Definition of ``Mail Order''
(1) Legislative and Regulatory History of the Medicare Durable
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)
Competitive Bidding Program
(2) National Mail Order Competitive Bidding Program
(3) The MIPPA and the Medicare DMEPOS Competitive Bidding
Program
(4) Competition for Mail Order Diabetic Supplies Under Round 1
of the Medicare DMEPOS Competitive Bidding Program
b. Overview of Proposed Rule
c. Future Competitions for Diabetic Testing Supplies
d. Definition of Mail Order Item
e. Special Rule in Case of National Mail Order Competition for
Diabetic Testing Strips
f. Anti-Switching Rule in Case of National Mail Order
Competition for Diabetic Test Strips
2. Off-the-Shelf (OTS) Orthotics Exemption
3. Changes to Payment for Oxygen and Oxygen Equipment
a. Background
b. Furnishing Oxygen Equipment After the 36-Month Rental Period
(Cap)
c. Furnishing Oxygen Equipment During the 36-Month Rental Period
(Cap)
4. Grandfathering Rules Resulting in Extra Payments to Contract
Suppliers Under the DMEPOS Competitive Bidding Program
5. Appeals Process
a. Background
b. Proposed Appeals Process
(1) Purpose and Definitions: (Sec. 414.402)
(2) Applicability
(3) Contract Termination
(4) Notice of Termination
(5) Corrective Action Plan
(6) Right to Request a Hearing by the CBIC Hearing Officer
(7) Scheduling of the Hearing
(8) Burden of Proof
(9) Role of the Hearing Officer
(10) CMS's Final Determination
(11) Effective Date of the Contract Termination
(12) Effect of Contract Termination
H. Provider and Supplier Enrollment Issue: Air Ambulance
Provision
I. Technical Corrections
1. Physical Therapy, Occupational Therapy, and Speech-Language
Pathology
2. Scope of Benefits
VII. Collection of Information Requirements
VIII. Response to Comments
IX. Regulatory Impact Analysis
A. RVU Impacts
1. Resource Based Work, PE, and Malpractice RVUs
2. CY 2011 PFS Impact Discussion
a. Changes in RVUs
b. Combined Impact
B. Geographic Practice Cost Indices (GPCIs)
C. Rebasing and Revising of the MEI
D. The Affordable Care Act Provisions
1. Section 3103: Extension of Exceptions Process for Medicare
Therapy Caps
2. Section 3104: Extension of Payment for Technical Component of
Certain Physician Pathology Services
3. Sections 3105 and 10311: Extension of Ambulance Add-Ons
4. Section 3107: Extension of Physician Fee Schedule Mental
Health Add-On
5. Section 3111: Payment for Bone Density Tests
6. Section 3122: Extension of Medicare Reasonable Costs Payments
for Certain Clinical Diagnostic Laboratory Tests Furnished to
Hospital Patients in Certain Rural Areas
7. Section 3135: Modification of Equipment Utilization Factor
for Advanced Imaging Services
8. Section 3136: Revisions in Payments for Power Wheelchairs
9. Section 3401: Revisions of Certain Market Basket Updates and
Incorporation of Productivity Adjustments
10. Section 4103: Medicare Coverage of Annual Wellness Visit
Providing a Personalized Prevention Plan
11. Section 4104: Removal of Barriers to Preventive Services in
Medicare
12. Section 5501: Expanding Access to Primary Care Services and
General Surgery Services
13. Section 6003: Disclosure Requirements for In-Office
Ancillary Services Exception to the Prohibition of Physician Self-
referral for Certain Imaging Services

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14. Section 6404: Maximum Period for Submission of Medicare
Claims Reduced to Not More Than 12 Months
E. Other Provisions of the Proposed Regulation
1. Part B Drug Payment: ASP Issues
2. Ambulance Fee Schedule: Proposed Policy for Reporting Units
When Billing for Ambulance Fractional Mileage
3. Chiropractic Services Demonstration
4. Renal Dialysis Services Furnished by ESRD Facilities
5. Section 131(b) of the MIPPA: Physician Payment, Efficiency,
and Quality Improvements--Physician Quality Reporting Initiative
(PQRI)
6. Section 132 of the MIPPA: Incentives for Electronic
Prescribing (eRx)--The eRx Incentive Program
7 RHC/FQHC Issues
8. Durable Medical Equipment-Related Issues
a. Off-the-Shelf (OTS) Orthotics Exemption
b. Changes to Payment for Oxygen Equipment
F. Alternatives Considered
G. Impact on Beneficiaries
H. Accounting Statement
Regulation Text
Addendum A--Explanation and Use of Addendum B
Addendum B--Proposed Relative Value Units and Related Information
Used in Determining Medicare Payments for CY 2011
Addendum C--[Reserved]
Addendum D--Proposed CY 2011 Geographic Adjustment Factors (GAFs)
Addendum E--Proposed CY 2011 Geographic Practice Cost Indices
(GPCIs) by State and Medicare Locality
Addendum F--Proposed CY 2011 Diagnostic Imaging Services Subject to
the Multiple Procedure Payment Reduction
Addendum G--CPT/HCPCS Imaging Codes Defined by Section 5102(b) of
the DRA
Addendum H--Proposed CY 2011 ``Always Therapy'' Services* Subject to
the Multiple Procedure Payment Reduction
Addendum I--[Reserved]
Addendum J--[Reserved]
Addendum K--Proposed CY 2011 ESRD Wage Index for Urban Areas Based
on CBSA Labor Market Areas
Addendum L--Proposed CY 2011 ESRD Wage Index for Rural Areas Based
on CBSA Labor Market Areas

Acronyms

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

AA Anesthesiologist assistant
AACVPR American Association of Cardiovascular and Pulmonary
Rehabilitation
AANA American Association of Nurse Anesthetists
ABMS American Board of Medical Specialties
ABN Advanced Beneficiary Notice
ACA ``Affordable Care Act''
ACC American College of Cardiology
ACGME Accreditation Council on Graduate Medical Education
ACLS Advanced cardiac life support
ACR American College of Radiology
AED Automated external defibrillator
AFROC Association of Freestanding Radiation Oncology Centers
AHA American Heart Association
AHFS-DI American Hospital Formulary Service--Drug Information
AHRQ [HHS'] Agency for Healthcare Research and Quality
AMA American Medical Association
AMA-DE American Medical Association Drug Evaluations
AMP Average manufacturer price
AO Accreditation organization
AOA American Osteopathic Association
APA American Psychological Association
APTA American Physical Therapy Association
ARRA American Recovery and Reinvestment Act (Pub. L. 111-5)
ASC Ambulatory surgical center
ASP Average sales price
ASRT American Society of Radiologic Technologists
ASTRO American Society for Therapeutic Radiology and Oncology
ATA American Telemedicine Association
AWP Average wholesale price
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 Basic Life support
BN Budget neutrality
BPM Benefit Policy Manual
CABG Coronary artery bypass graft
CAD Coronary artery disease
CAH Critical access hospital
CAHEA Committee on Allied Health Education and Accreditation
CAP Competitive acquisition program
CBIC Competitive Bidding Implementation Contractor
CBP Competitive Bidding Program
CBSA Core-Based Statistical Area
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
CMHC Community mental health center
CMP Civil money penalty
CMS Centers for Medicare & Medicaid Services
CNS Clinical nurse specialist
CoP Condition of participation
COPD Chronic obstructive pulmonary disease
CORF Comprehensive Outpatient Rehabilitation Facility
COS Cost of service
CPEP Clinical Practice Expert Panel
CPI Consumer Price Index
CPI-U Consumer price index for urban customers
CPR Cardiopulmonary resuscitation
CPT [Physicians'] Current Procedural Terminology (4th Edition, 2002,
copyrighted by the American Medical Association)
CR Cardiac rehabilitation
CRNA Certified registered nurse anesthetist
CRP Canalith repositioning
CRT Certified respiratory therapist
CSW Clinical social worker
CY Calendar year
DEA Drug Enforcement Agency
DHS Designated health services
DME Durable medical equipment
DMEPOS Durable medical equipment, prosthetics, orthotics, and
supplies
DOQ Doctor's Office Quality
DOS Date of service
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
EMTALA Emergency Medical Treatment and Active Labor Act
EOG Electro-oculogram
EPO Erythopoeitin
ESRD End-stage renal disease
FAX Facsimile
FDA Food and Drug Administration (HHS)
FFS Fee-for-service
FR Federal Register
GAF Geographic adjustment factor
GAO General Accounting Office
GEM Generating Medicare [Physician Quality Performance Measurement
Results]
GFR Glomerular filtration rate
GPO Group purchasing organization
GPCI Geographic practice cost index
HAC Hospital-acquired conditions
HBAI Health and behavior assessment and intervention
HCPAC Health Care Professional Advisory Committee
HCPCS Healthcare Common Procedure Coding System
HCRIS Healthcare Cost Report Information System
HDRT High dose radiation therapy
HH PPS Home Health Prospective Payment System
HHA Home health agency
HHRG Home health resource group
HHS [Department of] Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191)
HIT Health information technology
HITECH Health Information Technology for Economic and Clinical
Health Act (Title IV of Division B of the Recovery Act, together
with Title XIII of Division A of the Recovery Act)
HITSP Healthcare Information Technology Standards Panel
HIV Human immunodeficiency virus
HOPD Hospital outpatient department
HPSA Health Professional Shortage Area
HRSA Health Resources Services Administration (HHS)
IACS Individuals Access to CMS Systems
ICD International Classification of Diseases

[[Page 40045]]

ICF Intermediate care facilities
ICR Intensive cardiac rehabilitation
ICR Information collection requirement
IDTF Independent diagnostic testing facility
IFC Interim final rule with comment period
IMRT Intensity-Modulated Radiation Therapy
IPPE Initial preventive physical examination
IPPS Inpatient prospective payment system
IRS Internal Revenue Service
ISO Insurance services office
IVD Ischemic Vascular Disease
IVIG Intravenous immune globulin
IWPUT Intra-service work per unit of time
JRCERT Joint Review Committee on Education in Radiologic Technology
KDE Kidney disease education
LCD Local coverage determination
MA Medicare Advantage
MA-PD Medicare Advantage--Prescription Drug Plans
MAV Measure Applicability Validation
MCMP Medicare Care Management Performance
MDRD Modification of Diet in Renal Disease
MedCAC Medicare Evidence Development and Coverage Advisory Committee
(formerly the Medicare Coverage Advisory Committee (MCAC))
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MIEA-TRHCA Medicare Improvements and Extension Act of 2006 (that is,
Division B of the Tax Relief and Health Care Act of 2006 (TRHCA))
(Pub. L. 109-432)
MIPPA Medicare Improvements for Patients and Providers Act of 2008
(Pub. L. 110-275)
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173)
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L.
110-173)
MNT Medical nutrition therapy
MOC Maintenance of certification
MP Malpractice
MPPR Multiple procedure payment reduction
MQSA Mammography Quality Standards Act of 1992 (Pub. L. 102-539)
MRA Magnetic resonance angiography
MRI Magnetic resonance imaging
MSA Metropolitan statistical area
NBRC National Board for Respiratory Care
NCD National Coverage Determination
NCQDIS National Coalition of Quality Diagnostic Imaging Services
NDC National drug code
NF Nursing facility
NISTA National Institute of Standards and Technology Act
NP Nurse practitioner
NPI National Provider Identifier
NPP Nonphysician practitioner
NQF National Quality Forum
NRC Nuclear Regulatory Commission
OACT [CMS'] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act
ODF Open door forum
OGPE Oxygen generating portable equipment
OIG Office of Inspector General
OMB Office of Management and Budget
ONC [HHS'] Office of the National Coordinator for Health IT
OPPS Outpatient prospective payment system
OSCAR Online Survey and Certification and Reporting
PA Physician assistant
PAT Performance assessment tool
PC Professional component
PCI Percutaneous coronary intervention
PDP Prescription drug plan
PE Practice expense
PE/HR Practice expense per hour
PEAC Practice Expense Advisory Committee
PERC Practice Expense Review Committee
PFS Physician Fee Schedule
PGP [Medicare] Physician Group Practice
PHI Protected health information
PHP Partial hospitalization program
PIM [Medicare] Program Integrity Manual
PLI Professional liability insurance
POA Present on admission
POC Plan of care
PPI Producer price index
PPIS Physician Practice Information Survey
PPS Prospective payment system
PPTA Plasma Protein Therapeutics Association
PQRI Physician Quality Reporting Initiative
PR Pulmonary rehabilitation
PRA Paperwork Reduction Act
PSA Physician scarcity areas
PT Physical therapy
PTCA Percutaneous transluminal coronary angioplasty
PVBP Physician and Other Health Professional Value-Based Purchasing
Workgroup
RA Radiology assistant
RBMA Radiology Business Management Association
RFA Regulatory Flexibility Act
RHC Rural health clinic
RIA Regulatory impact analysis
RN Registered nurse
RNAC Reasonable net acquisition cost
RPA Radiology practitioner assistant
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
SRS Stereotactic radiosurgery
STARS Services Tracking and Reporting System
TC Technical Component
TIN Tax identification number
TRHCA Tax Relief and Health Care Act of 2006 (Pub. L. 109-432)
TTO Transtracheal oxygen
UPMC University of Pittsburgh Medical Center
USDE United States Department of Education
USP-DI United States Pharmacopoeia-Drug Information
VBP Value-based purchasing
WAMP Widely available market price

I. Background

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

A. Development of the Relative Value System

1. Work RVUs
The concepts and methodology underlying the PFS were enacted as
part of the Omnibus Budget Reconciliation Act (OBRA) of 1989 (Pub. L.
101-239), and OBRA 1990, (Pub. L. 101-508). The final rule, published
on November 25, 1991 (56 FR 59502), set forth the fee schedule for
payment for physicians' services beginning January 1, 1992. Initially,
only the physician work RVUs were resource-based, and the PE and
malpractice RVUs were based on average allowable charges.
The physician work RVUs established for the implementation of the
fee schedule in January 1992 were developed with extensive input from
the physician community. A research team at the Harvard School of
Public Health developed the original physician work RVUs for most codes
in a cooperative agreement with the Department of Health and Human
Services (DHHS). In constructing the code-specific vignettes for the
original physician work RVUs, Harvard worked with panels of experts,
both inside and outside the Federal government, and obtained input from
numerous physician specialty groups.
Section 1848(b)(2)(B) of the Act specifies that the RVUs for
anesthesia services are based on RVUs from a uniform relative value
guide, with appropriate adjustment of the

[[Page 40046]]

conversion factor (CF), in a manner to assure that fee schedule amounts
for anesthesia services are consistent with those for other services of
comparable value. We established a separate CF for anesthesia services,
and we continue to utilize time units as a factor in determining
payment for these services. As a result, there is a separate payment
methodology for anesthesia services.
We establish physician work RVUs for new and revised codes based on
our review of recommendations received from the American Medical
Association's (AMA) Specialty Society Relative Value Update Committee
(RUC).
2. Practice Expense Relative Value Units (PE RVUs)
Section 121 of the Social Security Act Amendments of 1994 (Pub. L.
103-432), enacted on October 31, 1994, amended section
1848(c)(2)(C)(ii) of the Act and required us to develop resource-based
PE RVUs for each 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 physicians'
service in a final rule, published November 2, 1998 (63 FR 58814),
effective for services furnished in 1999. Based on the requirement to
transition to a resource-based system for PE over a 4-year period,
resource-based PE RVUs did not become fully effective until 2002.
This resource-based system was based on two significant sources of
actual PE data: the Clinical Practice Expert Panel (CPEP) data; and the
AMA's Socioeconomic Monitoring System (SMS) data. The CPEP data were
collected from panels of physicians, practice administrators, and
nonphysicians (for example, registered nurses (RNs)) nominated by
physician specialty societies and other groups. The CPEP panels
identified the direct inputs required for each 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 the calendar year (CY) 2007 PFS final rule with comment period
(71 FR 69624), we revised the methodology for calculating direct PE
RVUs from the top-down to the bottom-up methodology beginning in CY
2007 and provided for a 4-year transition for the new PE RVUs under
this new methodology. This transition ended in CY 2010 and direct PE
RVUs are calculated in CY 2011 using this methodology, unless otherwise
noted.
In the CY 2010 PFS final rule with comment period, we updated the
PE/hour (HR) data that are used in the calculation of PE RVUs for most
specialties (74 FR 61749). For this update, we used the Physician
Practice Information Survey (PPIS) conducted by the AMA. The PPIS is a
multispecialty, nationally representative, PE survey of both physicians
and nonphysician practitioners (NPPs) using a survey instrument and
methods highly consistent with those of the SMS and the supplemental
surveys used prior to CY 2010. We note that in CY 2010, for oncology,
clinical laboratories, and independent diagnostic testing facilities
(IDTFs), we continued to use the supplemental survey data to determine
PE/HR values (74 FR 61752).
3. Resource-Based Malpractice (MP) RVUs
Section 4505(f) of the BBA amended section 1848(c) of the Act
requiring us to implement resource-based malpractice (MP) RVUs for
services furnished on or after 2000. The resource-based MP RVUs were
implemented in the PFS final rule published November 2, 1999 (64 FR
59380). The MP RVUs were based on malpractice insurance premium data
collected from commercial and physician-owned insurers from all the
States, the District of Columbia, and Puerto Rico.
4. Refinements to the RVUs
Section 1848(c)(2)(B)(i) of the Act requires that we review all
RVUs no less often than every 5 years. The first Five-Year Review of
the physician work RVUs was published on November 22, 1996 (61 FR
59489) and was effective in 1997. The second Five-Year Review was
published in the CY 2002 PFS final rule with comment period (66 FR
55246) and was effective in 2002. The third Five-Year Review of
physician work RVUs was published in the CY 2007 PFS final rule with
comment period (71 FR 69624) and was effective on January 1, 2007.
(Note: Additional codes relating to the third Five-Year Review of
physician work RVUs were addressed in the CY 2008 PFS final rule with
comment period (72 FR 66360).) The fourth Five-Year Review of physician
work RVUs was initiated in the CY 2010 PFS final rule with comment
period where we solicited candidate codes from the public for this
review (74 FR 61941). Changes due to the fourth Five-Year Review of
physician work RVUs will be effective January 1, 2012.
In 1999, the AMA'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 bottom-up methodology for determining resource-based PE RVUs and
transitioned the new methodology over a 4-year period. A comprehensive
review of PE was undertaken prior to the 4-year transition period for
the new PE methodology from the top-down to the bottom-up methodology,
and this transition was completed in CY 2010. In

[[Page 40047]]

CY 2010, we also incorporated the new PPIS data to update the
specialty-specific PE/HR data used to develop PE RVUs. Therefore, the
next Five-Year Review of PE RVUs will be addressed in CY 2014.
In the CY 2005 PFS final rule with comment period (69 FR 66236), we
implemented the first Five-Year Review of the MP RVUs (69 FR 66263).
Minor modifications to the methodology were addressed in the CY 2006
PFS final rule with comment period (70 FR 70153). The second Five-Year
Review and update of resource-based malpractice RVUs was published in
the CY 2010 PFS final rule with comment period (74 FR 61758) and was
effective in CY 2010.
5. Adjustments to RVUs Are Budget Neutral
Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments
in RVUs for a year may not cause total PFS payments to differ by more
than $20 million from what they would have been if the adjustments were
not made. In accordance with section 1848(c)(2)(B)(ii)(II) of the Act,
if revisions to the RVUs cause expenditures to change by more than $20
million, we make adjustments to ensure that expenditures do not
increase or decrease by more than $20 million.
As explained in the CY 2009 PFS final rule with comment period
(73FR 69730), as required by section 133(b) of the Medicare
Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L.
110-275), the separate budget neutrality (BN) adjustor resulting from
the third Five-Year Review of physician work RVUs is being applied to
the CF beginning in CY 2009 rather than to the work RVUs.
For CY 2010, we adopted a number of new payment policies for which
we estimated the potential for a redistributive effect under the PFS,
including the use of the new PPIS data to develop the specialty-
specific PE/HR used for the PE RVUs (74 FR 61749 through 61752) and the
elimination of the reporting of all CPT consultation codes in order to
allow for correct and consistent coding and appropriate payment for
evaluation and management services under the PFS (74 FR 61767 through
61775). We recognize that clinical experience with these new PFS
policies has been growing over the first 6 months of CY 2010 and, as we
seek to improve future PFS payment accuracy for services, we are
interested in public comments on the perspectives of physicians and
nonphysician practitioners caring for Medicare beneficiaries under the
current PFS coding and payment methodologies for physicians' services.

B. Components of the Fee Schedule Payment Amounts

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

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

C. Most Recent Changes to the Fee Schedule

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

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

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

1. Overview
Practice expense (PE) is the portion of the resources used in
furnishing the service that reflects the general categories of
physician and practitioner expenses, such as office rent and personnel
wages but excluding malpractice expenses, as specified in section
1848(c)(1)(B) of the Act. Section 121 of the Social Security Amendments
of 1994 (Pub. L. 103-432), enacted on October 31, 1994, required CMS to
develop a methodology for a resource-based system for determining PE
RVUs for each physician's service. We develop PE RVUs by looking at the
direct and indirect physician practice resources involved in furnishing
each service. Direct expense categories include clinical labor, medical
supplies and medical equipment. Indirect expenses include
administrative labor, office expense, and all other expenses. The
sections that follow provide more

[[Page 40048]]

detailed information about the methodology for translating the
resources involved in furnishing each service into service-specific PE
RVUs. In addition, we note that section 1848(c)(2)(B)(ii)(II) of the
Act provides that adjustments in RVUs for a year may not cause total
PFS payments to differ by more than $20 million from what they would
have been if the adjustments were not made. Therefore, if revisions to
the RVUs cause expenditures to change by more than $20 million, we make
adjustments to ensure that expenditures do not increase or decrease by
more than $20 million. We refer readers to the CY 2010 PFS final rule
with comment period (74 FR 61743 through 61748) for a more detailed
history of the PE methodology.
2. Practice Expense Methodology
a. Direct Practice Expense
We use a bottom-up approach to determine the direct PE by adding
the costs of the resources (that is, the clinical staff, equipment, and
supplies) typically required to provide each service. The costs of the
resources are calculated using the refined direct PE inputs assigned to
each CPT code in our PE database, which are based on our review of
recommendations received from the American Medical Association's
(AMA's) Relative Value Update Committee (RUC). For a detailed
explanation of the bottom-up direct PE methodology, including examples,
we refer readers to the Five-Year Review of Work Relative Value Units
Under the PFS and Proposed Changes to the Practice Expense Methodology
proposed notice (71 FR 37242) and the CY 2007 PFS final rule with
comment period (71 FR 69629).
b. Indirect Practice Expense per Hour Data
We use survey data on indirect practice expenses incurred per hour
worked (PE/HR) in developing the indirect portion of the PE RVUs. Prior
to CY 2010, we primarily used the practice expense per hour (PE/HR) by
specialty that was obtained from the AMA's Socioeconomic Monitoring
Surveys (SMS). These surveys were conducted from 1995 through 1999. For
several specialties that collected additional PE/HR data through
supplemental surveys, we incorporated these data in developing the PE/
HR values used annually.
While the SMS was not specifically designed for the purpose of
establishing PE RVUs, we found these data to be the best available at
the time. The SMS was a multispecialty survey effort conducted using a
consistent survey instrument and method across specialties. The survey
sample was randomly drawn from the AMA Physician Masterfile to ensure
national representativeness. The AMA discontinued the SMS survey in
1999. As required by the Balanced Budget Refinement Act of 1999 (BBRA)
(Pub. L. 106-113), we also established a process by which specialty
groups could submit supplemental PE data. In the May 3, 2000 Federal
Register, we issued the Medicare Program; Criteria for Submitting
Supplemental Practice Expense Survey Data interim final rule (65 FR
25664) in which we established criteria for acceptance of supplemental
data. The criteria were modified in the CY 2001 and CY 2003 PFS final
rules with comment period (65 FR 65380 and 67 FR 79971, respectively).
In addition to the SMS, we previously used supplemental survey data for
the following specialties: Cardiology; dermatology; gastroenterology;
radiology; cardiothoracic surgery; vascular surgery; physical and
occupational therapy; independent laboratories; allergy/immunology;
independent diagnostic testing facilities (IDTFs); radiation oncology;
medical oncology; and urology.
Because the SMS data and the supplemental survey data were from
different time periods, we historically inflated them by the Medicare
Economic Index (MEI) to put them on as comparable a time basis as we
could when calculating the PE RVUs. This MEI proxy was necessary in the
past due to the lack of contemporaneous, consistently collected, and
comprehensive multispecialty survey data.
The AMA administered a new survey in CY 2007 and CY 2008, the
Physician Practice Expense Information Survey (PPIS), which was
expanded (relative to the SMS) to include nonphysician practitioners
(NPPs) paid under the PFS. The PPIS was designed to update the
specialty-specific PE/HR data used to develop PE RVUs. The AMA and the
CMS contractor, The Lewin Group (Lewin), analyzed the PPIS data and
calculated the PE/HR for physician and nonphysician specialties,
respectively. The AMA's summary worksheets and Lewin's final report are
available on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=4&sortOrder=descending&itemID=CMS1223902&intNumPerPage=10.
(See downloads labeled AMA PPIS Worksheets 1-3 and Physician Practice
Expense non MDDO Final Report)
The PPIS is a multispecialty, nationally representative, PE survey
of both physicians and NPPs using a consistent survey instrument and
methods highly consistent with those used for the SMS and the
supplemental surveys. The PPIS gathered information from 3,656
respondents across 51 physician specialty and healthcare professional
groups.
We believe the PPIS is the most comprehensive source of PE survey
information available to date. Therefore, we used the PPIS data to
update the PE/HR data for almost all of the Medicare-recognized
specialties that participated in the survey for the CY 2010 PFS. When
we changed over to the PPIS data beginning in CY 2010, we did not
change the PE RVU methodology itself or the manner in which the PE/HR
data are used in that methodology. We only updated the PE/HR data based
on the new survey. Furthermore, as we explained in the CY 2010 PFS
final rule with comment period (74 FR 61751), because of the magnitude
of payment reductions for some specialties resulting from the use of
the PPIS data, we finalized a 4-year transition (75/25 for CY 2010, 50/
50 for CY 2011, 25/75 for CY 2012, and 0/100 for CY 2013) from the
previous PE RVUs to the PE RVUs developed using the new PPIS data.
Section 303 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173) added section
1848(c)(2)(H)(i) of the Act, which requires us to use the medical
oncology supplemental survey data submitted in 2003 for oncology drug
administration services. Therefore, the PE/HR for medical oncology,
hematology, and hematology/oncology reflects the continued use of these
supplemental survey data.
We do not use the PPIS data for reproductive endocrinology, sleep
medicine, and spine surgery since these specialties are not separately
recognized by Medicare, and we do not know how to blend these data with
Medicare-recognized specialty data.
Supplemental survey data on independent labs, from the College of
American Pathologists, were implemented for payments in CY 2005.
Supplemental survey data from the National Coalition of Quality
Diagnostic Imaging Services (NCQDIS), representing IDTFs, were blended
with supplementary survey data from the American College of Radiology
(ACR) and implemented for payments in CY 2007. Neither IDTFs nor
independent labs participated in the PPIS. Therefore, we continue to
use the PE/HR that was

[[Page 40049]]

developed from their supplemental survey data.
Finally, consistent with our past practice, the previous indirect
PE/HR values from the supplemental surveys for medical oncology,
independent laboratories, and IDTFs were updated to CY 2006 using the
MEI to put them on a comparable basis with the PPIS data. In the CY
2010 PFS final rule with comment period (74 FR 61753), we miscalculated
the indirect PE/HR for IDTFs as part of this update process. Therefore,
for CY 2011, we are proposing to use a revised indirect PE/HR of
$479.81 for IDTFs, consistent with our final policy to update the
indirect PE/HR values from prior supplemental survey data that we are
continuing to use in order to put these data on a comparable basis with
the PPIS data. This revision changes the IDTF indirect percentage from
51 percent to 50 percent.
Previously, CMS has established PE/HR values for various
specialties without SMS or supplemental survey data by crosswalking
them to other similar specialties to estimate a proxy PE/HR. For
specialties that were part of the PPIS for which we previously used a
crosswalked PE/HR, we instead use the PPIS-based PE/HR. We continue
previous crosswalks for specialties that did not participate in the
PPIS. However, beginning in CY 2010 we changed the PE/HR crosswalk for
portable x-ray suppliers from radiology to IDTF, a more appropriate
crosswalk because these specialties are more similar to each other with
respect to physician time.
In the CY 2010 PFS final rule with comment period (74 FR 61752), we
agreed that, under the current PE methodology, the PPIS data for
registered dieticians should not be used in the calculation of PE RVUs
since these dieticians are paid 85 percent of what a physician would be
paid for providing the service. To include their survey data in the PE
calculation would influence the ratesetting by incorporating what the
services would be paid if performed by registered dieticians and not
strictly what the payment rates would be if provided by physicians. We
further stated that we would utilize the ``All Physicians'' PE/HR, as
derived from the PPIS, in the calculation of resource-based PE RVUs in
lieu of the PE/HR associated with registered dieticians. In the
resource-based PE methodology for CY 2010, while we removed the
specialty of registered dieticians from the ratesetting step we did not
assign the ``All Physicians'' PE/HR to services furnished by registered
dieticians. Instead, we allowed the PE/HR for those services to be
generated by a weighted average of all the physician specialties that
also furnished the services. This method was consistent with our policy
to not use the registered dietician PPIS PE/HR in calculating the PE
RVUs for services furnished by registered dieticians but we did not
actually crosswalk the specialty of registered dietician to the ``All
Physicians'' PE/HR data as we had intended according to the final
policy. Nevertheless, we are affirming for CY 2011 that the proposed
resource-based PE RVUs have been calculated in accordance with the
final policy adopted in the CY 2010 PFS final rule with comment period
(74 FR 61752) for registered dietician services that crosswalks the
specialty to the ``All Physicians'' PE/HR data.
As provided in the CY 2010 PFS final rule with comment period (74
FR 61751), CY 2011 is the second year of the 4-year transition to the
PE RVUs calculated using the PPIS data. Therefore, in general, the CY
2011 PE RVUs are a 50/50 blend of the previous PE RVUs based on the SMS
and supplemental survey data and the new PE RVUS developed using the
PPIS data as described above. Note that the reductions in the PE RVUs
for expensive diagnostic imaging equipment attributable to the change
to an equipment utilization rate assumption of 75 percent (see 74 FR
61753 through 61755 and section II.A.3. of this proposed rule) are not
subject to the transition.
c. Allocation of PE to Services
To establish PE RVUs for specific services, it is necessary to
establish the direct and indirect PE associated with each service.
(i) Direct costs. The relative relationship between the direct cost
portions of the PE RVUs for any two services is determined by the
relative relationship between the sum of the direct cost resources
(that is, the clinical staff, equipment, and supplies) typically
required to provide the services. The costs of these resources are
calculated from the refined direct PE inputs in our PE database. For
example, if one service has a direct cost sum of $400 from our PE
database and another service has a direct cost sum of $200, the direct
portion of the PE RVUs of the first service would be twice as much as
the direct portion of the PE RVUs for the second service.
(ii) Indirect costs. Section II.A.2.b. of this proposed rule
describes the current data sources for specialty-specific indirect
costs used in our PE calculations. We allocate the indirect costs to
the code level on the basis of the direct costs specifically associated
with a code and the greater of either the clinical labor costs or the
physician work RVUs. We also incorporate the survey data described
earlier in the PE/HR discussion. The general approach to developing the
indirect portion of the PE RVUs is described below.
For a given service, we use the direct portion of the PE
RVUs calculated as described above and the average percentage that
direct costs represent of total costs (based on survey data) across the
specialties that perform the service to determine an initial indirect
allocator. For example, if the direct portion of the PE RVUs for a
given service were 2.00 and direct costs, on average, represented 25
percent of total costs for the specialties that performed the service,
the initial indirect allocator would be 6.00 since 2.00 is 25 percent
of 8.00.
We then add the greater of the work RVUs or clinical labor
portion of the direct portion of the PE RVUs to this initial indirect
allocator. In our example, if this service had work RVUs of 4.00 and
the clinical labor portion of the direct PE RVUs was 1.50, we would add
6.00 plus 4.00 (since the 4.00 work RVUs are greater than the 1.50
clinical labor portion) to get an indirect allocator of 10.00. In the
absence of any further use of the survey data, the relative
relationship between the indirect cost portions of the PE RVUs for any
two services would be determined by the relative relationship between
these indirect cost allocators. For example, if one service had an
indirect cost allocator of 10.00 and another service had an indirect
cost allocator of 5.00, the indirect portion of the PE RVUs of the
first service would be twice as great as the indirect portion of the PE
RVUs for the second service.
We next incorporate the specialty-specific indirect PE/HR
data into the calculation. As a relatively extreme example for the sake
of simplicity, assume in our example above that, based on the survey
data, the average indirect cost of the specialties performing the first
service with an allocator of 10.00 was half of the average indirect
cost of the specialties performing the second service with an indirect
allocator of 5.00. In this case, the indirect portion of the PE RVUs of
the first service would be equal to that of the second service.
d. Facility and Nonfacility Costs
For procedures that can be furnished in a physician's office, as
well as in a hospital or facility setting, we establish two PE RVUs:
facility and nonfacility.

[[Page 40050]]

The methodology for calculating PE RVUs is the same for both the
facility and nonfacility RVUs, but is applied independently to yield
two separate PE RVUs. Because Medicare makes a separate payment to the
facility for its costs of furnishing a service, the facility PE RVUs
are generally lower than the nonfacility PE RVUs.
e. Services With Technical Components (TCs) and Professional Components
(PCs)
Diagnostic services are generally comprised of two components: a
professional component (PC) and a technical component (TC), each of
which may be performed independently or by different providers, or they
may be performed together as a ``global'' service. When services have
PC and TC components that can be billed separately, the payment for the
global component equals the sum of the payment for the TC and PC. This
is a result of using a weighted average of the ratio of indirect to
direct costs across all the specialties that furnish the global
components, TCs, and PCs; that is, we apply the same weighted average
indirect percentage factor to allocate indirect expenses to the global
components, PCs, and TCs for a service. (The direct PE RVUs for the TC
and PC sum to the global under the bottom-up methodology.)
f. Alternative Data Sources and Public Comments on Final Rule for 2010.
In the CY 2010 PFS final rule with comment period (74 FR 61749
through 61750), we discussed the Medicare Payment Advisory Commission's
(MedPAC's) comment that in the future, ``CMS should consider
alternatives to collecting specialty-specific cost data or options to
decrease the reliance on such data.'' We agreed with MedPAC that it
would be appropriate to consider the future of the PE RVUs moving
forward. We sought comments from other stakeholders on the issues
raised by MedPAC for the future. In particular, we requested public
comments regarding MedPAC's suggestion that we consider alternatives
for collecting specialty-specific cost data or options to decrease the
reliance on such data. We noted MedPAC's comment that, ``CMS should
consider if Medicare or provider groups should sponsor future data
collection efforts, if participation should be voluntary (such as
surveys) or mandatory (such as cost reports), and whether a nationally
representative sample of practitioners would be sufficient for either a
survey or cost reports.'' MedPAC also stated that one option for
decreasing the reliance on specialty-specific cost data would be the
elimination of the use of indirect PE/HR data in the last step of
establishing the indirect cost portion of the PE RVUs as described
previously.
Almost all of the commenters on the CY 2010 PFS final rule with
comment period that addressed this issue expressed a general
willingness to work with CMS on methodological improvements or future
data collection efforts. Although no commenters detailed a
comprehensive overall alternative methodology, several commenters did
provide suggestions regarding future data collection efforts and
specific aspects of the current methodology.
The commenters that addressed the issue of surveys supported the
use of surveys if they yielded accurate PE information. The few
commenters that addressed the issue of cost reports were opposed to
physician cost reports. The commenters varied with respect to their
opinions regarding whether data collection efforts should be led by
organized medicine, individual specialty societies, or CMS. Several
commenters that addressed the issue of voluntary versus mandatory data
collection efforts supported voluntary data collection efforts and
opposed mandatory data collection efforts.
Some commenters recommended no changes to the methodology or PE
data in the near future. Other commenters indicated that the
methodology and data changes needed to be made for CY 2011. Although
most commenters did not directly address the use of the indirect PE/HR
data, those that did predominately opposed the elimination of the use
of these data.
Many commenters addressed specifics of the PE methodology (as
further described in section II.A.2.c. of this proposed rule). Some
were opposed to the scaling factor applied in the development of the
direct PE portion of the PE RVUs so that in the aggregate the direct
portion of the PE RVUs do not exceed the proportion indicated by the
survey data (See Step 4 in g.(ii) below). Several of these commenters
advocated the elimination of this direct scaling factor, while others
indicated that the issue should be examined more closely.
A few commenters recommended that physician work not be used as an
allocator in the development of the indirect portion of the PE RVUs as
described earlier in this section. A few indicated that physician time,
but not physician work, should be used in the allocation. Other
commenters suggested that indirect costs should be allocated solely on
the basis of direct costs.
We note that many of the issues raised by commenters on the CY 2010
PFS final rule with comment period are similar to issues raised in the
development of the original resource-based PE methodology and in
subsequent revisions to the methodology, including the adoption of the
bottom-up methodology. While we are not proposing a broad
methodological change or broad data collection effort in this CY 2011
PFS proposed rule, we invite comments on our summary of the issues
raised by the commenters on the CY 2010 PFS final rule with comment
period, as presented above. The complete public comments on that final
rule are available for public review at http://www.regulations.gov by
entering ``CMS-1413-FC'' in the search box on the main page.
g. PE RVU Methodology
For a more detailed description of the PE RVU methodology, we refer
readers to the CY 2010 PFS final rule with comment period (74 FR 61745
through 61746).
(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 PE/HR data from the surveys.
(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. Apply
a scaling adjustment to the direct inputs.
Step 2: Calculate the current aggregate pool of direct PE costs.
This is the product of the current aggregate PE (aggregate direct and
indirect) RVUs, the CF, and the average direct PE percentage from the
survey data.
Step 3: Calculate the aggregate pool of direct costs. This is the
sum of the product of the direct costs for each service from Step 1 and
the utilization data for that service.
Step 4: Using the results of Step 2 and Step 3 calculate a direct
PE scaling adjustment so that the aggregate direct cost pool does not
exceed the current aggregate direct cost pool and apply it to the
direct costs from Step 1 for each service.
Step 5: Convert the results of Step 4 to an RVU scale for each
service. To do this, divide the results of Step 4 by the CF. Note that
the actual value of the CF used in this calculation does not influence
the final direct cost PE RVUs, as long as the same CF is used in Step 2
and Step 5. Different CFs will result

[[Page 40051]]

in different direct PE scaling factors, but this has no effect on the
final direct cost PE RVUs since changes in the CFs and changes in the
associated direct scaling factors offset one another.
(iii) Create the Indirect Cost PE RVUs
Create indirect allocators.
Step 6: Based on the survey data, calculate direct and indirect PE
percentages for each physician specialty.
Step 7: Calculate direct and indirect PE percentages at the service
level by taking a weighted average of the results of Step 6 for the
specialties that furnish the service. Note that for services with TCs
and PCs, the direct and indirect percentages for a given service do not
vary by the PC, TC, and global components.
Step 8: Calculate the service level allocators for the indirect PEs
based on the percentages calculated in Step 7. The indirect PEs are
allocated based on the three components: the direct PE RVUs, the
clinical PE RVUs, and the work RVUs.
For most services the indirect allocator is:

indirect percentage * (direct PE RVUs/direct percentage) + work RVUs.

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

[[Page 40052]]

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

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 RVUs.
For example, the professional service, CPT code 93010
(Electrocardiogram, routine ECG with at least 12 leads; interpretation
and report only), is associated with the global service, CPT code 93000
(Electrocardiogram, routine ECG with at least 12 leads; with
interpretation and report).
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.
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); generally 150,000 minutes.
usage = equipment utilization assumption; 0.75 for certain expensive
diagnostic imaging equipment (see 74 FR 61753 through 61755 and
section II.A.3. of this proposed rule) and 0.5 for others.
price = price of the particular piece of equipment.
interest rate = 0.11.
life of equipment = useful life of the particular piece of
equipment.
maintenance = factor for maintenance; 0.05.

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

[[Page 40053]]

Table 2--Calculation of PE RVUs Under Methodology for Selected Codes
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
99213 Office 33533 CABG, 93000 ECG, 93005 ECG, 93010 ECG,
Step Source Formula visit, est arterial, single 71020 Chest x- 71020-TC Chest x- 71020-26 Chest x- complete tracing report
nonfacility facility ray nonfacility ray nonfacility ray nonfacility nonfacility nonfacility nonfacility
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Labor cost (Lab)........... Step 1.......... AMA............... ................. 13.32 77.52 5.74 5.74 0.00 6.12 6.12 0.00
(2) Suppy cost (Sup)........... Step 1.......... AMA............... ................. 2.98 7.34 3.39 3.39 0.00 1.19 1.19 0.00
(3) Equipment cost (Eqp)....... Step 1.......... AMA............... ................. 0.19 0.65 8.17 8.17 0.00 0.12 0.12 0.00
(4) Direct cost (Dir).......... Step 1.......... .................. =(1)+(2)+(3)..... 16.50 85.51 17.31 17.31 0.00 7.43 7.43 0.00
(5) Direct adjustment (Dir Adj) Steps 2-4....... See footnote*..... ................. 0.484 0.484 0.484 0.484 0.484 0.484 0.484 0.484
(6) Adjusted labor............. Steps 2-4....... =Lab * Dir Adj.... =(1) * (5)....... 6.45 37.52 2.78 2.78 0.00 2.96 2.96 0.00
(7) Adjusted supplies.......... Steps 2-4....... =Sup * Dir Adj.... =(2) * (5)....... 1.44 3.55 1.64 1.64 0.00 0.58 0.58 0.00
(8) Adjusted equipment......... Steps 2-4....... =Eqp * Dir Adj.... =(3) * (5)....... 0.09 0.32 3.96 3.96 0.00 0.06 0.06 0.00
(9) Adjusted direct............ Steps 2-4....... .................. =(6)+(7)+(8)..... 7.99 41.39 8.38 8.38 0.00 3.60 3.60 0.00
(10) Conversion Factor (CF).... Step 5.......... PFS............... ................. 36.0791 36.0791 36.0791 36.0791 36.0791 36.0791 36.0791 36.0791
(11) Adj. labor cost converted. Step 5.......... =(Lab * Dir Adj)/ =(6)/(10)........ 0.18 1.04 0.08 0.08 0.00 0.08 0.08 0.00
CF.
(12) Adj. supply cost converted Step 5.......... =(Sup * Dir Adj)/ =(7)/(10)........ 0.04 0.10 0.05 0.05 0.00 0.02 0.02 0.00
CF.
(13) Adj. equip cost converted. Step 5.......... =(Eqp * Dir Adj)/ =(8)/(10)........ 0.00 0.01 0.11 0.11 0.00 0.00 0.00 0.00
CF.
(14) Adj. direct cost converted Step 5.......... .................. =(11)+(12)+(13).. 0.22 1.15 0.23 0.23 0.00 0.10 0.10 0.00
(15) Wrk RVU................... Setup File...... PFS............... ................. 0.97 33.75 0.22 0.00 0.22 0.17 0.00 0.17
(16) Dir--pct.................. Steps 6, 7...... Surveys........... ................. 25.5% 18.0% 28.9% 28.9% 28.9% 29.0% 29.0% 29.0%
(17) Ind--pct.................. Steps 6, 7...... Surveys........... ................. 74.5% 82.0% 71.2% 71.2% 71.2% 71.1% 71.1% 71.1%
(18) Ind. Alloc. formula (1st Step 8.......... See Step 8........ ................. ((14)/(16)) * ((14)/(16)) * ((14)/(16)) * ((14)/(16)) * ((14)/(16)) * ((14)/(16)) * ((14)/(16)) * ((14)/(16)) *
part). (17) (17) (17) (17) (17) (17) (17) (17)
(19) Ind. Alloc. (1st part).... Step 8.......... .................. See (18)......... 0.65 5.23 0.57 0.57 0.00 0.24 0.24 0.00
(20) Ind. Alloc. formulas (2nd Step 8.......... See Step 8........ ................. (15) (15) (15)+(11) (11) (15) (15)+(11) (11) (15)
part).
(21) Ind. Alloc. (2nd part).... Step 8.......... .................. See (20)......... 0.97 33.75 0.30 0.08 0.22 0.25 0.08 0.17
(22) Indirect Allocator Step 8.......... .................. =(19)+(21)....... 1.62 38.98 0.87 0.65 0.22 0.50 0.33 0.17
(1st+2nd).
(23) Indirect Adjustment (Ind Steps 9-11...... See footnote**.... ................. 0.369 0.369 0.369 0.369 0.369 0.369 0.369 0.369
Adj).
(24) Adjusted Indirect Steps 9-11...... =Ind Alloc * Ind ................. 0.60 14.37 0.32 0.24 0.08 0.18 0.12 0.06
Allocator. Adj.
(25) Ind.Practice Cost Index Steps 12-16..... See Steps 12-16... ................. 1.104 0.831 0.852 0.852 0.852 0.926 0.926 0.926
(PCI).
(26) Adjusted Indirect......... Step 17......... = Adj. Ind Alloc * =(24) * (25)..... 0.66 11.95 0.27 0.20 0.07 0.17 0.11 0.06
PCI.
(27) MEI Rebasing Adjustment... Step 18......... PFS............... ................. 1.168 1.168 1.168 1.168 1.168 1.168 1.168 1.168
(28) MPPR Adjustment........... Step 18......... PFS............... ................. 1.011 1.011 1.011 1.011 1.011 1.011 1.011 1.011
(29) PE RVU.................... Step 18......... =(Adj Dir+Adj Ind) =((14)+(26)) * 1.03 15.36 0.59 0.51 0.08 0.32 0.25 0.07
* budn * MEI Adj budn * (27) *
* MPPR Adj. (28).
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: PE RVUs in Table 2, row 27, may not match Addendum B due to rounding.
* The direct adj = [current pe rvus * CF * avg dir pct]/[sum direct inputs] = [Step 2]/[Step 3].
** The indirect adj = [current pe rvus * avg ind pct]/[sum of ind allocators] = [Step 9]/[Step 10].

[[Page 40054]]

3. Proposed PE Revisions for CY 2011
a. Equipment Utilization Rate
As part of the PE methodology associated with the allocation of
equipment costs for calculating PE RVUs, we currently use an equipment
utilization rate assumption of 50 percent for most equipment, with the
exception of expensive diagnostic imaging equipment (which is equipment
priced at over $1 million, for example, computed tomography (CT) and
magnetic resonance imaging (MRI) scanners), for which we adopted a 90
percent utilization rate assumption and provided for a 4-year
transition beginning in CY 2010 (74 FR 61755). Therefore, CY 2010 is
the first transitional payment year. Payment is made in CY 2010 for the
diagnostic services listed in Table 3 (those that include expensive
diagnostic imaging equipment in their PE inputs) based on 25 percent of
the new PE RVUs and 75 percent of the prior PE RVUs for those services.
Section 1848(b)(4)(C) of the Act (as added by section 3135(a) of
the ACA) requires that with respect to fee schedules established for CY
2011 and subsequent years, in the methodology for determining PE RVUs
for expensive diagnostic imaging equipment under the CY 2010 PFS final
rule with comment period, the Secretary shall use a 75 percent
assumption instead of the utilization rates otherwise established in
that rule. The provision also requires that the reduced expenditures
attributable to this change in the utilization rate for CY 2011 and
subsequent years shall not be taken into account when applying the
budget neutrality limitation on annual adjustments described in section
1848(c)(2)(B)(ii)(II) of the Act.
As a result, the 75 percent equipment utilization rate assumption
will be applied to expensive diagnostic imaging equipment in a
nonbudget neutral manner for CY 2011, and the changes to PE RVUs will
not be transitioned over a period of years. We will apply the 75
percent utilization rate assumption in CY 2011 to all of the services
to which we currently apply the transitional 90 percent utilization
rate assumption in CY 2010. These services are listed in a file on the
CMS Web site that is posted under downloads for the CY 2010 PFS final
rule with comment period at: (http://www.cms.gov/physicianfeesched/downloads/CODES_SUBJECT_TO_90PCT_USAGE_RATE.zip). These codes are
also displayed in Table 3.

Table 3--Current CPT Codes Subject to First Year (CY 2010) of 4-Year
Transition to 90 Percent Equipment Utilization Rate Assumption and That
Will Be Subject to the 75 Percent Equipment Utilization Rate Assumption
in CY 2011
------------------------------------------------------------------------
CPT code Short descriptor
------------------------------------------------------------------------
70336............................. Mri, temporomandibular joint(s).
70450............................. Ct head/brain w/o dye.
70460............................. Ct head/brain w/dye.
70470............................. Ct head/brain w/o & w/dye.
70480............................. Ct orbit/ear/fossa w/o dye.
70481............................. Ct orbit/ear/fossa w/dye.
70482............................. Ct orbit/ear/fossa w/o & w/dye.
70486............................. Ct maxillofacial w/o dye.
70487............................. Ct maxillofacial w/dye.
70488............................. Ct maxillofacial w/o & w/dye.
70490............................. Ct soft tissue neck w/o dye.
70491............................. Ct soft tissue neck w/dye.
70492............................. Ct soft tissue neck w/o & w/dye.
70540............................. Mri orbit/face/neck w/o dye.
70542............................. Mri orbit/face/neck w/dye.
70543............................. Mri orbit/face/neck w/o & w/dye.
70551............................. Mri brain w/o dye.
70552............................. Mri brain w/dye.
70553............................. Mri brain w/o & w/dye.
70554............................. Fmri brain by tech.
71250............................. Ct thorax w/o dye.
71260............................. Ct thorax w/dye.
71270............................. Ct thorax w/o & w/dye.
71550............................. Mri chest w/o dye.
71551............................. Mri chest w/dye.
71552............................. Mri chest w/o & w/dye.
72125............................. CT neck spine w/o dye.
72126............................. Ct neck spine w/dye.
72127............................. Ct neck spine w/o & w/dye.
72128............................. Ct chest spine w/o dye.
72129............................. Ct chest spine w/dye.
72130............................. Ct chest spine w/o & w/dye.
72131............................. Ct lumbar spine w/o dye.
72132............................. Ct lumbar spine w/dye.
72133............................. Ct lumbar spine w/o & w/dye.
72141............................. Mri neck spine w/o dye.
72142............................. Mri neck spine w/dye.
72146............................. Mri chest spine w/o dye.
72147............................. Mri chest spine w/dye.
72148............................. Mri lumbar spine w/o dye.
72149............................. Mri lumbar spine w/dye.
72156............................. Mri neck spine w/o & w/dye.
72157............................. Mri chest spine w/o & w/dye.
72158............................. Mri lumbar spine w/o & w/dye.
72192............................. Ct pelvis w/o dye.
72193............................. Ct pelvis w/dye.
72194............................. Ct pelvis w/o & w/dye.
72195............................. Mri pelvis w/o dye.
72196............................. Mri pelvis w/dye.
72197............................. Mri pelvis w/o & w/dye.
73200............................. Ct upper extremity w/o dye.
73201............................. Ct upper extremity w/dye.
73202............................. Ct upper extremity w/o & w/dye.
73218............................. Mri upper extr w/o dye.
73219............................. Mri upper extr w/dye.
73220............................. Mri upper extremity w/o & w/dye.
73221............................. Mri joint upper extr w/o dye.
73222............................. Mri joint upper extr w/dye.
73223............................. Mri joint upper extr w/o & w/dye.
73700............................. Ct lower extremity w/o dye.
73701............................. Ct lower extremity w/dye.
73702............................. Ct lower extremity w/o & w/dye.
73718............................. Mri lower extremity w/o dye.
73719............................. Mri lower extremity w/dye.
73720............................. Mri lower ext w/dye & w/o dye.
73721............................. Mri joint of lwr extr w/o dye.
73722............................. Mri joint of lwr extr w/dye.
73723............................. Mri joint of lwr extr w/o & w/dye.
74150............................. Ct abdomen w/o dye.
74160............................. Ct abdomen w/dye.
74170............................. Ct abdomen w/o & w/dye.
74181............................. Mri abdomen w/o dye.
74182............................. Mri abdomen w/dye.
74183............................. Mri abdomen w/o and w/dye.
74261............................. Ct colonography, w/o dye.
74262............................. Ct colonography, w/dye.
75557............................. Cardiac mri for morph.
75559............................. Cardiac mri w/stress img.
75561............................. Cardiac mri for morph w/dye.
75563............................. Cardiac mri w/stress img & dye.
75571............................. Ct hrt w/o dye w/ca test.
75572............................. Ct hrt w/3d image.
75573............................. Ct hrt w/3d image, congen.
77058............................. Mri, one breast.
77059............................. Mri, both breasts.
77078............................. Ct bone density, axial.
77084............................. Magnetic image, bone marrow.
------------------------------------------------------------------------

Additionally, for CY 2011, we are proposing to expand the list of
services to which the higher equipment utilization rate assumption
applies to all other diagnostic imaging services that utilize similar
expensive CT and MRI scanners. The additional 24 CPT codes (listed in
Table 4) to which we are proposing to apply the 75 percent equipment
utilization rate assumption also have expensive diagnostic imaging
equipment (priced at over $1 million) included in their PE inputs.
These services are predominantly diagnostic computed tomographic
angiography (CTA) and magnetic resonance angiography (MRA) procedures
that include similar expensive CT and MRI scanners in their direct PE
inputs. We indicated in the CY 2010 PFS final rule with comment period
(74 FR 61754) that we were persuaded by PPIS data on angiography that
the extrapolation of MRI and CT data (and their higher equipment
utilization rate) may be inappropriate. However, this reference was
limited to those procedures that include an angiography room in the
direct PE inputs, such as CPT code 93510 (Left heart catheterization,
retrograde, from the brachial artery, axillary artery or femoral
artery; percutaneous). In contrast, CTA and MRA procedures include a CT
room or

[[Page 40055]]

MRI room, respectively, in the direct PE inputs, and the PPIS data
confirm that a higher assumed utilization rate than 50 percent would be
appropriate. The PPIS angiography room data that reflected a 56 percent
equipment utilization rate would not specifically apply to CTA and MRA
procedures. Thus, on further review, we believe it is appropriate to
include CTA and MRA procedures in the list of procedures for which we
assume a 75 percent equipment utilization rate, and we are proposing to
do so beginning in CY 2011.
Consistent with section 1848(c)(2)(B)(v)(III) of the Act (as
amended by section 3135 of the ACA), the reduced expenditures
attributable to this change in the utilization rate assumption
applicable to CY 2011 shall not be taken into account when applying the
budget neutrality limitation on annual adjustments described in section
1848(c)(2)(B)(ii)(III) of the Act.
As provided in the CY 2010 PFS final rule with comment period (74
FR 61751), CY 2011 is the second year of the 4-year transition to the
PE RVUs calculated using the PPIS data. The reductions in the PE RVUs
for expensive diagnostic imaging equipment attributable to the change
to an equipment utilization rate assumption of 75 percent for CY 2011
are not subject to the transition.

Table 4--Proposed CPT Code Additions to the 75 Percent Equipment
Utilization Rate Assumption CY 2011
------------------------------------------------------------------------
CPT code Short descriptor
------------------------------------------------------------------------
70496............................. Ct angiography, head.
70498............................. Ct angiography, neck.
70544............................. Mr angiography head w/o dye.
70545............................. Mr angiography head w/dye.
70546............................. Mr angiography head w/o & w/dye.
70547............................. Mr angiography neck w/o dye.
70548............................. Mr angiography neck w/dye.
70549............................. Mr angiography neck w/o & w/dye.
71275............................. Ct angiography, chest.
71555............................. Mri angio chest w/ or w/o dye.
72159............................. Mr angio spone w/o & w/dye.
72191............................. Ct angiography, pelv w/o & w/dye.
72198............................. Mri angio pelvis w/ or w/o dye.
73206............................. Ct angio upper extr w/o & w/dye.
73225............................. Mr angio upr extr w/o & w/dye.
73706............................. Ct angio lower ext w/o & w/dye.
73725............................. Mr angio lower ext w/ or w/o dye.
74175............................. Ct angiography, abdom w/o & w/dye.
74185............................. Mri angio, abdom w/ or w/o dye.
75565............................. Card mri vel flw map add-on.
75574............................. Ct angio hrt w/3d image.
75635............................. Ct angio abdominal arteries.
76380............................. CAT scan follow up study.
77079............................. Ct bone density, peripheral.
------------------------------------------------------------------------

b. HCPCS Code-Specific PE Proposals
In this section, we discuss other specific CY 2011 proposals and
changes related to direct PE inputs. The proposed changes that follow
are included in the proposed CY 2011 direct PE database, which is
available on the CMS Web site under the downloads for the CY 2011 PFS
proposed rule at http://www.cms.gov/PhysicianFeeSched/.
(1) Biohazard Bags
We have identified 22 codes for which the supply item ``biohazard
bag'' (SM004) is currently considered a direct PE input. The item is
already properly accounted for in the indirect PE because it is not
attributable to an individual patient service. Therefore, we are
proposing to remove the biohazard bag from the CY 2011 direct PE
database and the changes in direct PE inputs for the associated
services are reflected in the proposed CY 2011 direct PE database.
(2) PE Inputs for Professional Component (PC) Only and Technical
Component (TC) Only Codes Summing to Global Only Codes
In the case of selected diagnostic tests, different but related CPT
codes are used to describe global, professional, and technical
components of a service. These codes are unlike the majority of other
diagnostic test CPT codes where modifiers may be used in billing a
single CPT code in order to differentiate professional and technical
components. When different but related CPT codes are used to report the
components of these services, the different CPT codes are referred to
as ``global only,'' ``professional (PC) only,'' and ``technical (TC)
only'' codes. Medicare payment systems are programmed to ensure that
the PE RVUs for global only codes equal the sum of the PE RVUs for the
PC and TC only codes. However, it has come to our attention that the
direct PE inputs for certain global only codes do not reflect the
appropriate summation of their related TC only and PC only component
code PE inputs as they appear in the direct PE database. While the PFS
payment calculations have been programmed to apply the correct PE RVUs
for the global only code based on a summation of component code PE
RVUs, the direct PE database has reflected incorrect inputs that are
overridden by the payment system. Therefore, we are proposing to
correct the direct PE inputs for the global only codes so that the
inputs reflect the appropriate summing of the PE inputs for the
associated PC only and TC only codes. The proposed CY 2011 direct PE
database includes PE corrections to the 14 CPT codes listed in Table 5.

Table 5--Groups of Related CPT Codes With Proposed Changes to PE Inputs
So That Inputs for Professional Component (PC) Only and Technical
Component (TC) Only Codes Sum to Global Only Codes
------------------------------------------------------------------------
CPT code Long descriptor
------------------------------------------------------------------------
93224.................... Wearable electrocardiographic rhythm derived
monitoring for 24 hours by continuous
original waveform recording and storage,
with visual superimposition scanning;
includes recording, scanning analysis with
report, physician review and interpretation.
93225.................... Wearable electrocardiographic rhythm derived
monitoring for 24 hours by continuous
original waveform recording and storage,
with visual superimposition scanning;
recording (includes connection, recording,
disconnection).
93226.................... Wearable electrocardiographic rhythm derived
monitoring for 24 hours by continuous
original waveform recording and storage,
with visual superimposition scanning;
scanning analysis with report.
93230.................... Wearable electrocardiographic rhythm derived
monitoring for 24 hours by continuous
original waveform recording and storage
without superimposition scanning utilizing a
device capable of producing a full
miniaturized printout; including recording,
microprocessor-based analysis with report,
physician review and interpretation.
93231.................... Wearable electrocardiographic rhythm derived
monitoring for 24 hours by continuous
original waveform recording and storage
without superimposition scanning utilizing a
device capable of producing a full
miniaturized printout; recording (includes
connection, recording, and disconnection.

[[Page 40056]]

93232.................... Wearable electrocardiographic rhythm derived
monitoring for 24 hours by continuous
original waveform recording and storage
without superimposition scanning utilizing a
device capable of producing a full
miniaturized printout; microprocessor-based
analysis with report.
93268.................... Wearable patient activated
electrocardiographic rhythm derived event
recording with presymptom memory loop, 24-
hour attended monitoring, per 30 day period
of time; includes transmission, physician
review and interpretation.
93270.................... Wearable patient activated
electrocardiographic rhythm derived event
recording with presymptom memory loop, 24-
hour attended monitoring, per 30 day period
of time; recording (includes connection,
recording, and disconnection).
93271.................... Wearable patient activated
electrocardiographic rhythm derived event
recording with presymptom memory loop, 24-
hour attended monitoring, per 30 day period
of time; monitoring, receipt of
transmissions, and analysis.
93720.................... Plethysmography, total body; with
interpretation and report.
93721.................... Plethysmography, total body; tracing only,
without interpretation and report.
93784.................... Ambulatory blood pressure monitoring,
utilizing a system such as magnetic tape and/
or computer disk, for 24 hours or longer;
including recording, scanning analysis,
interpretation and report.
93786.................... Ambulatory blood pressure monitoring,
utilizing a system such as magnetic tape and/
or computer disk, for 24 hours or longer;
recording only.
93788.................... Ambulatory blood pressure monitoring,
utilizing a system such as magnetic tape and/
or computer disk, for 24 hours or longer;
scanning analysis with report.
------------------------------------------------------------------------

(3) Equipment Time Inputs for Certain Diagnostic Tests
We have recently identified incorrect equipment time inputs for
four CPT codes associated with certain diagnostic tests (each is
displayed in Table 5):
CPT code 93225 is the TC only code that includes the
connection, recording, and disconnection of the holter monitor (CMS
Equipment Code EQ127) used in 24 hour continuous electrocardiographic
rhythm derived monitoring. The current equipment time input for the
holter monitor is 42 minutes, which parallels the intra-service
clinical labor input time for the CPT code. However, the equipment time
should reflect the 24 hours of continuous monitoring in which the
device is used exclusively by the patient. Therefore, we are proposing
to change the monitor equipment time for CPT code 93225 to 1440
minutes, the number of minutes in 24 hours.
CPT code 93226 is the TC only code that includes the
scanning analysis with report. The number of minutes the monitor (CMS
Equipment Code EQ127) is used in this service should parallel the
intra-service clinical labor input time of 52 minutes during which the
monitor is in use, instead of the current equipment time of 1440
minutes, because this code does not represent 24 hours of device use.
Therefore, we are proposing to change the monitor equipment time for
CPT code 93226 to 52 minutes.
CPT 93224 is the global only code that includes the
connection, recording, and disconnection of the monitor (CMS Equipment
Code EQ127) and the scanning analysis with report, as well as the
physician review and interpretation. Under our proposal, its direct PE
inputs have been appropriately summed to include the 1492 total minutes
of time for the holter monitor that are included in CPT codes 93225 and
93226.
CPT code 93788 is the TC only code that describes the
scanning analysis with report for ambulatory blood pressure monitoring.
The equipment time input for the blood pressure monitor should parallel
the 10 minutes of clinical labor input for the CPT code since that is
the time during which the monitor is in use. Currently, the equipment
time input for the monitor is 1440 minutes, which is appropriate only
for CPT code 93786, the code that describes the 24 hours of ambulatory
blood pressure monitoring recording. In this case, CPT code 93786's
direct PE inputs are correct. Therefore, we are proposing to correct
the equipment time input for the ambulatory blood pressure monitor in
CPT code 93788 to 10 minutes.
CPT code 93784 is the global only code that includes the
recording, the scanning analysis with report, and the physician
interpretation and report for ambulatory blood pressure monitoring.
Under our proposal, its direct PE inputs have been appropriately summed
to include the 1450 total minutes of time for the ambulatory blood
pressure monitor that are included in CPT codes 93786 and 93788.
We have modified the proposed CY 2011 direct PE database to reflect
these changes.
(4) Cobalt-57 Flood Source
Stakeholders have requested that CMS reevaluate the useful life of
the Cobalt-57 flood source (CMS Equipment Code ER001), given their
estimate of approximately 271 days for the source's half-life. The
current useful life input for the Colbalt-57 flood source is 5 years.
Using publicly available catalogs, we found that the Cobalt-57 flood
source is marketed with a useful life of 2 years. Therefore, we are
proposing to change the useful life input from the current 5 years to 2
years. The Cobalt-57 flood source is included with the revised useful
life input for 96 HCPCS codes in the proposed CY 2011 direct PE
database.
(5) Venom Immunotherapy
One stakeholder provided updated price information for the venoms
used for the five venom immunology CPT codes, specifically 95145
(Professional services for the supervision of preparation and provision
of antigens for allergen immunotherapy (specify number of doses);
single stinging insect venom); 95146 (Professional services for the
supervision of preparation and provision of antigens for allergen
immunotherapy (specify number of doses); 2 single stinging insect
venoms); 95147 (Professional services for the supervision of
preparation and provision of antigens for allergen immunotherapy
(specify number of doses); 3 single stinging insect venoms); 95148
(Professional services for the supervision of preparation and provision
of antigens for allergen immunotherapy (specify number of doses); 4
single stinging insect venoms); 95149 (Professional services for the
supervision of preparation and provision of antigens for allergen
immunotherapy (specify number of doses); 5 single stinging insect
venoms).
In the CY 2004 PFS final rule with comment period (68 FR 63206), we

[[Page 40057]]

adopted a pricing methodology that utilizes the average price of a 1
milliliter dose of venom and adds that price per dose as direct PE
inputs for CPT codes 95145 and 95146. When a patient requires three
stinging insect venoms, as for CPT code 95147, the price input for a 3-
vespid mix is used. This 3-vespid mix price is also used to value CPT
codes 95148 (four venoms) and 96149 (five venoms), with the single
venom price added once to CPT code 97148 and twice to CPT code 97149.
As requested by the stakeholder, we are updating the price inputs
for the 1-milliliter dose of venom to $16.67 and for the 3-vespid mix
to $30.22 in the proposed CY 2011 direct PE database.
(6) Equipment Redundancy
Stakeholders have recently brought to our attention that the ECG,
3-channel (with SpO2, NIBP, temp, resp) (CMS Equipment Code EQ011)
incorporates all of the functionality of the pulse oximeter with
printer (CMS Equipment Code EQ211). Therefore, in HCPCS codes where CMS
Equipment Code EQ011 is present, CMS Equipment Code EQ211 is redundant.
On this basis, we are proposing to remove the pulse oximeter with
printer (CMS Equipment Code EQ211) as an input for the 118 codes that
also contain the ECG, 3-channel (with SpO2, NIBP, temp, resp) (CMS
Equipment Code EQ011). We have made these adjustments in the proposed
CY 2011 direct PE database.
(7) Equipment Duplication
We recently identified a number of CPT codes with duplicate
equipment inputs in the PE database. We are proposing to remove the
duplicate equipment items and have modified the proposed CY 2011 direct
PE database accordingly as detailed in Table 6.

Table 6--CPT Codes With Proposed Removal of Duplicate Equipment Items in
the Direct PE Database
------------------------------------------------------------------------
CMS equipment code
CPT code for duplicate Description of
equipment equipment
------------------------------------------------------------------------
19302 P-mastectomy w/ln EF014............... light, surgical.
removal.
19361 Breast reconstr w/lat ED005............... camera, digital
flap. system, 12
megapixel (medical
grade).
EF031............... table, power.
EQ168............... light, exam.
44157 Colectomy w/ileoanal EF031............... table, power.
anast.
EQ168............... light, exam.
44158 Colectomy w/neo-rectum EF031............... table, power.
pouch.
EQ168............... light, exam.
56440 Surgery for vulva EF031............... table, power.
lesion.
EQ170............... light, fiberoptic
headlight w-source.
57296 Revise vag graft, open EF031............... table, power.
abd.
EQ170............... light, fiberoptic
headlight w-source.
58263 Vag hyst w/t/o & vag EF031............... table, power.
repair.
59610 Vbac delivery......... EF031............... table, power.
67228 Treatment of retinal EL005............... lane, exam (oph).
lesion.
EQ230............... slit lamp (Haag-
Streit), dedicated
to laser use.
76813 Ob us nuchal meas, 1 ED024............... film processor, dry,
gest. laser.
77371 Srs, multisource...... EQ211............... pulse oximeter w-
printer.
93540 Injection, cardiac ED018............... computer
cath. workstation,
cardiac cath
monitoring.
EL011............... room, angiography.
EQ011............... ECG, 3-channel (with
SpO2, NIBP, temp,
resp).
EQ032............... IV infusion pump.
EQ088............... contrast media
warmer.
EQ211............... pulse oximeter w-
printer.
93542 Injection for heart x- ED018............... computer
rays. workstation,
cardiac cath
monitoring.
EL011............... room, angiography.
EQ011............... ECG, 3-channel (with
SpO2, NIBP, temp,
resp).
EQ032............... IV infusion pump.
EQ088............... contrast media
warmer.
EQ211............... pulse oximeter w-
printer.
------------------------------------------------------------------------

(8) Establishing Overall Direct PE Supply Price Inputs Based on Unit
Prices and Quantities
We have identified minor errors in total price inputs for a number
of supply items due to mathematical mistakes in multiplying the item
unit price and the quantity used in particular CPT codes for the
associated services. We are proposing to modify the direct PE database
to appropriately include the overall supply price input for a supply
item as the product of the unit price and the quantity of the supply
item used in the CPT code. Most of the overall supply price input
changes are small, and we have adjusted the proposed CY 2011 direct PE
database accordingly. The CPT and Level II HCPCS codes and associated
supplies for nonfacility and facility settings that are subject to
these corrections are displayed in Tables 7 and 8, respectively.

Table 7--Overall Supply Price Calculation Corrections for Nonfacility Settings
----------------------------------------------------------------------------------------------------------------
CMS Supply code with overall
CPT/HCPCS code Short descriptor price corrections Description of supply
----------------------------------------------------------------------------------------------------------------
11952....................... Therapy for contour SC029....................... needle, 18-27g.
defects.
11954....................... Therapy for contour SC029....................... needle, 18-27g.
defects.
15820....................... Revision of lower SA082....................... pack, ophthalmology visit
eyelid. (w-dilation).

[[Page 40058]]

15821....................... Revision of lower SA082....................... pack, ophthalmology visit
eyelid. (w-dilation).
15822....................... Revision of upper SA082....................... pack, ophthalmology visit
eyelid. (w-dilation).
17311....................... Mohs, 1 stage, h/n/hf/g SG078....................... tape, surgical occlusive
1in (Blenderm).
17312....................... Mohs addl stage........ SG078....................... tape, surgical occlusive
1in (Blenderm).
17313....................... Mohs, 1 stage, t/a/l... SG078....................... tape, surgical occlusive
1in (Blenderm).
17314....................... Mohs, addl stage, t/a/l SG078....................... tape, surgical occlusive
1in (Blenderm).
21011....................... Exc face les sc < 2 cm. SH046....................... lidocaine 1% w-epi inj
(Xylocaine w-epi).
21013....................... Exc face tum deep < 2 SH046....................... lidocaine 1% w-epi inj
cm. (Xylocaine w-epi).
21073....................... Mnpj of tmj w/anesth... SG079....................... tape, surgical paper 1in
(Micropore).
21076....................... Prepare face/oral SL047....................... dental stone powder.
prosthesis.
21081....................... Prepare face/oral SK024....................... film, dental.
prosthesis.
21310....................... Treatment of nose SB034....................... mask, surgical, with face
fracture. shield.
23075....................... Exc shoulder les sc < 3 SG056....................... gauze, sterile 4in x 4in
cm. (10 pack uou).
....................... SH021....................... bupivacaine 0.25% inj
(Marcaine).
24075....................... Exc arm/elbow les sc < SG056....................... gauze, sterile 4in x 4in
3 cm. (10 pack uou).
....................... SH021....................... bupivacaine 0.25% inj
(Marcaine).
25075....................... Exc forearm les sc < 3 SG056....................... gauze, sterile 4in x 4in
cm. (10 pack uou).
....................... SH021....................... bupivacaine 0.25% inj
(Marcaine).
26115....................... Exc hand les sc < 1.5 SG056....................... gauze, sterile 4in x 4in
cm. (10 pack uou).
....................... SH021....................... bupivacaine 0.25% inj
(Marcaine).
27327....................... Exc thigh/knee les sc < SG056....................... gauze, sterile 4in x 4in
3 cm. (10 pack uou).
27618....................... Exc leg/ankle tum < 3 SG056....................... gauze, sterile 4in x 4in
cm. (10 pack uou).
28039....................... Exc foot/toe tum sc > SG056....................... gauze, sterile 4in x 4in
1.5 cm. (10 pack uou).
28043....................... Exc foot/toe tum sc < SG056....................... gauze, sterile 4in x 4in
1.5 cm. (10 pack uou).
28045....................... Exc foot/toe tum deep < SG056....................... gauze, sterile 4in x 4in
1.5cm. (10 pack uou).
28306....................... Incision of metatarsal. SA048....................... pack, minimum multi-
specialty visit.
28307....................... Incision of metatarsal. SA048....................... pack, minimum multi-
specialty visit.
28310....................... Revision of big toe.... SA048....................... pack, minimum multi-
specialty visit.
28312....................... Revision of toe........ SA048....................... pack, minimum multi-
specialty visit.
28313....................... Repair deformity of toe SA048....................... pack, minimum multi-
specialty visit.
28315....................... Removal of sesamoid SA048....................... pack, minimum multi-
bone. specialty visit.
28340....................... Resect enlarged toe SA048....................... pack, minimum multi-
tissue. specialty visit.
28344....................... Repair extra toe(s).... SA048....................... pack, minimum multi-
specialty visit.
28345....................... Repair webbed toe(s)... SA048....................... pack, minimum multi-
specialty visit.
28496....................... Treat big toe fracture. SA048....................... pack, minimum multi-
specialty visit.
28755....................... Fusion of big toe joint SA048....................... pack, minimum multi-
specialty visit.
28820....................... Amputation of toe...... SA048....................... pack, minimum multi-
specialty visit.
28890....................... High energy eswt, SC051....................... syringe 10-12ml.
plantar f.
29870....................... Knee arthroscopy, dx... SG079....................... tape, surgical paper 1in
(Micropore).
32553....................... Ins mark thor for rt SB034....................... mask, surgical, with face
perq. shield.
36475....................... Endovenous rf, 1st vein SC074....................... iv pressure infusor bag.
36592....................... Collect blood from picc SG050....................... gauze, non-sterile 2in x
2in.
41530....................... Tongue base vol SD009....................... canister, suction.
reduction.
41805....................... Removal foreign body, SD134....................... tubing, suction, non-latex
gum. (6ft) with Yankauer tip
(1).
41806....................... Removal foreign body, SD134....................... tubing, suction, non-latex
jawbone. (6ft) with Yankauer tip
(1).
42107....................... Excision lesion, mouth SD009....................... canister, suction.
roof.
46505....................... Chemodenervation anal SD009....................... canister, suction.
musc.
49411....................... Ins mark abd/pel for rt SB034....................... mask, surgical, with face
perq. shield.
49440....................... Place gastrostomy tube SK089....................... x-ray developer solution.
perc.
49441....................... Place duod/jej tube SK089....................... x-ray developer solution.
perc.
49442....................... Place cecostomy tube SK089....................... x-ray developer solution.
perc.
49446....................... Change g-tube to g-j SK089....................... x-ray developer solution.
perc.
49450....................... Replace g/c tube perc.. SK089....................... x-ray developer solution.
49451....................... Replace duod/jej tube SK089....................... x-ray developer solution.
perc.
49452....................... Replace g-j tube perc.. SK089....................... x-ray developer solution.
49460....................... Fix g/colon tube w/ SK089....................... x-ray developer solution.
device.
49465....................... Fluoro exam of g/colon SK089....................... x-ray developer solution.
tube.
50382....................... Change ureter stent, SB034....................... mask, surgical, with face
percut. shield.
50384....................... Remove ureter stent, SB034....................... mask, surgical, with face
percut. shield.
50385....................... Change stent via SB034....................... mask, surgical, with face
transureth. shield.
50386....................... Remove stent via SB034....................... mask, surgical, with face
transureth. shield.
50387....................... Change ext/int ureter SB034....................... mask, surgical, with face
stent. shield.
50389....................... Remove renal tube w/ SB034....................... mask, surgical, with face
fluoro. shield.
51100....................... Drain bladder by needle SH047....................... lidocaine 1%-2% inj
(Xylocaine).
51101....................... Drain bladder by trocar/ SH047....................... lidocaine 1%-2% inj
cath. (Xylocaine).
51727....................... Cystometrogram w/up.... SC051....................... syringe 10-12ml.
51728....................... Cystometrogram w/vp.... SC051....................... syringe 10-12ml.
51729....................... Cystometrogram w/vp&up. SC051....................... syringe 10-12ml.
52649....................... Prostate laser SA048....................... pack, minimum multi-
enucleation. specialty visit.
53855....................... Insert prost urethral SB024....................... gloves, sterile.
stent.

[[Page 40059]]

59300....................... Episiotomy or vaginal SG062....................... packing, gauze plain 0.25-
repair. 0.50in (5 yd uou).
59812....................... Treatment of SA052....................... pack, post-op incision care
miscarriage. (staple).
64490....................... Inj paravert f jnt c/t SK025....................... film, dry, radiographic,
1 lev. 8in x 10in.
64493....................... Inj paravert f jnt l/s SH021....................... bupivacaine 0.25% inj
1 lev. (Marcaine).
....................... SK025....................... film, dry, radiographic,
8in x 10in.
65272....................... Repair of eye wound.... SA082....................... pack, ophthalmology visit
(w-dilation).
65286....................... Repair of eye wound.... SA082....................... pack, ophthalmology visit
(w-dilation).
66250....................... Follow-up surgery of SA082....................... pack, ophthalmology visit
eye. (w-dilation).
67031....................... Laser surgery, eye SA082....................... pack, ophthalmology visit
strands. (w-dilation).
67105....................... Repair detached retina. SA082....................... pack, ophthalmology visit
(w-dilation).
67110....................... Repair detached retina. SA082....................... pack, ophthalmology visit
(w-dilation).
67120....................... Remove eye implant SA082....................... pack, ophthalmology visit
material. (w-dilation).
67228....................... Treatment of retinal SA082....................... pack, ophthalmology visit
lesion. (w-dilation).
67901....................... Repair eyelid defect... SA048....................... pack, minimum multi-
specialty visit.
75571....................... Ct hrt w/o dye w/ca SJ019....................... electrode adhesive disk.
test.
75572....................... Ct hrt w/3d image...... SJ019....................... electrode adhesive disk.
75573....................... Ct hrt w/3d image, SJ019....................... electrode adhesive disk.
congen.
75574....................... Ct angio hrt w/3d image SJ019....................... electrode adhesive disk.
75960....................... Transcath iv stent rs&i SK034....................... film, x-ray 14in x 17in.
76821....................... Middle cerebral artery SM013....................... disinfectant, surface
echo. (Envirocide, Sanizide).
77371....................... Srs, multisource....... SG079....................... tape, surgical paper 1in
(Micropore).
77372....................... Srs, linear based...... SG079....................... tape, surgical paper 1in
(Micropore).
77373....................... Sbrt delivery.......... SG079....................... tape, surgical paper 1in
(Micropore).
78452....................... Ht muscle image spect, SC051....................... syringe 10-12ml.
mult.
....................... SK092....................... x-ray fixer solution
78454....................... Ht musc image, planar, SK092....................... x-ray fixer solution.
mult.
88125....................... Forensic cytopathology. SL026....................... clearing agent (Histo-
clear).
88355....................... Analysis, skeletal SK073....................... skin marking ink (tattoo).
muscle.
....................... SL061....................... embedding paraffin.
....................... SL078....................... histology freezing spray
(Freeze-It).
....................... SL201....................... stain, eosin.
88356....................... Analysis, nerve........ SB023....................... gloves, non-sterile,
nitrile.
....................... SK073....................... skin marking ink (tattoo).
....................... SL061....................... embedding paraffin.
....................... SL078....................... histology freezing spray
(Freeze-It).
....................... SL108....................... pipette.
....................... SL201....................... stain, eosin.
88365....................... Insitu hybridization SF004....................... blade, microtome.
(fish).
....................... SL179....................... 1.0N NaOH.
....................... SL183....................... slide, organosilane coated.
....................... SL189....................... ethanol, 100%.
....................... SL190....................... ethanol, 70%.
....................... SL194....................... Hemo-De.
....................... SM016....................... eye shield, splash
protection.
88367....................... Insitu hybridization, SC057....................... syringe 5-6ml.
auto.
....................... SF004....................... blade, microtome.
....................... SL030....................... cover slip, glass.
....................... SL085....................... label for microscope
slides.
....................... SL178....................... 0.2N HCL.
....................... SL179....................... 1.0N NaOH.
....................... SL181....................... pipette tips, sterile.
....................... SL183....................... slide, organosilane coated.
....................... SL189....................... ethanol, 100%.
....................... SL190....................... ethanol, 70%.
....................... SL191....................... ethanol, 85%.
....................... SL194....................... Hemo-De.
....................... SM016....................... eye shield, splash
protection.
88368....................... Insitu hybridization, SF004....................... blade, microtome.
manual.
....................... SL179....................... 1.0N NaOH.
....................... SL183....................... slide, organosilane coated.
....................... SL189....................... ethanol, 100%.
....................... SL190....................... ethanol, 70%.
....................... SL194....................... Hemo-De.
....................... SM016....................... eye shield, splash
protection.
88385....................... Eval molecul probes, 51- SL207....................... air, filtered, compressed.
250.
....................... SL218....................... DNA, Versagene, blood kit.
....................... SL220....................... ethanol, 200%.
....................... SL225....................... gas, nitogen, ultra-high
purity (compressed), grade
5.0.
88386....................... Eval molecul probes, SL207....................... air, filtered, compressed.
251-500.
....................... SL218....................... DNA, Versagene, blood kit.

[[Page 40060]]

....................... SL220....................... ethanol, 200%.
....................... SL225....................... gas, nitogen, ultra-high
purity (compressed), grade
5.0.
90470....................... Immune admin H1N1 im/ SB036....................... paper, exam table.
nasal.
91065....................... Breath hydrogen test... (blank)..................... Sivrite-4.
91132....................... Electrogastrography.... SD062....................... electrode, surface.
91133....................... Electrogastrography w/ SD062....................... electrode, surface.
test.
92550....................... Tympanometry & reflex SK059....................... paper, recording (per
thresh. sheet).
92597....................... Oral speech device eval SB022....................... gloves, non-sterile.
92610....................... Evaluate swallowing SB022....................... gloves, non-sterile.
function.
92626....................... Eval aud rehab status.. SK008....................... audiology scoring forms.
92627....................... Eval aud status rehab SK008....................... audiology scoring forms.
add-on.
92640....................... Aud brainstem implt SK068....................... razor.
programg.
95004....................... Percut allergy skin SC023....................... multi-tine device.
tests.
95024....................... Id allergy test, drug/ SA048....................... pack, minimum multi-
bug. specialty visit.
....................... SG050....................... gauze, non-sterile 2in x
2in.
95027....................... Id allergy titrate- SA048....................... pack, minimum multi-
airborne. specialty visit.
....................... SC052....................... syringe 1ml.
95044....................... Allergy patch tests.... SK087....................... water, distilled.
95052....................... Photo patch test....... SK087....................... water, distilled.
95148....................... Antigen therapy SH009....................... antigen, venom.
services.
95805....................... Multiple sleep latency SK094....................... x-ray marking pencil.
test.
96040....................... Genetic counseling, 30 SK062....................... patient education booklet.
min.
96102....................... Psycho testing by SK057....................... paper, laser printing (each
technician. sheet).
96360....................... Hydration iv infusion, SC018....................... iv infusion set.
init.
....................... SC051....................... syringe 10-12ml.
....................... SG050....................... gauze, non-sterile 2in x
2in.
96365....................... Ther/proph/diag iv inf, SC018....................... iv infusion set.
init.
....................... SC051....................... syringe 10-12ml.
....................... SG050....................... gauze, non-sterile 2in x
2in.
96366....................... Ther/proph/diag iv inf SB022....................... gloves, non-sterile.
addon.
96367....................... Tx/proph/dg addl seq iv SB022....................... gloves, non-sterile.
inf.
96369....................... Sc ther infusion, up to SC013....................... infusion pump cassette-
1 hr. reservoir.
96371....................... Sc ther infusion, reset SC013....................... infusion pump cassette-
pump. reservoir.
96372....................... Ther/proph/diag inj, sc/ SB022....................... gloves, non-sterile.
im.
96374....................... Ther/proph/diag inj, iv SB022....................... gloves, non-sterile.
push.
....................... SC051....................... syringe 10-12ml.
....................... SG050....................... gauze, non-sterile 2in x
2in.
96375....................... Tx/pro/dx inj new drug SB022....................... gloves, non-sterile.
addon.
....................... SC051....................... syringe 10-12ml.
96401....................... Chemo, anti-neopl, sq/ SC051....................... syringe 10-12ml.
im.
....................... SG050....................... gauze, non-sterile 2in x
2in.
96402....................... Chemo hormon antineopl SC051....................... syringe 10-12ml.
sq/im.
....................... SG050....................... gauze, non-sterile 2in x
2in.
96409....................... Chemo, iv push, sngl SC018....................... iv infusion set 22.
drug.
....................... SC051....................... syringe 10-12ml.
96411....................... Chemo, iv push, addl SC018....................... iv infusion set.
drug.
....................... SC051....................... syringe 10-12ml.
96413....................... Chemo, iv infusion, 1 SC018....................... iv infusion set.
hr.
....................... SC051....................... syringe 10-12ml.
96417....................... Chemo iv infus each SC018....................... iv infusion set.
addl seq.
96445....................... Chemotherapy, SC018....................... iv infusion set.
intracavitary.
....................... SH069....................... sodium chloride 0.9%
irrigation (500-1000ml
uou).
96542....................... Chemotherapy injection. SC018....................... iv infusion set.
99366....................... Team conf w/pat by hc SK062....................... patient education booklet.
pro.
G0270....................... MNT subs tx for change SK057....................... paper, laser printing (each
dx. sheet).
....................... SK062....................... patient education booklet.
G0271....................... Group MNT 2 or more 30 SK057....................... paper, laser printing (each
mins. sheet).
----------------------------------------------------------------------------------------------------------------

Table 8--Overall Supply Price Calculation Corrections for Facility Settings
----------------------------------------------------------------------------------------------------------------
CMS supply code with overall
CPT/HCPCS Code Short descriptor price corrections Description of supply
----------------------------------------------------------------------------------------------------------------
15738....................... Muscle-skin graft, leg. SG017....................... bandage, Kling, non-sterile
2in.
15820....................... Revision of lower SA082....................... pack, ophthalmology visit
eyelid. (w-dilation).
15821....................... Revision of lower SA082....................... pack, ophthalmology visit
eyelid. (w-dilation).
15822....................... Revision of upper SA082....................... pack, ophthalmology visit
eyelid. (w-dilation).
19303....................... Mast, simple, complete. SB006....................... drape, non-sterile, sheet
40in x 60in.
20900....................... Removal of bone for SA054....................... pack, post-op incision care
graft. (suture).

[[Page 40061]]

21011....................... Exc face les sc < 2 cm. SA048....................... pack, minimum multi-
specialty visit.
21013....................... Exc face tum deep < 2 SA048....................... pack, minimum multi-
cm. specialty visit.
21193....................... Reconst lwr jaw w/o SJ061....................... tongue depressor.
graft.
21194....................... Reconst lwr jaw w/graft SJ061....................... tongue depressor.
21240....................... Reconstruction of jaw SJ061....................... tongue depressor.
joint.
21366....................... Treat cheek bone SJ061....................... tongue depressor.
fracture.
21435....................... Treat craniofacial SJ061....................... tongue depressor.
fracture.
21555....................... Exc neck les sc < 3 cm. SA048....................... pack, minimum multi-
specialty visit.
21930....................... Exc back les sc < 3 cm. SA048....................... pack, minimum multi-
specialty visit.
22902....................... Exc abd les sc < 3 cm.. SA048....................... pack, minimum multi-
specialty visit.
23075....................... Exc shoulder les sc < 3 SA048....................... pack, minimum multi-
cm. specialty visit.
24075....................... Exc arm/elbow les sc < SA048....................... pack, minimum multi-
3 cm. specialty visit.
25075....................... Exc forearm les sc < 3 SA048....................... pack, minimum multi-
cm. specialty visit.
26115....................... Exc hand les sc < 1.5 SA048....................... pack, minimum multi-
cm. specialty visit.
27047....................... Exc hip/pelvis les sc < SA048....................... pack, minimum multi-
3 cm. specialty visit.
27327....................... Exc thigh/knee les sc < SA048....................... pack, minimum multi-
3 cm. specialty visit.
27618....................... Exc leg/ankle tum < 3 SA048....................... pack, minimum multi-
cm. specialty visit.
28307....................... Incision of metatarsal. SA048....................... pack, minimum multi-
specialty visit.
28340....................... Resect enlarged toe SA048....................... pack, minimum multi-
tissue. specialty visit.
28345....................... Repair webbed toe(s)... SA048....................... pack, minimum multi-
specialty visit.
28820....................... Amputation of toe...... SA048....................... pack, minimum multi-
specialty visit.
33516....................... Cabg, vein, six or more SA052....................... pack, post-op incision care
(staple).
34510....................... Transposition of vein SA054....................... pack, post-op incision care
valve. (suture).
35013....................... Repair artery rupture, SA048....................... pack, minimum multi-
arm. specialty visit.
41150....................... Tongue, mouth, jaw SA048....................... pack, minimum multi-
surgery. specialty visit.
41153....................... Tongue, mouth, neck SA048....................... pack, minimum multi-
surgery. specialty visit.
41155....................... Tongue, jaw, & neck SA048....................... pack, minimum multi-
surgery. specialty visit.
41805....................... Removal foreign body, SD134....................... tubing, suction, non-latex
gum. (6ft) with Yankauer tip
(1).
41806....................... Removal foreign body, SD134....................... tubing, suction, non-latex
jawbone. (6ft) with Yankauer tip
(1).
42160....................... Treatment mouth roof SD122....................... suction tip, Yankauer.
lesion.
51925....................... Hysterectomy/bladder SB006....................... drape, non-sterile, sheet
repair. 40in x 60in.
56620....................... Partial removal of SA048....................... pack, minimum multi-
vulva. specialty visit.
57284....................... Repair paravag defect, SA051....................... pack, pelvic exam.
open.
SB006....................... drape, non-sterile, sheet
40in x 60in.
57285....................... Repair paravag defect, SA051....................... pack, pelvic exam.
vag.
SB006....................... drape, non-sterile, sheet
40in x 60in.
57423....................... Repair paravag defect, SA051....................... pack, pelvic exam.
lap.
SB006....................... drape, non-sterile, sheet
40in x 60in.
58660....................... Laparoscopy, lysis..... SB006....................... drape, non-sterile, sheet
40in x 60in.
58662....................... Laparoscopy, excise SJ046....................... silver nitrate applicator.
lesions.
58670....................... Laparoscopy, tubal SJ046....................... silver nitrate applicator.
cautery.
58940....................... Removal of ovary(s).... SA052....................... pack, post-op incision care
(staple).
58952....................... Resect ovarian SB006....................... drape, non-sterile, sheet
malignancy. 40in x 60in.
64632....................... N block inj, common SA048....................... pack, minimum multi-
digit. specialty visit.
65112....................... Remove eye/revise SA050....................... pack, ophthalmology visit
socket. (no dilation).
65114....................... Remove eye/revise SA050....................... pack, ophthalmology visit
socket. (no dilation).
65235....................... Remove foreign body SA082....................... pack, ophthalmology visit
from eye. (w-dilation).
65265....................... Remove foreign body SA082....................... pack, ophthalmology visit
from eye. (w-dilation).
65272....................... Repair of eye wound.... SA082....................... pack, ophthalmology visit
(w-dilation).
65273....................... Repair of eye wound.... SA082....................... pack, ophthalmology visit
(w-dilation).
65280....................... Repair of eye wound.... SA082....................... pack, ophthalmology visit
(w-dilation).
65285....................... Repair of eye wound.... SA082....................... pack, ophthalmology visit
(w-dilation).
65286....................... Repair of eye wound.... SA082....................... pack, ophthalmology visit
(w-dilation).
65290....................... Repair of eye socket SA082....................... pack, ophthalmology visit
wound. (w-dilation).
65770....................... Revise cornea with SA050....................... pack, ophthalmology visit
implant. (no dilation).
65850....................... Incision of eye........ SA082....................... pack, ophthalmology visit
(w-dilation).
65865....................... Incise inner eye SA082....................... pack, ophthalmology visit
adhesions. (w-dilation).
65870....................... Incise inner eye SA082....................... pack, ophthalmology visit
adhesions. (w-dilation).
66180....................... Implant eye shunt...... SA082....................... pack, ophthalmology visit
(w-dilation).
66185....................... Revise eye shunt....... SA082....................... pack, ophthalmology visit
(w-dilation).
66220....................... Repair eye lesion...... SA082....................... pack, ophthalmology visit
(w-dilation).
66250....................... Follow-up surgery of SA082....................... pack, ophthalmology visit
eye. (w-dilation).
66500....................... Incision of iris....... SA082....................... pack, ophthalmology visit
(w-dilation).
66600....................... Remove iris and lesion. SA082....................... pack, ophthalmology visit
(w-dilation).
66605....................... Removal of iris........ SA082....................... pack, ophthalmology visit
(w-dilation).
66625....................... Removal of iris........ SA082....................... pack, ophthalmology visit
(w-dilation).
66630....................... Removal of iris........ SA082....................... pack, ophthalmology visit
(w-dilation).
66635....................... Removal of iris........ SA082....................... pack, ophthalmology visit
(w-dilation).
66682....................... Repair iris & ciliary SA082....................... pack, ophthalmology visit
body. (w-dilation).
66820....................... Incision, secondary SA082....................... pack, ophthalmology visit
cataract. (w-dilation).

[[Page 40062]]

66850....................... Removal of lens SA082....................... pack, ophthalmology visit
material. (w-dilation).
66852....................... Removal of lens SA082....................... pack, ophthalmology visit
material. (w-dilation).
66930....................... Extraction of lens..... SA082....................... pack, ophthalmology visit
(w-dilation).
66940....................... Extraction of lens..... SA082....................... pack, ophthalmology visit
(w-dilation).
66983....................... Cataract surg w/iol, 1 SA082....................... pack, ophthalmology visit
stage. (w-dilation).
67015....................... Release of eye fluid... SA082....................... pack, ophthalmology visit
(w-dilation).
67031....................... Laser surgery, eye SA082....................... pack, ophthalmology visit
strands. (w-dilation).
67036....................... Removal of inner eye SA082....................... pack, ophthalmology visit
fluid. (w-dilation).
67040....................... Laser treatment of SA082....................... pack, ophthalmology visit
retina. (w-dilation).
67105....................... Repair detached retina. SA082....................... pack, ophthalmology visit
(w-dilation).
67107....................... Repair detached retina. SA082....................... pack, ophthalmology visit
(w-dilation).
67110....................... Repair detached retina. SA082....................... pack, ophthalmology visit
(w-dilation).
67115....................... Release encircling SA082....................... pack, ophthalmology visit
material. (w-dilation).
67120....................... Remove eye implant SA082....................... pack, ophthalmology visit
material. (w-dilation).
67228....................... Treatment of retinal SA082....................... pack, ophthalmology visit
lesion. (w-dilation).
67400....................... Explore/biopsy eye SA082....................... pack, ophthalmology visit
socket. (w-dilation).
67412....................... Explore/treat eye SA082....................... pack, ophthalmology visit
socket. (w-dilation).
67440....................... Explore/drain eye SA082....................... pack, ophthalmology visit
socket. (w-dilation).
67908....................... Repair eyelid defect... SG008....................... applicator, cotton-tipped,
non-sterile 6in.
88356....................... Analysis, nerve........ SL108....................... pipette.
----------------------------------------------------------------------------------------------------------------

c. AMA RUC Recommendations in CY 2010 for Changes to Direct PE Inputs
In a March 2010 letter, the AMA RUC made specific PE
recommendations that we consider below. As stated earlier, the proposed
changes that follow are included in the proposed CY 2011 direct PE
database, which is available on the CMS Web site under the downloads
for the CY 2011 PFS proposed rule at http://www.cms.gov/PhysicianFeeSched/.
(1) Electrogastrography and Esophageal Function Test
We are accepting the AMA RUC recommendations for the CY 2011 PE
inputs for the following CPT codes: 91132 (Electrogastrography,
diagnostic, transcutaneous); 91133 (Electrogastrography, diagnostic,
transcutaneous; with provocative testing); 91038 (Esophageal function
test, gastroesophageal reflux test with nasal catheter intraluminal
impedance electrode(s) placement, recording, analysis and
interpretation; prolonged (greater than 1 hour, up to 24 hours)). For
CPT code 91038, we have assumed a useful life of 5 years for the
equipment item ``ZEPHR impedance/pH reflux monitoring system with data
recorder, software, monitor, workstation and cart,'' based on its entry
in the AHA's publication, ``Estimated Useful Lives of Depreciable
Hospital Assets,'' which we use as a standard reference. The proposed
CY 2011 direct PE database has been changed accordingly.
(2) 64-Slice CT Scanner and Software
The AMA RUC submitted an updated recommendation regarding the
correct pricing of the 64-slice CT scanner and its accompanying
software. Based on the documentation accompanying the recommendation,
we are accepting this recommendation and updating the price input for
the 64-slice scanner and software. This affects the following four CPT
codes that use either the scanner, the software, or both: 75571
(computed tomography, heart, without contrast material, with
quantitative evaluation of coronary calcium); 75572 (Computed
tomography, heart, with contrast material, for evaluation of cardiac
structure and morphology (including 3D image postprocessing, assessment
of cardiac function, and evaluation of venous structures, if
performed)); 75573 (Computed tomography, heart, with contrast material,
for evaluation of cardiac structure and morphology in the setting of
congenital heart disease (including 3D image postprocessing, assessment
of LV cardiac function, RV structure and function and evaluation of
venous structures, if performed)); and 75574 (Computed tomographic
angiography, heart, coronary arteries and bypass grafts (when present),
with contrast material, including 3D image postprocessing (including
evaluation of cardiac structure and morphology, assessment of cardiac
function, and evaluation of venous structure, if performed)). The
proposed CY 2011 direct PE database has been modified accordingly.
(3) Cystometrogram
The AMA RUC recently identified a rank order anomaly regarding CPT
code 51726 (Complex cystometrogram (i.e., calibrated electronic
equipment)). Currently, this procedure has higher PE RVUs, despite
being less resource- intensive than the three CPT codes for which it
serves as the base: 51727 (Complex cystometrogram (i.e., calibrated
electronic equipment); with urethral pressure profile studies (i.e.,
urethral closure pressure profile), any technique); 51728 (Complex
cystometrogram (i.e., calibrated electronic equipment); with voiding
pressure studies (i.e., bladder voiding pressure), any technique); and
51729 (Complex cystometrogram (i.e., calibrated electronic equipment);
with voiding pressure studies (i.e., bladder voiding pressure) and
urethral pressure profile studies (i.e., urethral closure pressure
profile), any technique).
Since usual AMA RUC policy is that CPT codes with a 0-day global
period do not have pre-service time associated with the code, the AMA
RUC recommended removing the nonfacility pre-service clinical staff
time from the PE inputs for 51726. Additionally, the AMA RUC
recommended that the nonfacility clinical intra-service staff time for
CPT code 51276 be reduced from the 118 minutes of intra-service
clinical staff time currently assigned to the code to 85 minutes of
intra-service clinical staff time. These changes would resolve the rank
order anomaly and bring the PE inputs for CPT code 51726 into alignment
with the other three codes. Finally, and for the reasons

[[Page 40063]]

stated above, the AMA RUC recommended that CMS remove the 23 minutes of
pre-service nonfacility clinical staff time from CPT code 51725 (Simple
cystometrogram (CMG) (e.g., spinal manometer)). We are accepting these
recommendations and, therefore, have changed the direct PE inputs for
CPT codes 51725 and 51726 in the nonfacility setting in the proposed CY
2011 direct PE database.
(4) Breath Hydrogen Test
The AMA RUC provide recommendations regarding the PE inputs for CPT
code 91065 (breath hydrogen test (e.g., for detection of lactase
deficiency, fructose intolerance, bacterial overgrowth, or oro-cecal
gastrointestinal transit). We are accepting the recommendations with
two modifications. We have folded the two pieces of equipment listed as
``quinGas Table-Top Support Stand, 3 Tank'' and ``Drying Tube, Patient
Sample'' into the ``BreathTrackerDigital SC Instrument'' and summed
their inputs into one equipment line-item, since these equipment items
are used together specifically for the service in question. We have
increased the useful life input of the ``BreathTrackerDigital SC
Instrument'' from 7 to 8 years based on our use of the American
Hospital Association (AHA)'s publication entitled, ``Estimated Useful
Lives of Depreciable Hospital Assets'' as a standard reference.
Additionally, because the AMA RUC did not include equipment times in
their recommendations for this CPT code, we have used 53 minutes as the
total time for all equipment items based on the total intra-service
period for the clinical labor, consistent with our general policy for
establishing equipment times. These modifications are reflected in the
proposed CY 2011 direct PE database.
(5) Radiographic Fluoroscopic Room
A recent AMA RUC review of services that include the radiographic
fluoroscopic room (CMS Equipment Code EL014) as a direct PE revealed
that the use of the item is no longer typical for certain services in
which it is specified within the current direct cost inputs. The AMA
RUC recommended to CMS that the radiographic fluoroscopic room be
deleted from CPT codes 64420 (Injection, anesthetic agent; intercostal
nerve, single); 64421 (Injection, anesthetic agent; intercostal nerves,
multiple, regional block); and 64620 (Destruction by neurolytic agent,
intercostal nerve).
We are accepting these recommendations and, therefore, these
changes are included in the proposed CY 2011 direct PE database.
The AMA RUC also informed us that it has convened a workgroup to
examine the inclusion of the fluoroscopic room across a broader range
of codes. We will consider any future recommendations from the AMA RUC
on this topic when they are submitted.
d. Referral of Existing CPT Codes for AMA RUC Review
As part of our review of high cost supplies, we conducted a
clinical review of the procedures associated with high cost supplies to
confirm that those supplies currently are used in the typical case
described by the CPT codes. While we confirmed that most high cost
supplies could be used in the procedures for which they are currently
direct PE inputs, we noted that one of the high cost supplies, fiducial
screws (CMS Supply Code SD073) with a current price of $558, is
included as a direct PE input for two CPT codes, specifically 77301
(Intensity modulated radiotherapy plan, including dose-volume
histograms for target and critical structure partial tolerance
specifications) and 77011 (Computed tomography guidance for
stereotactic localization). The documentation used in the current
pricing of the supply item describes a kit that includes instructions,
skull screws, a drill bit, and a collar for the TALON[reg] System
manufactured by Best nomos. Best nomos' literature describes the
insertion of the screws into the patient's skull to ensure accurate
set-up. When CPT codes 77301 and 77011 were established in CY 2002 and
CY 2003, respectively, we accepted the AMA RUC recommendations to
include fiducial screws in the PE for these services. Upon further
review, while we understand why this supply may be considered a typical
PE input for CPT code 77011, we do not now believe that fiducial
screws, as described in the Best nomos literature, would typically be
used in CPT code 77301, where the most common clinical scenario would
be treatment of prostate cancer.
Therefore, in order to ensure that CPT codes 77301 and 77011 are
appropriately valued for CY 2011 through the inclusion or exclusion of
fiducial screws in their PE, we are asking the AMA RUC to review these
CPT codes with respect to the inclusion of fiducial screws in their PE.
We are requesting that the AMA RUC make recommendations to us regarding
whether this supply should be included in the PE or removed from the PE
for CPT codes 77301 and 77011 in a timeframe that would allow us to
adopt interim values for these codes for CY 2011, should the AMA RUC
recommend a change. If the AMA RUC continues to recommend the inclusion
of fiducial screws in the PE for CPT code 77301 and/or 77011 for CY
2011, we are requesting that the AMA RUC provide us with a detailed
rationale for the inclusion of this specialized supply in the PE for
the typical case reported under the relevant CPT code. We would also
request that the AMA RUC furnish updated pricing information for the
screws if they continue to recommend the screws as a PE input for one
or both of these CPT codes in CY 2011.
e. Updating Equipment and Supply Price Inputs for Existing Codes
Historically, we have periodically received requests to change the
PE price inputs for supplies and equipment in the PE database. In the
past, we have considered these requests on an ad hoc basis and updated
the price inputs as part of quarterly or annual updates if we believed
them to be appropriate. In this proposed rule, we are proposing to
establish a regular and more transparent process for considering public
requests for changes to PE database price inputs for supplies and
equipment used in existing codes.
We are proposing to act on public requests to update equipment and
supply price inputs annually through rulemaking by following a regular
and consistent process as discussed in the following paragraphs. We are
proposing to use the annual PFS proposed rule released in the summer
and the final rule released on or about November 1 each year as the
vehicle for making these changes.
We will accept requests for updating the price inputs for supplies
and equipment on an ongoing basis; requests must be received no later
than December 31 of each CY to be considered for inclusion in the next
proposed rule. In that next proposed rule, we would present our review
of submitted requests to update price inputs for specific equipment or
supplies and our proposals for the subsequent calendar year. We would
then finalize changes in the final rule for the upcoming calendar year.
Our review of the issues and consideration of public comments may
result in the following outcomes that would be presented in the final
rule with comment period:
Updating the equipment or supply price inputs, as
requested.
Updating the equipment or supply price inputs, with
modifications.
Rejecting the new price inputs.

[[Page 40064]]

Declining to act on the request pending a recommendation
from the AMA RUC.
To facilitate our review and preparation of issues for the proposed
rule, at a minimum, we would expect that requesters would provide the
following information:
Name and contact information for the requestor.
The name of the item exactly as it appears in the direct
PE file under downloads for the most recent PFS final rule with comment
period, available on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
In order to best evaluate the requests in the context of our goal
of utilizing accurate market prices for these items as direct PE
inputs, we also would expect requestors to provide multiple invoices
from different suppliers/manufacturers. In some cases, multiple sources
may not be available, whereupon a detailed explanation should be
provided to support the request. When furnishing invoices, requestors
should take into consideration the following parameters:
++ May be either print or electronic but should be on supplier and/
or manufacturer stationery (for example, letterhead, billing statement,
etc.)
++ Should be for the typical, common, and customary version of the
supply or equipment that is used to furnish the services.
++ Price should be net of typical rebates and/or any discounts
available, including information regarding the magnitude and rationale
for such rebates or discounts.
++ If multiple items are presented on the same invoice, relevant
item(s) should be clearly identified.
We are soliciting public comments on this proposed process,
including the information that requestors should furnish to facilitate
our full analysis in preparation for the next calendar year's
rulemaking cycle.

B. Malpractice Relative Value Units (RVUs)

1. Background
Section 1848(c) of the Act requires that each service paid under
the PFS be comprised of three components: work, PE, and malpractice.
From 1992 to 1999, malpractice RVUs were charge-based, using weighted
specialty-specific malpractice expense percentages and 1991 average
allowed charges. Malpractice RVUs for new codes after 1991 were
extrapolated from similar existing codes or as a percentage of the
corresponding work RVU. Section 4505(f) of the BBA required us to
implement resource-based malpractice RVUs for services furnished
beginning in 2000. Therefore, initial implementation of resource-based
malpractice RVUs occurred in 2000.
The statute also requires that we review, and if necessary adjust,
RVUs no less often than every 5 years. The first review and update of
resource-based malpractice RVUs was addressed in the CY 2005 PFS final
rule with comment period (69 FR 66263). Minor modifications to the
methodology were addressed in the CY 2006 PFS final rule with comment
period (70 FR 70153). In the CY 2010 PFS final rule with comment
period, we implemented the second review and update of malpractice
RVUs. For a discussion of the second review and update of malpractice
RVUs see the CY 2010 PFS proposed rule (74 FR 33537) and final rule
with comment period (74 FR 61758).
2. Malpractice RVUs for New and Revised Services Effective Before the
Next 5-Year Review
Currently, malpractice RVUs for new and revised codes effective
before the next 5-Year Review (for example, effective CY 2011 through
CY 2014) are determined by a direct crosswalk to a similar ``source''
code or a modified crosswalk to account for differences in work RVUs
between the new/revised code and the source code. For the modified
crosswalk approach, we adjust the malpractice RVUs for the new/revised
code to reflect the difference in work RVUs between the source code and
the AMA RUC's recommended work value (or the work value we are applying
as an interim final value under the PFS) for the new code. For example,
if the interim final work RVUs for the new/revised code are 10 percent
higher than the work RVUs for the source code, the malpractice RVUs for
the new/revised code would be increased by 10 percent over the source
code RVUs. This approach presumes the same risk factor for the new/
revised code and source code but uses the work RVUs for the new/revised
code to adjust for risk-of-service. The assigned malpractice RVUs for
new/revised codes effective between updates remain in place until the
next 5-Year Review.
We will continue our current approach for determining malpractice
RVUs for new/revised codes that become effective before the next 5-Year
Review and update. Under this approach we will crosswalk the new/
revised code to the RVUs of a similar source code and adjust for
differences in work (or, if greater, the clinical labor portion of the
fully implemented PE RVUs), between the source code and the new/revised
code. Additionally, we will publish a list of new/revised codes and the
analytic crosswalk(s) used for determining their malpractice RVUs in
the final rule with comment period, which we have not previously done.
The CY 2011 malpractice RVUs for new/revised codes will be implemented
as interim final values in the CY 2011 PFS final rule with comment
period, where they will be subject to public comment. They will then be
finalized in the CY 2012 PFS final rule with comment period.
3. Revised Malpractice RVUs for Selected Disc Arthroplasty Services
As discussed in the CY 2010 PFS proposed rule (74 FR 33539), we
assign malpractice RVUs to each service based upon a weighted average
of the risk factors of all specialties that furnish the service. For
the CY 2010 review of malpractice RVUs, we used CY 2008 Medicare
payment data on allowed services to establish the frequency of a
service by specialty. CPT code 22856 (Total disc arthroplasty
(artificial disc), anterior approach, including discectomy with end
plate preparation (includes osteophytectomy for nerve root or spinal
cord decompression and microdissection), single interspace, cervical)
had zero allowed services for CY 2008. Therefore, our contractor
initially set the level of services to 1, and assigned a risk factor
according to the average risk factor for all services that do not
explicitly have a separate technical or professional component. We
proposed to adopt our contractor's initial malpractice RVUs for CPT
code 22856 in the CY 2010 proposed rule. Application of the average
physician risk factor would have resulted in a significant decrease in
malpractice RVUs for CPT code 22856 in CY 2010.
Several commenters on the CY 2010 PFS proposed rule expressed
concern regarding the proposed malpractice RVUs for CPT code 22856,
which represented a proposed reduction of more than 77 percent. The
commenters stated that this service is predominantly furnished by
neurosurgeons and orthopedic surgeons. Given the high risk factors
associated with these specialty types and the changes in malpractice
RVUs for comparable services, the commenters stated that a reduction in
the malpractice RVUs of this magnitude for CPT code 22856 could not be
correct.
After consideration of the public comments, for CY 2010, we set the
risk factor for CPT code 22856 as the weighted average risk factor of
six comparable procedures mentioned by

[[Page 40065]]

the commenters: CPT code 22554 (Arthrodesis, anterior interbody
technique, including minimal discectomy to prepare interspace (other
than for decompression); cervical below C2); CPT code 22558
(Arthrodesis, anterior interbody technique, including minimal
discectomy to prepare interspace (other than for decompression);
lumbar); CPT code 22857 (Total disc arthroplasty (artificial disc),
anterior approach, including discectomy to prepare interspace (other
than for decompression), single interspace, lumbar); CPT code 22845
(Anterior instrumentation; 2 to 3 vertebral segments (list separately
in addition to code for primary procedure)); CPT code 63075
(Discectomy, anterior, with decompression of spinal cord and/or nerve
root(s), including osteophytectomy; cervical, single interspace); and
CPT code 20931 (Allograft for spine surgery only; structural (list
separately in addition to code for primary procedure)). The weighted
average risk factor for these services is 8.4.
Since publication of the CY 2010 PFS final rule with comment
period, stakeholders have mentioned that we made significant changes to
the malpractice RVUs for CPT code 22856 in CY 2010. The commenters also
brought to our attention that other services are clinically similar to
CPT code 22856 and have similar work RVUs, and therefore, some
stakeholders believe these services should all have similar malpractice
RVUs. Services mentioned by the stakeholders that are clinically
similar to CPT code 22856 include CPT code 22857; CPT code 22861
(Revision including replacement of total disc arthroplasty (artificial
disc), anterior approach, single interspace; cervical); CPT code 22862
(Revision including replacement of total disc arthroplasty (artificial
disc) anterior approach, lumbar); CPT code 22864 (Removal of total disc
arthroplasty (artificial disc), anterior approach, single interspace;
cervical); and CPT code 22865 (Removal of total disc arthroplasty
(artificial disc), anterior approach, single interspace; lumbar).
After further review of this issue, we are proposing to apply the
same risk factor used for CPT code 22856 to certain other services
within this family of services (CPT codes 22857 through 22865) for
which there were no allowed services in CY 2008. CPT codes 22861 and
22864 had zero allowed services in CY 2008 and our contractor initially
set their malpractice RVUs in the same way as it did for CPT code
22856. Therefore, we will assign the weighted average risk factor we
use for CPT code 22856 (that is, the weighted average of the risk
factors for CPT codes 20931, 22554, 22558, 22845, 22857, and 63075) to
CPT codes 22861 and 22864. However, CPT codes 22857, 22862, and 22865
are low volume services (allowed services under 100). Our policy for
low volume services is to apply the risk factor of the dominant
specialty as indicated by our claims data. We will continue to apply
our policy for low volume services to CPT codes 22857, 22862, and
22865.

C. Potentially Misvalued Services Under the Physician Fee Schedule

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

[[Page 40066]]

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

[[Page 40067]]

necessary before the code can be reviewed. In that case, it would
determine the appropriate future timeframe for review.
We also note that in its June 2008 Report to Congress entitled
``Reforming the Health Care System'' and in the context of a discussion
about primary care, MedPAC acknowledges, ``* * * Efficiency can improve
more easily for other types of services, such as procedures, with
advances in technology, technique, and other factors. Ideally, when
such efficiency gains are achieved, the fee schedule's relative value
units (RVUs) for the affected services should decline accordingly,
while budget neutrality would raise the RVUs for the fee schedule's
primary care services.'' (page 27). Section III.C.5. of this proposed
rule includes a discussion regarding periodic updates to the costs of
high cost supplies. This discussion is highly relevant to new
technology services, where growth in volume of a service as it diffuses
into clinical practice may lead to a decrease in the cost of expensive
supplies. We also expect that other efficiencies in physician work and
PE may be achieved after an initial period of relative inefficiency
that reflects the ``learning curve.'' We plan to pay particular
attention to the work values and direct PE inputs for these new
services and the AMA RUC's periodic review process to ensure that any
efficiencies are captured under the PFS over time, recognizing that the
appropriate timing for revaluing these services needs to be considered
on a case-by-case basis depending on the growth rate in service volume.
We have also addressed the fourth category (multiple codes that are
frequently billed in conjunction with furnishing a single service) in
rulemaking prior to the enactment of the ACA. As discussed in the CY
2009 PFS proposed rule (73 FR 38586), we have a longstanding policy of
reducing payment for multiple surgical procedures performed on the same
patient, by the same physician, on the same day. Over the ensuing
years, the multiple procedure payment reduction (MPPR) policy has been
extended to a number of nuclear diagnostic and diagnostic imaging
procedures. We continue our work to recognize efficiencies in this area
with a proposal to expand the MPPR policy to additional combinations of
imaging services and to therapy services for CY 2011 as described in
section II.C.4. of this proposed rule.
We note the AMA RUC has also established a screen to identify
services performed by the same physician on the same date of service 95
percent of the time or more. Over the past 2 years, the CPT Editorial
Panel has established new bundled codes to describe a comprehensive
service for certain combinations of these existing services that are
commonly furnished together, and the AMA RUC has recommended work
values and direct PE inputs to CMS for these comprehensive service
codes that recognize the associated efficiencies. CMS looks forward to
working with the AMA RUC in this joint effort to examine codes commonly
reported together and more appropriately value common combinations
services.
We address the fifth category of potentially misvalued codes (codes
with low relative values, particularly those that are often billed
multiple times for a single treatment) in section II.C.3.b. of this
proposed rule. That is, we are providing a list of services with low
work RVUs that are commonly reported with multiple units in a single
encounter and requesting that the AMA RUC review these codes that we
have identified as potentially misvalued.
The sixth category (codes which have not been subject to review
since the implementation of the RBRVS (the so-called `Harvard-valued
codes')) also continues to be addressed by CMS and the AMA RUC on an
ongoing basis. As we noted in the CY 2009 PFS proposed rule (73 FR
38589), there were at that time approximately 2900 codes, representing
$5 billion in annual spending, that were originally valued using
Harvard data and have not subsequently been evaluated by the AMA RUC.
Consequently, in CY 2009, we requested that the AMA RUC engage in an
ongoing effort to review the remaining Harvard-valued codes, focusing
first on the high-volume, low intensity codes (73 FR 38589). In
response to our request, the AMA RUC initially conducted an analysis of
Harvard-valued services with utilization above 10,000 services per
year, which resulted in a list of 296 distinct services (73 FR 69883).
The AMA RUC, in its public comment on the CY 2009 proposed rule, stated
that it believes it would be effective to limit any review to these 296
services and also noted that of the 296 services identified, 23 had
already been identified by another screen and were in the process of
being reviewed (73 FR 69883). To date, the AMA RUC has reviewed and
submitted to CMS recommendations for revised work RVUs and/or direct PE
inputs for a number of Harvard-valued codes, prioritizing those codes
with utilization of over 1 million services. The AMA RUC and CMS intend
to continue our ongoing assessment of Harvard-valued codes, next
targeting codes with utilization of over 100,000 services.
Finally, the seventh category of potentially misvalued codes
mentioned in section 1848(c)(2)(K)(ii) (as added by section 3134 of the
ACA) is all other codes determined to be appropriate by the Secretary.
In this category, CMS has previously proposed policies and requested
that the AMA RUC review codes for which there have been shifts in the
site-of-service (site-of-service anomalies), as well as codes that
qualify as ``23-hour stay'' outpatient services. The policies for
valuation of both the site-of-service anomaly codes and the ``23-hour
stay'' codes are developed further in sections II.C.3.d. and e.,
respectively, of this proposed rule. For CY 2011, we are also
identifying codes with low work RVUs but are high volume based on
claims data as another category of potentially misvalued codes and are
referring these codes to the AMA RUC for review, as discussed in
section II.C.3.b. of this proposed rule. In addition, for CY 2011 we
are newly targeting key codes that the AMA RUC uses as reference
services for valuing other services, termed ``multispecialty points of
comparison'' services, and referring these to the AMA RUC for review as
potentially misvalued codes as described in section II.C.3.a. of this
proposed rule. Finally, we note the AMA RUC has also established
screens to identify potentially misvalued codes in additional
categories, including codes with a high intra-service work per unit of
time (IWPUT) and codes representing services that had been surveyed by
one specialty, but are now performed by a different specialty. We will
continue to review AMA RUC recommendations for revised work RVUs and/or
direct PE inputs for codes that fall into these categories.
As a result of the combined efforts of CMS and the AMA RUC to
address potentially misvalued codes, for CY 2009 the AMA RUC
recommended revised work values and/or PE inputs for 204 misvalued
services (73 FR 69883). For CY 2010, an additional 113 codes were
identified as misvalued and the AMA RUC provided new recommendations
for revised work RVUs and/or PE inputs to CMS as discussed in the CY
2010 PFS final rule with comment period (74 FR 61778). Upon review of
the AMA RUC-recommended work RVUs, CMS accepted the majority of the
values as appropriate adjustments to the RVUs under the PFS, in
accordance with section 1848(c) of the Act. However, for a number of
codes, mainly the site-of-service anomaly codes, we indicated

[[Page 40068]]

that although we would accept the AMA RUC valuations for these site-of-
service anomaly codes on an interim basis through CY 2010, we had
ongoing concerns about the methodology used by the AMA RUC to review
these services (73 FR 69883 and 74 FR 61776 through 61778,
respectively). In the CY 2010 PFS final rule with comment period, we
requested that the AMA RUC reexamine the site-of-service anomaly codes
and use the building block methodology to revalue the services (74 FR
61777). In that same rule, we also stated that we would continue to
examine these codes and consider whether it would be appropriate to
propose additional changes in future rulemaking. We discuss our CY 2011
proposal with respect to these codes in section II.C.3.d. of this
proposed rule.
c. Validating RVUs of Potentially Misvalued Codes
In addition to identifying and reviewing potentially misvalued
codes, section 1848(c)(2)(L) (as added by section 3134 of the ACA)
specifies that the Secretary shall establish a formal process to
validate relative value units under the PFS. The validation process may
include validation of work elements (such as time, mental effort and
professional judgment, technical skill and physical effort, and stress
due to risk) involved with furnishing a service and may include
validation of the pre, post, and intra-service components of work. The
Secretary is directed to validate a sampling of the work RVUs of codes
identified through any of the seven categories of potentially misvalued
codes specified by section 1848(c)(2)(K)(ii) (as added by section 3134
of the ACA). Furthermore, the Secretary may conduct the validation
using methods similar to those used to review potentially misvalued
codes, including conducting surveys, other data collection activities,
studies, or other analyses as the Secretary determines to be
appropriate to facilitate the validation of RVUs of services.
Currently, while CMS does assess the AMA RUC- recommended work RVUs to
determine if the recommendations constitute appropriate adjustments to
the RVUs under the PFS, we intend to establish a more extensive
validation process of RVUs in the future in accordance with the
requirements of section 1848(c)(2)(L) (as added by section 3134 of the
ACA). Therefore, we are soliciting public comments on this proposed
rule on possible approaches and methodologies that we should consider
for a validation process. We are especially interested in public
comments regarding approaches, including the use of time and motion
studies, to validate estimates of physician time and intensity that are
factored into the work RVUs for services with rapid growth in Medicare
expenditures, one of the categories that the statute specifically
directs CMS to examine. We plan to discuss the validation process in a
future PFS rule once we have considered the matter further in
conjunction with any public comments and other input from stakeholders
that we receive.
3. CY 2011 Identification and Review of Potentially Misvalued Services
In this section, we discuss codes that may be misvalued according
to five different criteria:
Codes on the multi-specialty points of comparison list;
Codes with low work RVUs commonly billed in multiple units
per single encounter;
Codes with high volume and low work RVUs;
Codes with site-of-service anomalies; and
Codes that qualify as ``23-hour stay'' outpatient
services.
a. Codes on the Multispecialty Points of Comparison List
The AMA RUC uses a scale referred to as the multispecialty points
of comparison (MPC) to evaluate the reasonableness of a specialty
society's recommended RVU value for a service. The MPC list contains
reference codes of established comparison services that are used in the
valuation of new codes. The current MPC list consists of 316 codes
which the AMA RUC may use to compare and contrast the relativity of
codes under review to existing relative values. Since the AMA RUC may
use the values on the MPC list as a basis for relativity when
determining the values for new, revised, and newly reviewed codes
(including potentially misvalued codes), it is essential that the
services on the MPC list be appropriately valued since any codes
misvalued on the MPC list could contribute to the misvaluing of other
codes under review. While we believe that the entire MPC list should be
assessed to ensure that services are paid appropriately under the PFS,
we have prioritized the review of the MPC list, ranking the codes by
allowed service units and charges based on CY 2009 claims data. We are
proposing to refer the codes in Table 9 to the AMA RUC for review.

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

b. Codes With Low Work RVUs Commonly Billed in Multiple Units per
Single Encounter
Consistent with section 1848(c)(2)(K)(ii) (as added by section 3134
of the ACA) which identifies categories of potentially misvalued codes
for our review, we believe services with low work RVUs that are
commonly billed with multiple units in a single encounter are an
additional appropriate category for identifying potentially misvalued
codes. An example of a high multiple/low work RVU service is CPT code
95004 (Percutaneous tests (scratch, puncture, prick) with allergenic
extracts, immediate type reaction, including test interpretation and
report by a physician, specify number of tests). For purposes of
compiling a list of the high multiple/low work RVU services, we defined
a high multiple service as one that is commonly performed in multiples
of 5 or more per day. Then, we selected from high multiple services
with work RVUs of less than or equal to 0.5 RVUs. We note that in
selecting 5 per day as the minimum threshold for the number of common
services performed in a multiple service encounter, we intended to
establish a meaningful threshold which, in conjunction with the

[[Page 40069]]

threshold for work RVUs of 0.5 RVUs or less, would produce a reasonable
number of services for the RUC to review that have substantial total
work RVUs for the comprehensive service furnished during a single
treatment. That is, as a general example, with a work RVU threshold of
0.5 RVUs and a multiple threshold of 5 per day, the total work RVUs for
a typical treatment would equate to 2.5 RVUs, which is approximately
comparable to a high level office visit, an interpretation of a complex
imaging procedure, or a minor surgical procedure.
We are asking the AMA RUC to review the codes in Table 10.

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

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

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

d. Codes With Site-of-Service Anomalies
In previous years, we requested that the AMA RUC review codes that,
according to the Medicare claims database, have experienced a change in
the typical site of service since the original valuation of the code.
For example, we have found services that originally were provided in
the inpatient setting but for which current claims data show the
typical case has shifted to being furnished outside the inpatient
setting. Since the procedures were typically performed in the inpatient
setting when the codes were originally valued, the work RVUs for these
codes would have been valued to include the inpatient physician work
provided, as well as to reflect the intensive care and follow-up
normally associated with an inpatient procedure. If the typical case
for the procedure has shifted from the inpatient setting to an
outpatient or physician's office setting, it is reasonable to expect
that there have been changes in medical practice, and that such changes
would represent a decrease in physician time or intensity or both. The
AMA RUC reviewed and recommended to CMS revised work RVUs for 29 codes
for CY 2009 and 11 codes for CY 2010 that were identified as having
site-of-service anomalies.
In the CY 2010 PFS proposed and final rules with comment period (74
FR 33556 and 74 FR 61777, respectively), we encouraged the AMA RUC to
utilize the building block methodology when revaluing services with
site-of-service anomalies. Specifically, where the AMA RUC has
determined in its review that changes in the inclusion of inpatient
hospital days, office visits, and hospital discharge day management
services (that is, the ``building blocks'' of the code) are warranted
in the revaluation of the code, we asked the AMA RUC to adjust the
site-of-service anomaly code for the work RVUs associated with those
changes.
Additionally, we suggested that in cases where the AMA RUC has
adjusted the pre-service, intra-service and post-service times of the
code under review, the AMA RUC should also make associated work RVU
adjustments to account for those changes. However, we remain concerned
that in the AMA RUC's recommendations of the work RVUs for the CYs 2009
and 2010 site-of-service anomaly codes, the AMA RUC may have determined
that eliminating or reallocating pre-service and post-service times,
hospital days, office visits, and hospital discharge day management
services was appropriate to reflect the typical case that is now
occurring in a different setting, but the work RVUs associated with
those changes may not have been systematically extracted or reallocated
from the total work RVU value for the service.
In the CYs 2009 and 2010 PFS final rules with comment period (73 FR
69883 and 74 FR 61776 through 61778, respectively), we indicated that
although we would accept the AMA RUC valuations for these site-of-
service anomaly codes on an interim basis through CY 2010, we had
ongoing concerns about the methodology used by the AMA RUC to review
these services. We requested that the RUC reexamine the site-of-service
anomaly codes and use the building block methodology to revalue the
services (74 FR 61777). We also stated that we would continue to
examine these codes and consider whether it would be appropriate to
propose additional changes in future rulemaking.
Accordingly, in preparation for CY 2011 rulemaking, we conducted a
comprehensive analysis of the codes that the AMA RUC reviewed for CYs
2009 and 2010 due to site-of-service anomaly concerns. We
systematically applied the reverse building block methodology to the 29
codes from CY 2009 and 11 codes from CY 2010 as follows:
First, we obtained the original work RVU value assigned to
the code (this is the ``starting value'') and made a list of the
building block services with RVUs that were originally associated with
the code (that is, before the AMA RUC reviewed the code for site-of-
service anomalies).
Next, we examined the AMA RUC-recommended changes to the
building blocks of the code.

[[Page 40070]]

We then deducted the RVUs associated with the AMA RUC's
recommended eliminations from the code's starting RVU value.
Generally, the AMA RUC eliminated inpatient hospital visit building
blocks from the value of the code since the site-of-service for the
code has shifted from the inpatient setting to another setting. We note
in some cases, the AMA RUC left an inpatient hospital visit in the
valuation of the code. We believe this is inconsistent with the change
in the site of service to non-inpatient settings. Accordingly, we
adhered to the methodology and deducted the RVUs associated with all
inpatient hospital visits from the starting value. In cases where the
AMA RUC recommended adding or substituting outpatient visits, we also
added or substituted the RVUs associated with those changes to the
starting value. If the AMA RUC recommended changes to the pre-, intra-,
or post-service times, we calculated the incremental change in RVUs
associated with that time and either added or deducted that RVU amount
from the starting value. We note that the RVU values associated with
the incremental time change are calculated using the intensity
associated with the particular pre-, intra-, or post period. For the
intensity of the intra-service period, we utilized the original IWPUT
associated with the code. The AMA RUC generally recommended allowing
only half of a hospital discharge day management service for the site-
of-service anomaly codes. That is, CPT code 99238 (Hospital discharge
day management; 30 minutes or less) has a work RVU value of 1.28;
therefore, half the value associated with CPT code 99238 is 0.64.
Accordingly, if a code had one CPT code 99238 listed as part of the
original valuation, we deducted 0.64 RVUs from the starting value.
We standardized the methodology so that each of the site-of-service
anomaly codes has half of a hospital discharge day management service
value accounted in the valuation. Finally, we note that while we
eliminated the RVUs associated with all inpatient hospital visits built
into the code's starting value, because the typical case no longer
occurs in the inpatient setting, we allowed for the possibility that in
some cases, some part of the work which had been performed in the
inpatient setting may continue to be provided even in the outpatient
setting. Therefore, to be conservative in our deductions of work RVUs
associated with the inpatient hospital codes from the starting values,
we allowed the intra-time of any inpatient hospital visits included in
the original valuation to migrate to the post-service period of the
code. Accordingly, while we deducted the full RVUs of an inpatient
hospital visit from the starting value, we added the intra-service time
of the inpatient hospital visit to the post-service time of the code
and accounted for the incremental change in RVUs. The following
description provides an example of our methodology.
CPT code 21025 (Excision of bone (e.g., for osteomyelitis or bone
abscess); mandible) has a starting value of 11.07 RVUs. Table 12 shows
the building blocks that are included in the original valuation of the
code.

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

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

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

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

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

In the final step, the RVUs associated with the changes to the
building blocks recommended by the AMA RUC (Table 14) were deducted
from or added to the starting value of 11.07 RVUs, which resulted in
the CY 2011 reverse building

[[Page 40071]]

block value of 8.08 RVUs (11.07+0.22-0.44+0.38-0.76-1.39 -0.64-
0.36=8.08).
The methodology discussed above was applied to each of the site-of-
service anomaly codes from CYs 2009 and 2010 and the results are
summarized in Tables 15 and 16.

Table 15--CY 2009 Site-of-Service Anomaly Codes \1\
----------------------------------------------------------------------------------------------------------------
CY 2008 RVUs RUC Recommended CY 2011 Reverse
CPT code Short descriptor (``starting value for CY building block
value'') 2009 value
----------------------------------------------------------------------------------------------------------------
21025.......................... Excision of bone, lower 11.07 9.87 8.09
jaw.
23415.......................... Release of shoulder 10.09 9.07 10.63
ligament.
25116.......................... Remove wrist/forearm 7.38 7.38 7.21
lesion.
42440.......................... Excise submaxillary gland 7.05 7.05 6.52
52341.......................... Cysto w/ureter stricture 6.11 5.35 5.62
tx.
52342.......................... Cysto w/up stricture tx.. 6.61 5.85 6.20
52343.......................... Cysto w/renal stricture 7.31 6.55 5.90
tx.
52344.......................... Cysto/uretero, stricture 7.81 7.05 5.58
tx.
52345.......................... Cysto/uretero w/up 8.31 7.55 5.76
stricture.
52346.......................... Cystouretero w/renal 9.34 8.58 6.05
strict.
52400.......................... Cystouretero w/congen 10.06 8.66 7.00
repr.
52500.......................... Revision of bladder neck. 9.39 7.99 8.72
52640.......................... Relieve bladder 6.89 4.73 5.01
contracture.
53445.......................... Insert uro/ves nck 15.21 15.21 11.72
sphincter.
54410.......................... Remove/replace penis 16.48 15.00 14.00
prosth.
54530.......................... Removal of testis........ 9.31 8.35 8.88
57287.......................... Revise/remove sling 11.49 10.97 10.20
repair.
62263.......................... Epidural lysis mult 6.41 6.41 6.99
sessions.
62350.......................... Implant spinal canal cath 8.04 6.00 0.41
62355.......................... Remove spinal canal 6.60 4.35 -0.43
catheter.
62360.......................... Insert spine infusion 3.68 4.28 -3.14
device.
62361.......................... Implant spine infusion 6.59 5.60 -0.92
pump.
62362.......................... Implant spine infusion 8.58 6.05 -0.51
pump.
62365.......................... Remove spine infusion 6.57 4.60 -0.35
device.
63650.......................... Implant neuroelectrodes.. 7.57 7.15 4.25
63685.......................... Insrt/redo spine n 7.87 6.00 4.80
generator.
64708.......................... Revise arm/leg nerve..... 6.22 6.22 6.17
64831.......................... Repair of digit nerve.... 10.23 9.00 8.87
65285.......................... Repair of eye wound...... 14.43 14.43 13.52
----------------------------------------------------------------------------------------------------------------
\1\ We note that in this table, we have not adjusted the RVUs for these codes for the RVU changes to the
evaluation and management codes that resulted from the CY 2010 elimination of the consultation codes (74 FR
61775). However, we note that we may, if appropriate, adjust the RVUs for services with global periods to
account for relevant changes in the RVUs for evaluation and management services as necessary.

Table 16--CY 2010 Site-of-Service Anomaly Codes \2\
----------------------------------------------------------------------------------------------------------------
CY 2009 RVUs RUC Recommended CY 2011 Reverse
CPT code Short descriptor (``starting value for CY building block
value'') 2010 value
----------------------------------------------------------------------------------------------------------------
28120.......................... Part removal of ankle/ 5.64 8.08 6.03
heel.
28122.......................... Partial removal of foot 7.56 7.56 6.79
bone.
28725.......................... Fusion of foot bones..... 11.97 11.97 12.41
28730.......................... Fusion of foot bones..... 12.21 12.21 10.06
36825.......................... Artery-vein autograft.... 10.00 15 13.12
42415.......................... Excise parotid gland/ 17.99 17.99 15.17
lesion.
42420.......................... Excise parotid gland/ 20.87 20.87 17.80
lesion.
49507.......................... Prp i/hern init block >5 9.97 9.97 9.37
yr.
49521.......................... Rerepairing hernia, 12.36 12.36 11.59
blocked.
49587.......................... Rpr umbil hern, block > 5 7.96 7.96 7.19
yr.
61885.......................... Insrt/redo neurostim 1 7.37 7.57 3.22
array.
----------------------------------------------------------------------------------------------------------------
\2\ We note that in this table, we have not adjusted the RVUs for these codes for the RVU changes to the
evaluation and management codes that resulted from the CY 2010 elimination of the consultation codes (74 FR
61775). However, we note that we may, if appropriate, adjust the RVUs for services with global periods to
account for relevant changes in the RVUs for evaluation and management services as necessary.

For most codes in Tables 15 and 16, the CY 2011 reverse building
block methodology produced a value that is somewhat lower than the AMA
RUC-recommended value. While our results suggest that the majority of
the codes with site-of-service anomalies continue to be overvalued
under the AMA RUC's most recent recommendations, we also found that the
methodology may produce a result that is considerably reduced or, in
several cases, a negative value. We understand that in previous years,
stakeholders have expressed confusion as to why the application of a
building block methodology would produce negative values. We believe in
some cases, the starting value, that is,

[[Page 40072]]

the original work RVU, may have been misvalued using building block
inputs that were not consistent with the service, although the overall
work value of the code may have been consistent with the values for
other similar services. Moreover, a number of these services are the
Harvard-valued codes, for which the RVUs were established many years
ago based on historical inputs that may no longer be appropriate for
the code. An attempt to extract the RVUs associated with these
inappropriate inputs through the reverse building block methodology
could produce aberrant results. Furthermore, in some cases, we noticed
that the original IWPUT of the code was negative even before the code
was reviewed by the AMA RUC for a site-of-service anomaly. A negative
value for the IWPUT is counterintuitive to the IWPUT concept,
indicating that the code was originally misvalued at the building block
level. At a minimum, we believe that in cases where the reverse
building block methodology produces aberrant results, and where
clinical review indicates a need for further analysis, the codes should
be referred back to the AMA RUC for review and new valuation should be
performed based on the building block methodology.
We note the application of the reverse building block methodology
is an objective way to account for changes in the resources resulting
from the change in the site-of-service in which the typical service is
provided. However, because relative values under the PFS are
``relative,'' that is, where work relative value units for a code are
established relative to work relative value units for other codes, the
recommended methodology of valuing services based on input building
blocks is best applied within the context of the AMA RUC discussion.
For example, we recognize that the AMA RUC looks at families of codes
and may assign RVUs based on a particular code ranking within the
family. This method of valuing services preserves relativity within the
relative value scale for that code family. However, we have stated that
we believe the relative value scale requires each service to be valued
based on the resources used in furnishing the service as specified in
section 1848(c)(1)(A) of the Act, which defines the physician work
component to include ``the portion of the resources used in furnishing
the service that reflects physician time and intensity in furnishing
the service.'' Furthermore, section 1848(c)(2)(C)(i) of the Act
specifies that ``the Secretary shall determine a number of work
relative value units (RVUs) for the service based on the relative
resources incorporating physician time and intensity required in
furnishing the service.'' Read together, these two sections of the
statute support our intention to rely on the building block methodology
to determine appropriate work RVUs for codes.
We note that we continue to rely on the extensive expertise
provided by the AMA RUC to recommend appropriate input building blocks
for codes. Additionally, the AMA RUC's unique infrastructure and broad
perspective permits the valuation of a code within the context of
relativity to the entire relative value system. Therefore, we believe
that the recommended methodology of valuing services based on input
building blocks is best applied within the context of the AMA RUC
discussion.
Accordingly, we are requesting that the AMA RUC review the CPT
codes displayed in Tables 15 and 16. In addition, where the application
of the CY 2011 reverse building block methodology produces an aberrant
result that is clearly not a reflection of physician work for the
service, we are requesting that the AMA RUC review the input building
blocks and recommend an appropriate RVU value that is both consistent
with the building blocks of the code and appropriate relative to the
values for other codes in the family. For other codes where the
application of the CY 2011 reverse building block methodology produces
a result that is consistent with the physician work for the service, we
encourage the AMA RUC to confirm the values and recommend these work
values for CY 2011. In this way, we would hope to receive new AMA RUC
recommendations for all of the codes in Tables 15 and 16 for CY 2011.
Furthermore, if the recommendations that we receive from the AMA RUC
are not consistent with the building block methodology and not
appropriate relative to the values of other services, and the
application of the CY 2011 reverse building block methodology produces
a result that CMS medical advisors believe is consistent with the work
for the service, we are proposing to adopt the CY 2011 reverse building
block methodology values that are listed in Tables 15 and 16 for CY
2011. In cases where the reverse building block methodology produces a
negative work value, we are suggesting that the AMA RUC review and
revise the building blocks of the code so that a new valuation can be
determined based on the building block methodology. For such codes, if
the revised recommendations that we would hope to receive from the AMA
RUC are still not consistent with the building block methodology upon
revision, because we cannot pay for these services based on negative
work RVUs, we are proposing to modify the AMA RUC-recommended values
for these codes as CMS determines clinically appropriate and adopt the
CMS-modified RVUs on a interim final basis for CY 2011.
In their future work, we urge the AMA RUC to use the building block
methodology when valuing services or provide CMS with extensive
rationale for cases where the AMA RUC believes the building block
methodology is inappropriate for a specific code. Since section
1848(c)(2)(L) (as added by section 3134 of the ACA) specifies that the
Secretary shall establish a process to validate work RVUs of
potentially misvalued codes under the PFS, as we have discussed earlier
in this section, we believe codes that are valued using the building
block methodology would be more likely to meet the standards of a
systematic RVU validation process that could be developed in accordance
with the requirements of the statute.
e. Codes With ``23-hour'' Stays
In the CY 2010 PFS proposed rule (74 FR 33557), we requested that
the AMA RUC review services that are typically performed in the
outpatient setting and require a hospital stay of less than 24 hours.
We stated in the proposed rule that we believed these to be primarily
outpatient services and expressed concern that the value of evaluation
and management (E/M) visits for inpatients was inappropriately included
in the valuation of codes that qualify as ``23-hour stay'' outpatient
services.
We received a number of comments in response to the discussion in
the CY 2010 proposed rule. The AMA RUC stated that it already values
stays of less than 23 hours appropriately by reducing the hospital
discharge day management service (that is, CPT code 99238), from 1 day
to a half day. The AMA RUC also explained that when the AMA RUC refers
to 23-hour stay services in discussions at AMA RUC meetings, it is
referring primarily to services that are reported in the Medicare
claims database as typically outpatient services, but where the patient
is kept overnight and, on occasion, even longer in the hospital.
Because the AMA RUC believes the patient stays overnight in the
hospital, it believes the inclusion of inpatient E/M visits to be
appropriate in the valuation of this category of codes.
We believe that the 23-hour stay issue encompasses several
scenarios. The typical patient is commonly in the

[[Page 40073]]

hospital for less than 24 hours, which often means the patient may
indeed stay overnight in the hospital. On occasion, the patient may
stay longer than a single night in the hospital; however, in both
cases, the patient is considered for Medicare purposes to be a hospital
outpatient, not an inpatient, and our claims data support that the
typical 23-hour stay service is billed as an outpatient service.
Accordingly, we believe that the valuation of the codes that fall into
the 23-hour stay category should not reflect work that is typically
associated with an inpatient service. For example, inpatient E/M visit
codes such as CPT codes 99231 (Level 1 subsequent hospital care, per
day); 99232 (Level 2 subsequent hospital care, per day); and 99233
(Level 3 subsequent hospital care, per day), should not be included at
the full value in the valuation of 23-hour stay services.
Currently, the valuation of 23-hour stay services is conducted in a
nonuniform manner by the AMA RUC. The AMA RUC has indicated that it
currently includes a half hospital discharge day management service and
no hospital inpatient visits for outpatient services with expected
hospital stays of 23 hours or less. In contrast, for those outpatient
services where the AMA RUC believes that the recovery period could be
longer than 23 hours, the AMA RUC stated in its comment on the CY 2010
PFS proposed rule that it currently includes a full hospital discharge
day management service and one or more inpatient E/M visits in the
code's value. However, we note the typical 23-hour stay service is
billed as an outpatient service and so long as the typical case
continues to be billed as an outpatient service, we believe the code
should not incorporate physician work values for services that are
typically associated with an inpatient service. In the 2010 PFS
proposed and final rule with comment period (74 FR 33556 and 74 FR
61777, respectively), we stated that we believed the use of inpatient
E/M visit codes for services rendered in the post-service period for
outpatient 23-hour stay procedures would result in overpayment for pre-
and post-service work that would not be provided. Accordingly, we
proposed in the CY 2010 proposed rule (74 FR 33556 through 33557) not
to allow any additional inpatient E/M service to be billed for care
furnished during the post-procedure period when care is furnished for
an outpatient service requiring less than a 24-hour hospital stay.
However, we find it is plausible that while the patient receiving
the 23-hour stay service remains a hospital outpatient, the patient
would typically be cared for by the physician furnishing the procedure
during that post-procedure period. While we do not believe that post-
procedure hospital ``visits'' would be at the inpatient level since the
typical case is an outpatient who would be ready to be discharged from
the hospital in 23 hours or less, we agree that the intra-service time
of the inpatient hospital visit may be included in the valuation for
the 23-hour stay code.
Accordingly, we are modifying our proposed CY 2010 approach and
suggesting that in the future, when the AMA RUC reviews new and
potentially misvalued codes that are identified as 23-hour stay
services, the AMA RUC would apply the following methodology:
(1) Begin with the starting RVU value of the 23-hour stay code
under review and decrease the hospital discharge day management service
from one day to a half day.
(2) Deduct the RVUs of inpatient hospital visits from the starting
RVU value.
(3) Reallocate the time associated with the intra-service portion
of the inpatient hospital visits to the immediate post-service time of
the 23-hour stay code under review.
Example: A 23-hour stay code is currently valued at 15 RVUs and has
1 hospital discharge day management service and 1 level 3 subsequent
hospital care visit incorporated in this value.
Applying step (1): 15-0.64\*\ = 14.36
Applying step (2): 14.36-2\**\ = 12.36
Applying step (3): 12.36 + (30 minutes x 0.0224)\***\ =
13.032 RVUs
\*\Value associated with \1/2\ hospital discharge day management
service.
\**\Value associated with an inpatient hospital visit, CPT code
99233.
\***\Value associated with the reallocated intra-service time
multiplied by the post-service intensity of the 23-hour stay code.
Finally, we note that since work relative value units are
established by the Secretary in the context of relativity to other
codes in the system, the recommended methodology for the evaluation of
23-hour stay codes is best applied within the context of relativity. We
appreciate that the AMA RUC has the ability to assess the 23-hour stay
code after application of the recommended methodology to ensure
appropriate relativity of this code and other codes within the system.
We strongly encourage the AMA RUC to apply the recommended methodology
to ensure the consistent and appropriate valuation of the physician
work for these services.
4. Expanding the Multiple Procedure Payment Reduction (MPPR) Policy to
Additional Nonsurgical Services
a. Background
Medicare has a longstanding policy to reduce payment by 50 percent
for the second and subsequent surgical procedures furnished to the same
patient by the same physician on the same day, largely based on the
presence of efficiencies in the PE and pre- and post-surgical physician
work. Effective January 1, 1995, the multiple procedure payment
reduction (MPPR) policy, with the same percentage reduction, was
extended to nuclear medicine diagnostic procedures (CPT codes 78306,
78320, 78802, 78803, 78806, and 78807). In the CY 1995 PFS final rule
with comment period (59 FR 63410), we indicated that we would consider
applying the policy to other diagnostic tests in the future.
Consistent with recommendations of MedPAC in its March 2005 Report
to Congress on Medicare Payment Policy, under the CY 2006 PFS, the MPPR
policy was extended to the technical component (TC) of certain
diagnostic imaging procedures performed on contiguous areas of the body
in a single session (70 FR 70261). The reduction recognizes that, for
the second and subsequent imaging procedures, there are some
efficiencies in clinical labor, supplies, and equipment time. In
particular, certain clinical labor activities and supplies are not
duplicated for subsequent procedures and, because equipment time and
indirect costs are allocated based on clinical labor time, those would
also be reduced accordingly.
The imaging MPPR policy currently applies to computed tomography
(CT) and computed tomographic angiography (CTA), magnetic resonance
imaging (MRI) and magnetic resonance angiography (MRA), and ultrasound
services within 11 families of codes based on imaging modality and body
region. When we adopted the policy in CY 2007, we stated that we
believed efficiencies were most likely to occur when contiguous body
areas are the focus of the imaging because the patient and equipment
have already been prepared for the second and subsequent procedures,
potentially yielding resource savings in areas such as clerical time,
technical preparation, and supplies (70 FR 45850). Therefore, the MPPR
policy currently applies only to procedures involving contiguous body

[[Page 40074]]

areas within a family of codes, not across families, and to those
procedures that are provided in a single session. Additionally, while
the MPPR policy applies to TC-only services and to the TC of global
services, it does not apply to professional component (PC) services.
Under the current imaging MPPR policy, full payment is made for the
TC of the highest-paid procedure, and payment is reduced by 25 percent
of the TC for each additional procedure when an MPPR scenario applies.
We had originally planned to phase in the MPPR policy over a 2-year
period, with a 25 percent reduction in CY 2006 and a 50 percent
reduction in CY 2007 (70 FR 70263). However, the Deficit Reduction Act
of 2005 (Pub. L. 109-171) (DRA) capped the PFS payment amount for most
imaging procedures at the amount paid under the hospital Outpatient
Prospective Payment System (OPPS). In view of the DRA, we determined
that it would be prudent to retain the MPPR at 25 percent while we
continued to examine the appropriate payment levels (71 FR 69659). The
DRA also exempted reduced expenditures attributable to the MPPR policy
from the PFS budget neutrality provision. Most recently, effective July
1, 2010, section 3135(b) of the ACA increased the MPPR on the TC of
imaging services under the policy established in the CY 2006 PFS final
rule with comment period from 25 to 50 percent and exempted the reduced
expenditures attributable to this further change from the PFS budget
neutrality provision.
In the July 2009 GAO report entitled, ``Medicare Physician
Payments: Fees Could Better Reflect Efficiencies Achieved when Services
are Provided Together,'' the GAO recommended that we take further steps
to ensure that fees for services paid under the PFS reflect
efficiencies that occur when services are performed by the same
physician on the same beneficiary on the same day. The GAO recommended
the following: (1) Expanding the existing MPPR policy to the PC to
reflect efficiencies in physician work for certain imaging services;
and (2) expanding the MPPR to reflect PE efficiencies that occur when
certain nonsurgical, nonimaging services are provided together. The GAO
also encouraged us to focus on service pairs that have the most impact
on Medicare spending.
In the March 2010 report, MedPAC noted its concerns about
mispricing of services under the PFS. MedPAC indicated that it would
explore whether expanding the unit of payment through packaging or
bundling would improve payment accuracy and encourage more efficient
use of services.
In the CYs 2009 and 2010 PFS proposed rules (73 FR 38586 and 74 FR
33554, respectively), we stated that we planned to analyze nonsurgical
services commonly furnished together (for example, 60 to 75 percent of
the time) to assess whether an expansion of the MPPR policy could be
warranted. MedPAC encouraged us to consider duplicative physician work,
as well as PE, in any expansion of the MPPR policy.
b. Proposed CY 2011 Expansion of the Imaging Technical Component MPPR
Policy to Additional Combinations of Imaging Services
Over the past 2 years, the AMA RUC has examined several services
billed 90 percent or more of the time together as part of the
potentially misvalued service initiative and, in several cases, created
one code to describe the complete service, with a value that reflects
the expected efficiencies. Notwithstanding the bundling work of the
RUC, there may be additional imaging and other diagnostic services that
are furnished together less than 90 percent of the time where we could
still expect efficiencies in the TC, and in some cases in the PC,
resulting in potential overpayment for these services under current
policy when furnished together.
Section 1848(c)(2)(K) of the Act (as added by section 3134 of the
ACA) specifies that the Secretary shall identify potentially misvalued
codes by examining multiple codes that are frequently billed in
conjunction with furnishing a single service, and review and make
appropriate adjustments to their relative values. As a first step in
applying this provision, we are proposing a limited expansion of the
current imaging MPPR policy for CY 2011. We will continue to review
other possible expansions of the MPPR policy to the TC and/or PC of
imaging procedures or other diagnostic tests for the future. Any
further changes would be addressed in future rulemaking.
In a related policy for hospital outpatient payment of imaging
services, in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68559 through 68569), the OPPS adopted a policy to pay for two or more
CT and CTA, MRI and MRA, or ultrasound procedures furnished in the same
session through a single composite ambulatory payment classification
(APC) group. These composite APC payments were based on the 11 families
of codes subject to the MPPR under the PFS that were collapsed into 3
imaging families for the OPPS according to their modality--1 for
ultrasound, 1 for CT and CTA, and 1 for MRI and MRA services.
At that time, we stated our belief that the contiguous body area
concept that was incorporated in the PFS imaging families was not
necessary for potential efficiencies to be achieved in an imaging
session. We provided examples to illustrate that we would not expect
second and subsequent imaging services of the same modality involving
noncontiguous body areas to require duplicate facility resources
(comparable to the TC under the PFS) for clinical labor activities such
as greeting the patient, providing education and obtaining consent,
retrieving prior exams, setting up an intravenous infusion, and
preparing and cleaning the room, any more than second and subsequent
imaging procedures of the same modality involving contiguous body
areas. While we noted that multiple imaging claims under the OPPS are
generally within the same imaging modality and involve contiguous body
areas the vast majority of the time, we estimated that the collapsed 3
families, as opposed to the 11 PFS families, would add 12 percent
additional claims to those eligible for a single composite APC payment
under the OPPS based on the provision of 2 or more imaging services in
a single session, allowing us to capture additional claims with
efficiencies.
Taking into consideration the OPPS policy that was adopted in the
CY 2009 OPPS/ASC final rule with comment period, in this proposed rule,
we are proposing to apply the MPPR regardless of family, that is, the
policy would apply to multiple imaging services furnished within the
same family of codes or across families. This proposal would simplify
the current imaging MPPR policy in a way that is consistent with the
standard PFS MPPR policy for surgical procedures that does not group
procedures by body region. Therefore, the MPPR would apply to CT and
CTA, MRI and MRA, and ultrasound procedures services furnished to the
same patient in the same session, regardless of the imaging modality,
and not limited to contiguous body areas.
Because of the different pieces of equipment used for CT/CTA, MRI/
MRA, and ultrasound procedures, it would be highly unlikely that a
single practitioner would furnish more than one imaging procedure
involving 2 different modalities to one patient in a single session
where the proposed MPPR policy would apply. On the other hand, while
most multiple procedures furnished with a single modality in one
session would involve procedures currently assigned to one of the 11

[[Page 40075]]

imaging families, it would not be uncommon for more than one imaging
procedure of the same modality to be furnished across families and,
like the scenario for hospital outpatient imaging services, we would
expect efficiencies to occur in these cases. Therefore, we believe that
an expansion of the current imaging MPPR policy to account for
efficiencies in such situations would allow us to pay more
appropriately for these multiple imaging procedure sessions, consistent
with our ongoing efforts to address misvalued services.
The proposed expansion of the imaging MPPR policy to include all of
the current codes in a single family to which the standard 50 percent
reduction for second and subsequent procedures would apply would reduce
payment for 20 percent more services than the current MPPR policy under
the PFS. Thus, under the CY 2011 proposal, we would capture additional
efficiencies and pay more appropriately in these cases. We note that,
as indicated above, section 3135(b)(2) of the ACA specifies that
reduced expenditures attributable to the increase in the imaging MPPR
from 25 to 50 percent in CY 2011 are excluded from the PFS budget
neutrality adjustment. However, the reduced payment for code
combinations that would newly be subject to the imaging MPPR policy
under this proposal would be made in a budget neutral manner under the
PFS, as these new combinations are not included under section
1848(b)(4)(D) (added by section 3135(b) of the ACA), which addresses
``single-session imaging to consecutive body parts'' under the
established imaging MPPR policy.
Finally, we are also proposing to add the codes displayed in Table
17 to the list of imaging services subject to the MPPR policy in CY
2011. These codes were newly created for CY 2010 and are similar to
codes currently in imaging family 2, titled CT and CTA (Chest/Thorax/
Abdomen/Pelvis).
We further note that new CY 2010 CPT codes 74261 (Computed
tomography (CT) colonography, diagnostic, including image
postprocessing; without contrast material) and 74262 (Computed
tomography (CT) colonography, diagnostic, including image
postprocessing; with contrast material(s) including non-contrast
images, if performed) were added to the CY 2010 MPPR policy through the
July 2010 PFS quarterly update, with a retroactive effective date of
January 1, 2010. These codes replaced CPT code 0067T (Computed
tomographic (CT) colonography (i.e., virtual colonoscopy); diagnostic)
in CY 2010, which was on the list of procedures subject to the imaging
MPPR policy prior to CY 2010.
As discussed earlier in this section, reduced expenditures
attributable to the increase in the MPPR for multiple imaging
procedures to consecutive body parts (that is, those previously
designated in the same family of codes) are exempt from the budget
neutrality provision of the PFS. However, the reduced expenditures
attributable to the MPPR for combinations of multiple imaging
procedures that we are proposing for CY 2011 (the MPPR for multiple
imaging procedures not involving consecutive body parts) would be
subject to budget neutrality adjustment under the PFS. We note that
this formulation for whether reduced expenditures are exempt from
budget neutrality applies both to procedures currently subject to the
imaging MPPR and to new codes that are subject to the policy in CY 2011
and in future years. To the extent that imaging procedures described by
the new codes are furnished in combination with other procedures that
are subject to the imaging MPPR on consecutive body areas, the reduced
expenditures attributable to the MPPR for these combinations would be
exempt from the PFS budget neutrality adjustment.
The complete list of codes subject to the proposed CY 2011 MPPR
policy for diagnostic imaging services is included in Addendum F to
this proposed rule.

Table 17--Proposed CPT Code Additions to the Diagnostic Imaging MPPR
Policy for CY 2011
------------------------------------------------------------------------
CPT code Short descriptor
------------------------------------------------------------------------
75571........................... Ct hrt w/o dye w/ca test.
75572........................... Ct hrt w/3d image.
75573........................... Ct hrt w/3d image, congen.
75574........................... Ct angio hrt w/3d image.
------------------------------------------------------------------------

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

[[Page 40076]]

to the patient on the same day. In the case of contractor-priced codes,
there is no nationally established pricing that could be uniformly
adjusted to reflect the expected efficiencies when multiple therapy
services are furnished.

Table 18--Separately Payable ``Always Therapy'' Services Subject to the
Proposed CY 2011 MPPR Policy*
------------------------------------------------------------------------
CPT/HCPCS code Short descriptor
------------------------------------------------------------------------
92506........................... Speech/hearing evaluation.
92507........................... Speech/hearing therapy.
92508........................... Speech/hearing therapy.
92526........................... Oral function therapy.
92597........................... Oral speech device eval.
92607........................... Ex for speech device rx, 1hr.
92608........................... Ex for speech device rx addl.
92609........................... Use of speech device service.
96125........................... Cognitive test by hc pro.
97001........................... Pt evaluation.
97002........................... Pt re-evaluation.
97003........................... Ot evaluation.
97004........................... Ot re-evaluation.
97010........................... Hot or cold packs therapy.
97012........................... Mechanical traction therapy.
97016........................... Vasopneumatic device therapy.
97018........................... Paraffin bath therapy.
97022........................... Whirlpool therapy.
97024........................... Diathermy eg, microwave.
97026........................... Infrared therapy.
97028........................... Ultraviolet therapy.
97032........................... Electrical stimulation.
97033........................... Electric current therapy.
97034........................... Contrast bath therapy.
97035........................... Ultrasound therapy.
97036........................... Hydrotherapy.
97110........................... Therapeutic exercises.
97112........................... Neuromuscular reeducation.
97113........................... Aquatic therapy/exercises.
97116........................... Gait training therapy.
97124........................... Massage therapy.
97140........................... Manual therapy.
97150........................... Group therapeutic procedures.
97530........................... Therapeutic activities.
97533........................... Sensory integration.
97535........................... Self care mngment training.
97537........................... Community/work reintegration.
97542........................... Wheelchair mngment training.
97750........................... Physical performance test.
97755........................... Assistive technology assess.
97760........................... Orthotic mgmt and training.
97761........................... Prosthetic training.
97762........................... C/o for orthotic/prosth use.
G0281........................... Elec stim unattend for press.
G0283........................... Elec stim other than wound.
G0329........................... Electromagntic tx for ulcers.
------------------------------------------------------------------------
* Excludes contractor-priced and bundled codes.

At this time, we are not proposing an MPPR policy for ``sometimes
therapy'' services, specifically those services that may be furnished
under a therapy plan of care or otherwise by physicians or NPPs as
medical services. We believe that the care patterns are different for
the latter group of services that may sometimes be furnished as therapy
services, and note that they are less commonly furnished with multiple
services in a single session than the ``always therapy'' services. In
the discussion that follows, our reference to therapy services means
those HCPCS codes designated annually as ``always therapy'' services by
CMS.
Based on CY 2009 PFS claims data, we identified over 500 therapy
service code pairs billed for the same patient in a single session. We
then reviewed a sample of the most common therapy code pairs,
specifically those high volume code pairs with more than 250,000
combined services per year, to examine the potential for duplication in
the PE. These codes pairs represented more than half of the occurrences
of therapy services billed together. While we acknowledge that the PE
inputs per service for some therapy services were included in the
direct PE database based on one-half of the total PE inputs required
for two services provided in a single session, which would account for
some duplication, this was not the case for all combinations of therapy
services. Of the high volume therapy services examined, approximately
one-fourth of the code pairs were not valued based on two services. In
addition, we note that the CY 2009 PFS claims data show that when
multiple therapy services are billed on a claim for the same date of
service, the median number is four services per day. Therefore, even
for those clinical labor times that may reflect the allocation of total
time across two units of therapy services, we believe that some
elements of the current PE inputs are duplicated based on current
patterns of therapy service delivery where most multiple service claims
involve delivery of more than 2 services in a session.
Duplicate labor activities currently included in the PE for the
service period for these high volume pairs of therapy services are as
follows: clean room/equipment; education/instruction/counseling/
coordinating home care; greet patient/provide gowning; obtain
measurements, for example, ROM/strength/edema; and post-treatment
patient assistance. The most common duplicate supply item included in
the PE was the multispecialty visit pack. Examples of duplicated and
unduplicated labor activities and supplies for two sample therapy code
pairs and our estimates of potential clinically appropriate time and
quantity reductions for multiple service sessions are displayed in
Table 19. We note that CY 2009 PFS claims data for these sample code
pairs include over 3.4 million pairs of CPT codes 97112 (Therapeutic
procedure, 1 or more areas, each 15 minutes; neuromuscular reeducation
of movement, balance, coordination, kinesthetic sense, posture, and/or
proprioception for sitting and/or standing activities) and 97110
(Therapeutic procedure, 1 or more areas, each 15 minutes; therapeutic
exercises to develop strength and endurance, range of motion and
flexibility) furnished by the same practitioner on the same day and
over 500,000 pairs of CPT codes 97001 (Physical therapy evaluation) and
97140 (Manual therapy techniques (e.g., mobilization/manipulation,
manual lymphatic drainage, manual traction), 1 or more regions, each 15
minutes).

Table 19: Examples of Duplicate PE Inputs for Therapy Services That
Should Be Accounted for When Multiple Services Are Furnished in One
Session

Example 1: CPT code 97112 (Therapeutic procedure, 1 or more areas,
each 15 minutes; neuromuscular reeducation of movement, balance,
coordination, kinesthetic sense, posture, and/or proprioception for
sitting and/or standing activities) and CPT code 97110 (Therapeutic
procedure, 1 or more areas, each 15 minutes; therapeutic exercises to
develop strength and endurance, range of motion and flexibility)

----------------------------------------------------------------------------------------------------------------
Code A 97112 Code B 97110
Staff description Labor task Time period labor task labor task Total minute
description time time reduction
----------------------------------------------------------------------------------------------------------------
Physical Therapy Aide........ Clean room/equipment. Service Period, 1 1 1
Post-Service.

[[Page 40077]]

Physical Therapy Assistant... Education/instruction/ Service Period, 2.5 2.5 2.5
counseling/coord Post-Service.
home care.
Physical Therapy Aide........ Greet patient/provide Service Period, 1.5 1.5 1.5
gowning. Pre-Service.
Physical Therapy Assistant... Obtain measurements, Service Period, 1.5 1.5 1.5
e.g., ROM/strength/ Pre-Service.
edema.
Physical Therapy Assistant... Obtain vital signs... Service Period, 1 1 1
Pre-Service.
Physical Therapy Assistant... Phone calls between Post-Service 1 1 1
visits with patient, Period.
family.
Physical Therapy Aide........ Post treatment Service Period, 1 1 1
patient assistance. Post-Service.
Physical Therapy Assistant... Review/read Pre-Service 1.5 1.5 1.5
documentation, plan Period.
of care, treatment
goals.
Physical Therapy Aide........ Verify/Coordinate Pre-Service 1.5 1.5 1.5
availability of Period.
resources/equip.
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Code B 97110
Supply description Price Code A 97112 Code B 97110 quantity
quantity quantity reduction
----------------------------------------------------------------------------------------------------------------
pack, minimum multi-specialty visit............. $1.14 0.5 0.5 0
Thera-bands (6in width)......................... 0.06 1.5 1.5 1.5
----------------------------------------------------------------------------------------------------------------

Example 2: CPT code 97001 (Physical therapy evaluation) and CPT
Code 97140 (Manual therapy techniques (eg, mobilization/manipulation,
manual lymphatic drainage, manual traction), 1 or more regions, each 15
minutes)

----------------------------------------------------------------------------------------------------------------
Code A 97001 Code B 97140
Staff description Labor task Time period labor task labor task Total minute
description time time reduction
----------------------------------------------------------------------------------------------------------------
Physical Therapy Aide........ Clean room/equipment. Service Period, 3 1 1
Post-Service.
Physical Therapy Assistant... Education/instruction/ Service Period, 2 1 1
counseling/coord Post-Service.
home care.
Physical Therapy Aide........ Greet patient/provide Service Period, 3 1.5 1.5
gowning. Pre-Service.
Physical Therapy Assistant... Obtain measurements, Service Period, 8 1.5 1.5
e.g., ROM/strength/ Pre-Service.
edema.
Physical Therapy Assistant... Obtain vital signs... Service Period, 3 1 1
Pre-Service.
Physical Therapy Assistant... Phone calls between Post-Service 2 1 1
visits with patient, Period.
family.
Physical Therapy Assistant... Review/read Pre-Service 1 .5 .5
documentation, plan Period.
of care, treatment
goals.
Physical Therapy Aide........ Verify/Coordinate Pre-Service 3 1.5 1.5
availability of Period.
resources/equip.
Physical Therapy Aide........ Prep and position Service Period, 2 0 0
patient. Pre-Service.
Physical Therapy Aide........ Prepare room, Service Period, 2 0 0
equipment, supplies. Pre-Service.
Physical Therapy Aide........ Post treatment Service Period, 0 1 0
assistance. Post-Service.
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Code B 97140
Supply description Price Code A 97001 Code B 97140 quantity
quantity quantity reduction
----------------------------------------------------------------------------------------------------------------
pack, minimum multi-specialty visit............ $1.14 1 0.5 0.5
lotion, message, unscented..................... 0.158 0 0.5 0
----------------------------------------------------------------------------------------------------------------

[[Page 40078]]

We did not remove minutes for clinical labor tasks that were not
duplicated. For example, for CPT code pair 97001 and 97140 the
following tasks were not duplicated: Post treatment patient assistance;
prep and position patient; and prepare room, equipment, and supplies.
In addition, we did not remove any supply items that would be required
for only one of the separate services because these would not be
duplicated in the PE applicable to the combination of services. We
estimated no reduction for equipment time, even though efficiencies
would be expected for equipment that is used in both services when they
are furnished together. Finally, a corresponding reduction to the
indirect expenses is appropriate since indirect costs are allocated
partially based on direct costs. For five high volume therapy code
pairs that each occur over 2 million time in PFS claims for multiple
therapy services and account for almost half of such claims, we
estimated that the resulting reduction in the PE for the lower paying
code would range from 28 to 56 percent.
In summary, given the duplicative clinical labor activities and
supplies as shown in the code combination examples, we believe it would
be appropriate to extend the 50 percent MPPR policy that is currently
applied to surgical services and the TC of imaging services, to the PE
component of certain therapy services. Specifically, we are proposing
to apply a 50 percent payment reduction to the PE component of the
second and subsequent therapy services for multiple ``always therapy''
services furnished to a single patient in a single day. Because it
would be difficult to determine the precise beginning and end of
therapy sessions and we do not believe that beneficiaries would
typically have more than one therapy session in a single day, we are
proposing to apply the 50 percent MPPR policy to the PE component of
subsequent therapy services provided to the same patient on the same
day, rather than in the same session.
We note that many therapy services are time-based CPT codes, so
multiple units of a single code may be billed for a single session that
lasts for a longer period of time than one unit of the code. The
proposed MPPR policy would apply to multiple units of the same therapy
service, as well as to multiple different services, when furnished to
the same patient on the same day. Full payment would be made for the
service or unit with the highest PE and payment would be made at 50
percent of the PE component for the second and subsequent procedures or
units of the service. The work and malpractice components of the
therapy service payment would not be reduced. For therapy services
furnished by a group practice or ``incident to'' a physician's service,
the MPPR would apply to all ``always therapy'' services furnished to a
patient on the same day, regardless of whether the services are
provided in one therapy discipline or multiple disciplines, for
example, physical therapy, occupational therapy, or speech-language
pathology. The proposed CY 2011 MPPR policy would apply to both those
services paid under the PFS that are furnished in the office setting
and those services paid at the PFS rates that are furnished by
outpatient hospitals, home health agencies, comprehensive outpatient
rehabilitation facilities (CORFs), and other entities that are paid by
Medicare for outpatient therapy services. Table 20 provides a sample
calculation of the current and proposed CY 2011 payment for multiple
therapy services furnished on the same day. For those services paid
under the PFS, the PFS budget neutrality provision would apply so that
the estimated reduced expenditures for therapy services would be
redistributed to increase payment for other PFS services.

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

We believe this proposed therapy MPPR policy would provide more
appropriate payment for therapy services that are commonly furnished
together by taking into account the duplicative clinical labor
activities and supplies in the PE that are not furnished more than once
in the single therapy session. This approach is consistent with the
statutory requirement for the Secretary to identify, review, and adjust
the relative values of potentially misvalued services under the PFS as
specified by section 3134 of the ACA. We also believe this proposed
policy is responsive to Congressional concerns about significant growth
in therapy spending and to MedPAC and GAO recommendations regarding the
expansion of MPPR policies under the PFS to account for additional
efficiencies. We note that paying more appropriately for therapy
services based on PE relative values that are adjusted for the clinical
scenario under which the services are furnished would result in reduced
therapy expenditures, and beneficiaries would be able to receive more
medically necessary outpatient therapy services before reaching the
therapy cap. For a further discussion of potential alternatives to the
therapy caps, we refer readers to section III.A.2. of this proposed
rule.
5. High Cost Supplies
a. Background
MedPAC and the AMA RUC have long recommended that CMS establish a
frequent price update process for high-cost supplies that are direct PE
inputs in the PE database for services paid under the PFS because of
their speculation that prices for these items may decrease over time as
competition increases and new technologies disseminate into medical
practice. MedPAC in particular has perennially noted that it is
important for CMS to update the prices of high-priced supplies on a
regular basis as inaccurate prices can distort PE RVUs over time,

[[Page 40079]]

contributing to the misvaluing of established services under the PFS.
Most of the current prices for high-cost supplies included in the
direct PE database are from 2004 or earlier. There are currently 62
unique supplies with prices of $150 or more in the proposed CY 2011 PE
database, which is available on the CMS Web site under the supporting
data files for the CY 2011 PFS proposed rule at http://www.cms.gov/PhysicianFeeSched/. Finally, we note that we do not actually pay the
supply prices included in the PE database but, instead, use them to
develop the PE RVUs according to our standard PE methodology as
described in section II.A.2. of this proposed rule. Payment for a
procedure that uses a supply is based upon the PE RVUs that result from
the PE methodology, and supplies are among the direct PE inputs for
procedures. Therefore, it is the relativity of high-cost supply prices
to prices for other PE items (equipment, low-cost supplies, and
clinical labor) that is important.
Accordingly, in the CY 2009 PFS proposed rule (73 FR 38582), we
proposed a process to update the prices for high-cost supplies priced
at $150 or more that are included in the PE inputs for procedures paid
under the PFS PE methodology. The CY 2009 proposed rule described a
publicly transparent process in which CMS would publish a list of the
high-cost supplies in the PFS proposed rule (65 supplies were included
in the CY 2009 PFS proposed rule), and specialty societies or other
relevant organizations would provide acceptable documentation
supporting the pricing for the supplies during the 60-day public
comment period. Furthermore, in that same proposed rule (73 FR 38582),
we provided guidance on what constitutes valid, reliable documentation
that reflects the typical price of the high-cost item in the
marketplace. We outlined examples of acceptable documentation, such as
a detailed description (including system components), sources, and
current pricing information, confirmed by copies of catalog pages,
invoices, and quotes from manufacturers, vendors, or distributors. We
indicated that documentation that does not include specific pricing
information such as phone numbers and addresses of manufacturers,
vendors, or distributors or Web site links without pricing information
would not be acceptable. We also noted that if acceptable documentation
was not received within the proposed rule's 60-day public comment
period, we would use prices from the Internet, retail vendors, and
supply catalogs to determine the appropriate cost, and that we would
use the lowest price identified by these sources (73 FR 38582).
Finally, we solicited public comments on alternatives that could be
used to update pricing information in the absence of acceptable
documentation provided by specialty societies or other interested
organizations.
In the CY 2009 PFS final rule with comment period (73 FR 69882), we
indicated that we received many comments on the proposed process and,
while some commenters expressed support, others believed the proposed
process was flawed and burdensome. Moreover, although we received some
data in response to our request for information on the 65 high-cost
supplies with prices of $150 or more, much of what we received was not
complete or did not represent typical market prices. In particular, we
expressed concern that the submitted data often represented
manufacturer list prices for the premier models of many supplies, while
we believed there were less expensive alternatives. Therefore, we were
unable to determine the most appropriate, typical supply prices for our
PFS payment methodology that prices the typical service described by a
HCPCS code. Rather than finalizing the proposed process for updating
high-cost supplies and revising the prices for the 65 supplies based on
inadequate pricing information, we stated in the CY 2009 PFS final rule
with comment period (73 FR 69882) that we would research the
possibility of using an independent contractor to assist us in
obtaining accurate pricing information. Furthermore, we informed the
public that we planned to study the limitations of available pricing
data and determine how to revise our proposed process to elicit better
data.
In the CY 2010 PFS proposed rule and final rule with comment period
(74 FR 33554 and 61776, respectively), we stated that we were
continuing to examine ways to obtain accurate pricing information for
high-cost supplies. We noted again in the CY 2010 PFS proposed rule
that we would depend upon the cooperation of the medical community to
obtain typical prices in the marketplace, and we provided stakeholders
with another opportunity to submit public comments on the process. In
the CY 2010 PFS final rule with comment period, we acknowledged
commenters' general support for an initiative to ensure accurate
pricing of high-cost supplies. In general, the commenters strongly
preferred a transparent and public process, and we stated that we would
consider this perspective as we explore the best way to ensure that
accurate supply pricing information is used in the PFS payment
methodology.
b. Future Updates to the Prices of High-Cost Supplies
In working towards refining a process to update the prices of high-
cost supplies and consistent with our intention expressed in the CY
2009 PFS final rule with comment period (73 FR 69882), we contracted
with an independent contractor during CY 2009 to help us study the
availability of accurate pricing information. We requested that the
independent contractor, L&M Policy Research, research pricing
information for the 65 high-cost supplies listed in the CY 2009
proposed rule (73 FR 38583 through 38585) and determine what, if any,
pricing information reflecting typical market prices could be obtained
for these high-cost supplies.
We first requested that the contractor explore publicly available
sources to obtain typical market prices for these supplies. The
contractor utilized supply vendor catalogs and Web sites and directly
contacted vendors, manufacturers, group purchasing organizations
(GPOs), and any other suppliers that the contractor identified in their
research in order to identify prices for each of the supplies. Where
more than one version of a supply item appeared to match a description
of a high-cost supply and/or more than one possible vendor or
manufacturer was identified, the contractor attempted to obtain prices
from the multiple sources.
Upon review of the high-cost supply list, the contractor refined
the list to 62 unique high-cost items with prices of $150 or more for
the study. The original list only consisted of 64 items but included
one item inadvertently listed twice (CMS Supply Code SD207 (suture
device for vessel closure (Perclose A-T)) and one item (CMS Supply Code
SH079 (collagen implant)) that was deleted from the PE database after
CY 2007 because it was no longer used as an input for any codes. While
the contractor was able to obtain prices for 37 of the 62 unique
supplies, the contractor was unable to obtain pricing information for
the remaining 25 supplies. Documentation of these prices, a requirement
we discussed in the CY 2009 PFS proposed rule (73 FR 38582), was only
obtained for 25 of the 36 supplies with new pricing information. For
the remainder, while the contractor was given price quotes over the
phone, the sales agents or customer service representatives declined to
provide any form of written documentation, in some cases because
company policies

[[Page 40080]]

restricted providing pricing documentation to prospective customers
without an account. Moreover, information on typical discounts was
obtained for only seven products, and only one discount was documented.
In the case of these products, companies disclosed the maximum
available discounts, ranging from 18 percent to 45 percent. Relative to
prices currently included in the PE database, the contractor found
higher prices for the majority of the medical supplies that were
researched, specifically 23 supplies with higher prices, 8 with lower
prices, and 3 with the same price. The high-cost supplies studied by
the contractor and their current database prices are displayed in Table
20.

Table 20--High-Cost Supplies With Prices of $150 or Greater in the PFS
Direct PE Database That Were Studied by the CMS Contractor
------------------------------------------------------------------------
Supply Current database Associated CPT
CMS supply code description unit price codes
------------------------------------------------------------------------
stent, ureteral, $235 52332
wguidewire, 3cm
flexible tip.
probe, 1,175 50593
cryoablation,
renal.
catheter, 1,380 22526, 22527
intradiscal
(spineCATH).
probe, 1,589 19105
cryoablation
(Visica ICE 30
or 40).
kit, capsule, 450 91111
ESO, endoscopy
w-application
supplies (ESO).
catheter, 306 68816
balloon,
lacrimal.
catheter, CVA, 1,750 36566
system,
tunneled w-
port, dual
(LifeSite).
stent, vascular, 1,645 37205, 37206
deployment
system, Cordis
SMART.
agent, embolic, 258 37210
2 ml uou.
tube, 195 49441, 49446,
jejunostomy. 49451, 49452
SA005............. kit, capsule 450 91110
endoscopy w-
application
supplies (M2A).
SA010............. kit, CVA 308 36557, 36558,
catheter, 36581
tunneled,
without
portpump.
SA011............. kit, CVA 495 36560, 36561,
catheter, 36563, 36582,
tunneled, with 36583
subcut port.
SA015............. kit, for 488 36870, 37184,
percutaneous 37186, 37187,
thrombolytic 37188
device
(Trerotola).
SA020............. kit, loop snare 275 36595, 37203
(Microvena).
SA022............. kit, 305 63610, 64561
percutaneous
neuro test
stimulation.
SA024............. kit, 858 36522
photopheresis
procedure.
SA025............. kit, PICC with 586 36570, 36571,
subcut port. 36585
SA036............. kit, 1,149 53850
transurethral
microwave
thermotherapy.
SA037............. kit, 1,050 53852
transurethral
needle ablation
(TUNA).
SA038............. kit, 650 53853
transurethral
waterinduced
thermotherapy.
SA039............. kit, 696 22520, 22521
vertebroplasty
(LP2, CDO).
SA074............. kit, 519 36478
endovascular
laser treatment.
SA075............. kit, 1,245 58565
hysteroscopic
tubal implant
for
sterilization.
SA077............. kit, pleural 329 32550, 96440
catheter
insertion.
SA087............. tray, RTS 2,550 19296
applicator
(Mammosite).
SA091............. tray, scoop, 750 31730
fast track
system.
SA092............. kit, gene, MLL 1,395 88385
fusion.
SA093............. kit, priming, \1\ 463 88385, 88386
random.
SC085............. tubing set, 173 36514
plasma exchange.
SD018............. catheter, 727 58353
balloon,
thermal
ablation
(Thermachoice).
SD019............. catheter, 166 43456, 45303,
balloon, 45340, 45386,
ureteral-GI 46604
(strictures).
SD020............. catheter, CVA, 355 36565
tunneled, dual
(Tesio).
SD023............. catheter, 183 74251, 74260,
enteroclysis. 89100, 89105,
89130, 89132,
89135, 89136,
89140, 89141
SD058............. electrode, grid. 475 95829
SD072............. eyelid weight 218 67912
implant, gold.
SD073............. fiducial screws \2\ 558 77011, 77301
(set of 4).
SD094............. mammotome probe. 200 19103
SD109............. probe, 1,995 20982, 32998,
radiofrequency, 41530, 50592
3 array
(StarBurstSDE).
SD151............. catheter, 432 35470, 35471,
balloon, low 35474
profile PTA.
SD152............. catheter, 244 35472, 35473,
balloon, PTA. 35475, 35476,
G0392, G0393
SD154............. catheter, 338 36217, 36247,
microcatheter 36481, 37183,
(selective 3rd 37210
order).

[[Page 40081]]

SD155............. catheter, RF $725 36475
endovenous
occlusion.
SD175............. guidewire, 180 36217, 36247,
steerable 36481, 37183,
(Transcend). 37205, 37206,
37210, 49440,
49441, 49442,
49446, 49450,
49451, 49452,
49460
SD177............. hysteroscope, 1,146 58563
ablation device.
SD185............. plasma antibody 1,150 36515
adsorption
column
(Prosorba).
SD186............. Plasma LDL 1,380 36516
adsorption
column
(Liposorber).
SD189............. plate, surgical, 226 21208
mini-
compression, 4
hole.
SD191............. plate, surgical, 719 21125, 21127,
reconstruction, 21215
left, 5 x 16
hole.
SD193............. plate, surgical, 389 21461, 21462
rigid
comminuted
fracture.
SD204............. sensor, pH 225 91035
capsule (Bravo).
SD205............. sheath, 154 31620
endoscope
ultrasound
balloon.
SD207............. suture device 225 35470, 35471,
for vessel 35472, 35473,
closure 35474, 35475,
(Perclose A-T). 37184, 37187,
37188, 37205,
G0392
SD215............. probe, 1,250 58356
endometrial
cryoablation
(Her Option).
SD216............. catheter, 165 91040, 91120
balloon,
esophageal or
rectal (graded
distention
test).
SD218............. stent, ureteral, 162 50382, 50384,
without 50385
guidewire.
SF028............. laser tip 290 30117, 52214,
(single use). 52224, 52317
SF029............. laser tip, bare 150 46917, 46924
(single use).
SF030............. laser tip, 850 52647, 52648
diffuser fiber.
SL055............. DNA stain kit \3\ 150 88358
(per test).
SL209............. array kit, 2,121 88386
Genosensor.
SL225............. gas, nitogen, 190 88385, 88386
ultra-high
purity
(compressed)
grade 5.0.
------------------------------------------------------------------------
\1\ Six pack.
\2\ Set of 4.
\3\ 10 pack.

Next, we directed the contractor to access the United States
General Services Administration (GSA) medical supply schedule to
augment the results obtained through review of vendor materials and
direct contact with vendors, manufacturers, and GPOs. We note that the
GSA establishes long-term government-wide contracts with commercial
firms for many products, negotiating contracts and determining prices
to be fair and reasonable prior to placing them on schedule. Included
on the schedule are thousands of medical supplies at prices that, in
most cases, are established through competition. The GSA schedule is an
open solicitation and a business of any size, if it is stable and
financially sound, can request to be included on the schedule. GSA's
vendors usually are nationwide vendors with substantial non-government
sales, and products on the schedule must be manufactured in the U.S. or
in a nation with a trade agreement with the United States. Submissions
for the schedule are received 365 days per year, vendor contracts can
be of varying lengths, and vendors can add or delete products from the
schedule. Depending on the aggregate cost estimate associated with the
vendor's supply items, the time to achieve inclusion on the schedule
can vary from as short as several months to as long as 2 years. The GSA
has delegated authority to the Department of Veterans Affairs (VA) to
procure medical supplies under the VA Federal Supply Schedules Program.
Using the GSA general search engine under the category
``Laboratory, Scientific, & Medical'' available at https://www.gsaadvantage.gov/advgsa/advantage/main/start_page.do the
contractor obtained nine prices for items similar to the high-cost
supplies in the PE database and that are displayed in Table 20 from the
publicly available information on the Internet, including pricing for
one product for which its prior work did not yield an updated price. We
believe that additional items that are similar to the high-cost
supplies in the PE database and that may be used with the same
procedures may be on the GSA schedule but we are still working through
the crosswalk between our supplies and the way the supplies are
presented on the GSA schedule. Examples of high-cost supplies in the PE
database that the contractor located on the GSA schedule include: (1)
Kit, capsule, ESO, endoscopy w-application supplies (ESO), priced at
$450 in the PE database and $444 on the GSA schedule; and (2) tube,
jejunostomy, priced at $195 in the PE database and $60 to $83 on the
GSA schedule, depending on the characteristics of the tube.
Since the GSA medical supply schedule is a source for pricing
information that is public and transparent and reflects the best
government contract price for a product, we believe it is a desirable
resource for us to use in a refined process for updating the prices of
high-cost

[[Page 40082]]

supplies. For historical context, CMS has previously proposed to use VA
prices that result from the competitive marketplace as comparison
points to limit the Medicare prices for oxygen and certain items of
durable medical equipment and prosthetic devices (62 FR 38100 through
38107, and 64 FR 44227 through 44231) in 1997 and 1999, respectively.
These prior proposals were based on our determination that the Medicare
payment amounts for these items as durable medical equipment or
prosthetics (not as physicians' services) were not inherently
reasonable. We note, however, that our current interest in the GSA
schedule for pricing high-cost supplies for payment of physicians'
services is not based on considerations of inherent reasonableness, and
we do not actually pay the prices in the PE database for supplies under
the PFS.
We further note that public commenters on pricing high-cost
supplies have consistently requested that CMS ensure that the pricing
information used to update the prices is provided publicly. The
commenters have observed that this transparency would enable
stakeholders to evaluate and provide feedback to the agency on pricing
accuracy (74 FR 61776). We also acknowledge that our past attempts over
several years to identify typical market prices for the high-cost
supplies have been inhibited by the limited availability of public data
that meet the documentation requirements we have previously
established. Individual vendors do not always publish their product
prices or provide typical discounts. Moreover, discounts may vary
depending on suppliers and the volume of supplies purchased. Our
understanding of the GSA medical supply schedule is that the publicly
listed fair and reasonable prices on the schedule generally do not
include volume and or certain other discounts that may be subsequently
negotiated by the buyer. Consequently, we would consider the prices
available on the GSA schedule to represent the ``individual item
ceiling'' price for a single item purchase, which we believe would be
appropriate to estimate the high-cost supply prices for physicians'
office purchases. We are soliciting public comments regarding the high-
cost supplies in the direct PE database for the CY 2011 PFS proposed
rule, available on the CMS Web site as noted earlier in this section,
and the corresponding supplies or alternative items that could be used
for the same function that are currently on the GSA supply schedule. We
encourage commenters to provide a detailed analysis of the current
relationships between the items in the PE database and those on the GSA
schedule.
At this time, we would like to describe a refined process for
regularly updating prices for high-cost supplies under the PFS and
solicit comments on how we could improve on this process. The process
could occur every 2 years beginning as soon as CY 2013, although we
note that we would propose the refined process through rulemaking
before revising the prices for any high-cost supply item based on the
GSA schedule. We could also consider establishing a different price
update period depending on whether a high-cost supply was a new supply
in the PE database or had been in use for some time, in which case we
might expect that the price would have stabilized and, therefore, could
be updated less frequently. In general, we would expect that the
periodicity of updating prices for high-cost supplies that we
eventually adopted would balance the associated administrative burden
with the rate of price changes, to ensure that the associated
procedures remain appropriately valued, rather than increasingly
misvalued, over time.
We envision that we would base high-cost supply price inputs on the
publicly available price listed on the GSA medical supply schedule.
Since the medical community would have several years to examine the GSA
medical supply schedule before the refined process would be adopted,
and we have found no apparent limitations on vendors placing products
on the GSA schedule, beyond the schedule's interest in competitive,
best value procurements, stakeholders would have the opportunity to
ensure that any high-cost direct PE input for a PFS service that may
currently be missing from the GSA medical supply schedule would be
included before CMS needs to access the publicly available price for
the item. If a supply price were not publicly available on the GSA
medical supply schedule by the time CMS needs to access the price, we
would propose to reduce the current price input for the supply by a
percentage that would be based on the relationship between GSA prices
at that time and the existing PE database prices for similar supplies
(currently an average 23 percent reduction). We believe that this
refined process is desirable because it is consistent with commenters'
repeated requests for the updating methodology to be transparent and
predictable.
Moreover, the VA (with responsibility delegated by the GSA)
determines whether prices are fair and reasonable by comparing the
prices and discounts that a company offers the government with the
prices and discounts that the company offers to commercial customers.
Therefore, using the GSA medical supply schedule as a source for
publicly available prices would also better account for product-
specific market dynamics than the alternative of an across-the-board
percentage reduction for supplies not on the GSA schedule based on
general price trends for the high-cost supplies on the schedule. That
is, if the market price of a particular supply were not to drop
according to broad trends for other high-cost supplies, suppliers would
have the opportunity to provide their price to the public on the GSA
schedule in order to preclude any reduction in Medicare payment for
procedures associated with that supply.
Finally, we would like to reiterate that we are interested in
receiving detailed public comments on the refined process discussed
above, including all aspects of the price update methodology that we
have presented. Moreover, we believe a similar approach could
potentially be appropriate to update the prices for other supplies in
the PE database that would not fall under our definition of high-cost
supplies, and we welcome further public comments on that possible
extension. We also invite further suggestions for alternative
approaches to updating high-cost supply prices, specifically those that
would result in a predictable, public, and transparent methodology that
would ensure that the prices in the PE database reflect typical market
prices. These principles are particularly important in order to ensure
that the services that utilize the high-cost supplies when provided in
the physician's office are appropriately valued under the PFS and
continue to be appropriately valued over time.

D. Geographic Practice Cost Indices (GPCIs)

1. Background
Section 1848(e)(1)(A) of the Act requires us to develop separate
Geographic Practice Cost Indices (GPCIs) to measure resource cost
differences among localities compared to the national average for each
of the three fee schedule components (that is, work, PE, and
malpractice). While requiring that the PE and malpractice GPCIs reflect
the full relative cost differences, section 1848(e)(1)(A)(iii) of the
Act requires that the physician work GPCIs reflect only one-quarter of
the relative cost differences compared to the national average. In
addition, section 1848(e)(1)(G) of the Act sets a

[[Page 40083]]

permanent 1.5 work GPCI floor in Alaska for services furnished
beginning January 1, 2009. Section 1848(e)(1)(C) of the Act requires us
to review and, if necessary, adjust the GPCIs 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 2009 PFS final rule with comment period (73 FR 69740), the CY
2009 adjustment to the GPCIs reflected the fully implemented fifth
comprehensive GPCI update. CY 2010 would have typically included no
adjustments to the GPCIs. However, section 3102(a) of the ACA amends
section 1848(e)(1)(E) of the Act to extend the 1.0 work GPCI floor for
services furnished through December 31, 2010. Additionally, section
3102(b) of the ACA adds a new subparagraph 1848(e)(1)(H) to the Act,
which specifies that for CY 2010 and CY 2011, the employee compensation
and rent portions of the PE GPCI must reflect only one-half of the
relative cost differences for each locality compared to the national
average. The new subparagraph also includes a ``hold harmless''
provision for CY 2010 and CY 2011 for any PFS locality that would
otherwise receive a reduction to its PE GPCI resulting from the limited
recognition of cost differences. Additionally, section 1848(e)(1)(I) of
the Act (as added by section 10324(c) of ACA) establishes a 1.0 PE GPCI
floor for services furnished in frontier States effective January 1,
2011. In May 2010, we provided our Medicare contractors with an updated
CY 2010 payment file that included the 1.0 work GPCI floor and the PE
GPCIs calculated according to the methodology required by section
1848(e)(1)(H) of the Act (as added by section 3102(b) of ACA) for CY
2010, to be used for payment of services furnished on or after January
1, 2010.
For the CY 2011 PFS proposed rule, we have completed the sixth
review of the GPCIs and are proposing new GPCIs. We note that section
1848(e)(1)(E) of the Act (as amended by section 3102(a) of ACA) extends
the 1.0 work GPCI floor only through December 31, 2010. Under current
statute, the 1.0 work GPCI floor will expire on January 1, 2011.
Therefore, the CY 2011 physician work GPCIs and summarized geographic
adjustment factors (GAFs) do not reflect the 1.0 work floor. However,
section 1848(e)(1)(G) of the Act (as amended by section 134(b) of the
MIPPA) set a permanent 1.5 work GPCI floor in Alaska for services
furnished beginning January 1, 2009; and, as noted above, section
1848(e)(1)(I) of the Act (as added by section 10324(c) of ACA) provides
for a permanent 1.0 PE GPCI floor for frontier States effective January
1, 2011. Therefore, as required by the statute, the 1.5 work GPCI floor
for Alaska and the 1.0 PE GPCI floor for frontier States will be in
effect for CY 2011. In addition to the limited recognition of certain
cost differences for the PE GPCIs, section 1848(e)(1)(H) of the Act (as
added by section 3102(b) of ACA) also requires us to complete an
analysis of the data sources used and cost share weights assigned to
the PE GPCIs. Implementation of ACA provisions related to the CY 2011
PE GPCIs is discussed in more detail in the GPCI update section below.
See Addenda D and E to this proposed rule for the proposed CY 2011
GPCIs and summarized GAFs.
2. GPCI Update
The proposed updated GPCI values were developed by Acumen, LLC
(Acumen) under contract to CMS. As mentioned above, there are three
GPCI components (physician work, PE, and malpractice), and all GPCIs
are developed through comparison to a national average for each
component. Additionally, each of the three GPCIs relies on its own data
source(s) and methodology for calculating its value as described below.
a. Physician Work GPCIs
The physician work GPCIs are designed to capture the relative cost
of physician labor by Medicare PFS locality. Previously, the physician
work GPCIs were developed using the median hourly earnings from the
2000 Census of workers in seven professional specialty occupation
categories which we used as a proxy for physicians' wages and
calculated to reflect one-quarter of the relative cost differences for
each locality compared to the national average. Physicians' wages are
not included in the occupation categories because Medicare payments are
a key determinant of physicians' earnings. Including physicians' wages
in the physician work GPCIs would, in effect, have made the indices
dependent upon Medicare payments.
The physician work GPCIs were updated in CYs 2001, 2003, 2005, and
2008 using professional earnings data from the 2000 Census. However,
wage and earnings data are no longer available from the Census long
form and the 2000 data are outdated. Therefore, for the proposed sixth
GPCI update, we used the 2006 through 2008 Bureau of Labor Statistics
(BLS) Occupational Employment Statistics (OES) data as a replacement
for the 2000 Census data. The use of BLS OES data as a replacement for
the 2000 Census data is discussed in more detail in the update of the
PE GPCIs section. As noted above, the 1.0 work GPCI floor is set to
expire under current statute on December 31, 2010. Therefore, the CY
2011 proposed physician work GPCIs reflect the removal of this floor.
b. Practice Expense GPCIs
(1) The Affordable Care Act Requirements for PE GPCIs
General Methodology for the CY 2011 GPCIs
ACA added a new subparagraph 1848(e)(1)(H) to the Act which revises
the methodology for calculating the PE GPCIs for CY 2010 and CY 2011 so
that the employee compensation and rent portions of the PE GPCIs
reflect only one-half of the relative cost differences for each
locality compared to the national average. Additionally, under section
1848(e)(1)(H)(iii) of the Act (as added by section 3102(b) of the ACA),
each PFS locality is held harmless so that the PE GPCI will not be
reduced as a result of the change in methodology for PE GPCIs. In
accordance with section 1848(e)(1)(H)(ii) of the Act (as added by
section 3102(b) of ACA), the employee compensation and rent components
of the proposed CY 2011 PE GPCIs were calculated to reflect one-half of
the cost differences for each PFS locality relative to the national
average cost. Additionally, as required by the statute, physicians'
services furnished in each PFS locality would be adjusted by the higher
of the locality's PE GPCI calculated with the limited recognition of
employee compensation and rent cost differences or the PE GPCI
calculated without the limited recognition of cost differences.
Phase-In of PE GPCIs
Section 1848(e)(1)(C) of the Act requires us to phase in GPCI
adjustments over 2 years if there was more than 1 year between GPCI
adjustments. In accordance with the statute, we are proposing to phase
in the updated PE GPCIs using one-half of the CY 2010 values and one-
half of the fully implemented values (as described in this section). To
apply the phase-in and hold harmless provisions of the Act, we
calculated transitional PE GPCIs based on two scenarios. Under the
first scenario, we calculated transitional CY 2011 PE GPCIs using the
full recognition of employee compensation and rent cost differences for
each locality as compared to the national average. The

[[Page 40084]]

CY 2011 transitional PE GPCI values with full recognition of cost
differences were calculated using one-half of the CY 2010 PE GPCI
values with full recognition of cost differences and one-half of the
updated PE GPCIs with full recognition of cost differences. The first
scenario represents the transitional PE GPCI values prior to the
limited recognition of cost differences. In other words, this scenario
does not include the effects of sections 1848(e)(1)(H)(i) and (ii) of
the Act (as added by section 3102(b) of ACA).
For the second scenario, we calculated transitional CY 2011 PE
GPCIs with the limited recognition of cost differences for the employee
compensation and rent components (as required by sections
1848(e)(1)(H)(i) and (ii) of the Act (as added by section 3102(b) of
ACA)). The CY 2011 transitional PE GPCI values with the limited
recognition of cost differences were calculated using one-half of the
CY 2010 PE GPCIs with the limited cost differences and one-half of the
updated PE GPCIs with the limited cost differences. The hold harmless
provision under section 1848(e)(1)(H)(iii) of the Act (as added by
section 3102(b) of ACA) was applied by selecting the greater of the CY
2011 transitional PE GPCI value calculated with the limited recognition
of cost differences or the CY 2011 transitional PE GCPI value
calculated with full recognition of cost differences. The phase-in of
the CY 2011 PE GPCIs and application of the hold harmless provision are
illustrated in Table 21 below.

Table 21--Phase-In of the CY 2011 PE GPCIs
----------------------------------------------------------------------------------------------------------------
CY 2011
CY 2010 Updated GPCIs (transitional Hold harmless
year)
----------------------------------------------------------------------------------------------------------------
File 1
PE GPCI Without 3102(b) of ACA.. Without ACA....... Without ACA (\1/2\ of 2010) + Greater of File 1
(Updated Data). (\1/2\ Updated Transitional
GPCI). Value
File 2
PE GPCI With 3102(b) of ACA..... With ACA.......... With ACA (Updated (\1/2\ of 2010 w/ or File 2
Data). ACA) + (\1/2\ Transitional
Updated GPCI w/ Value.
ACA).
----------------------------------------------------------------------------------------------------------------
*ACA in this table means the Affordable Care Act.

Data Analysis
Section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b)
of ACA) also requires the Secretary to ``analyze current methods of
establishing practice expense adjustments under subparagraph (A)(i) and
evaluate data that fairly and reliably establishes distinctions in the
cost of operating a medical practice in different fee schedule areas.''
This section also requires the Secretary to make appropriate
adjustments to the PE GPCIs no later than by January 1, 2012. To
implement this statutory requirement, we are proposing to implement
changes in PE data sources and cost share weights discussed herein
effective beginning in CY 2011.
In accordance with section 1848(e)(1)(H)(iv) of the Act (as added
by section 3102(b) of ACA), we have analyzed the current methods and
data sources used in the establishment of the PE GPCIs. With respect to
the method used, we began with a review of the GAO's March 2005 Report
entitled, ``MEDICARE PHYSICIAN FEES: Geographic Adjustment Indices Are
Valid in Design, but Data and Methods Need Refinement'' (GAO-05-119).
While we have raised concerns in the past about some of the GAO's GPCI
recommendations, we note that with respect to the PE GPCIs, the GAO did
not indicate any significant issues with the methods underlying the PE
GPCIs. Rather, the report focused on some of the data sources used in
the method. For example, the GAO stated that the wage data used for the
PE GPCIs are not current. Similarly, upon our reexamination of public
comments we have received on the PE GPCIs for previous updates, we note
that the commenters predominately focused on either the data sources
used in the method or raised issues such as incentivizing the provision
of care in different geographic areas. However, the latter issue
(incentivizing the provision of care) is outside the scope of the
statutory requirement that the PE GPCIs reflect the relative costs of
the mix of goods and services comprising practice expenses in the
different fee schedule areas relative to the national average.
One key component of the PE GPCI method that our analysis
identified involved the office expense portion of the PE GPCIs and the
cost share weight assigned to this component. Most significantly, we
are proposing that the weight for the office rent component be revised
from 12.209 percent to 8.410 percent to reflect our more detailed
breakout of the types of office expenses that are determined in local
markets instead of national markets. For example, for previous GPCI
updates, we used the office expenses cost category as the cost share
weight for office rent and, therefore, all individual components
previously included in the office expenses category were adjusted for
local area cost differences by the GPCIs. As discussed in section
II.E.1. of this proposed rule, we are proposing to disaggregate the
broader office expenses component into 9 new cost categories as part of
the proposed CY 2011 MEI rebasing. The disaggregation of the office
expenses category indicates that the fixed capital cost category, for
which the consumer price index (CPI) for owner's equivalent rent is the
price proxy, is the office expense category applicable to the office
rent component of the PE GPCI. Therefore, the fixed cost capital cost
category is the only component of office expenses that we are proposing
to adjust for local area cost differences beginning in CY 2011. We are
proposing to assign other newly defined components of the office
expenses category (for example, utilities, chemicals, paper, rubber and
plastics, telephone, postage, and moveable capital) to the medical
equipment, supplies, and other miscellaneous expenses cost component of
the PE GPCIs. As discussed later in this section, the medical
equipment, supplies, and other miscellaneous expenses component of the
PE GPCIs is assumed to have a national market and, therefore, this
component is not adjusted for local area cost differences.
The proposed expense categories for the PE GPCIs, along with their
respective cost share weights, are primarily derived from the 2006
American Medical Association (AMA) Physician Practice Information
Survey (PPIS) for self-employed physicians and selected self-employed
non-medical doctor specialties. The PPIS is the most comprehensive,
multispecialty, contemporaneous, and consistently collected PE data
source available. It

[[Page 40085]]

was developed by medical organizations and captures the costs of
operating a medical practice, including office rents and nonphysician
staff wages.
Moreover, we also examined the feasibility of using the American
Community Survey (ACS) and the Bureau of Labor and Statistics (BLS)
Occupational Employment Statistics (OES) data for the employee
compensation component of the PE GPCI. For previous updates, the
employee compensation component was based on the 2000 Decennial Census
long form data. Since the Census data are significantly outdated and
the 2010 Census no longer includes occupational wage data, we believed
the ACS or BLS OES data might be viable alternatives. While the ACS 3-
year public use microsample (PUMS) is currently available, it reflects
only about 3 percent of households and the data exhibit significant
variation due to the small sample. In particular, the ACS PUMS has
fewer than 10 observations of pharmacists in the Manhattan, Beaumont
Texas, and Southern Maine localities. Therefore, we believe it would be
premature to use the ACS data for determining GPCI values. The 2006,
2007, and 2008 panels from the BLS OES represent a larger sample than
the ACS PUMS and more recent data than the 2000 Census. As such, we are
proposing to use the BLS OES data for updating the GPCIs. We look
forward to exploring the use of the full ACS data when they become
available.
Additionally, we explored other sources of rent data (including
commercial rental data and survey data) for use in calculating the PE
GPCIs. We could not identify a reliable alternative rental data source
available on a national basis with coverage of non-metropolitan areas.
We do not believe there is a national data source better than the
Housing and Urban Development (HUD) data for determining the relative
cost differences in office rents. Therefore, based on our review of the
available data sources, we are proposing to use the 2010 apartment
rental data produced by HUD at the 50th percentile as a proxy for the
relative cost difference in physician office rents.
We believe our analysis of the current methods of establishing PE
GPCIs and our evaluation of data that fairly and reliably establish
distinctions in the cost of operating a medical practice in the
different fee schedule areas meet the statutory requirements of section
1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of ACA). A
more detailed discussion of our analysis of current methods of
establishing PE GPCIs and evaluation of data sources is included in
Acumen's draft report. Acumen's draft report and associated analysis of
the sixth GPCI update, including the PE GPCIs, will be posted on the
CMS Web site after display of this CY 2011 PFS proposed rule. The draft
report may be accessed from the PFS Web site at: http://www.cms.gov/PhysicianFeeSched/ under the ``Downloads'' section of the CY 2011 PFS
proposed rule web page.
Determining the Proposed PE GPCI Cost Share Weights
To determine the cost share weights for the proposed CY 2011 GPCIs,
we used the proposed 2006-based Medicare Economic Index (MEI) as
discussed in section II.E.1. of this proposed rule. The proposed MEI
was rebased and revised to reflect the weighted-average annual price
change for various inputs needed to provide physicians' services. As
discussed in detail in that section, the proposed expense categories in
the MEI, along with their respective weights, are primarily derived
from data collected in the 2006 AMA PPIS for self-employed physicians
and selected self-employed non-medical doctor specialties.
For the cost share weight for the PE GPCIs, we used the 2006-based
MEI weight for the PE category of 51.734 percent minus the professional
liability insurance category weight of 4.295 percent. Therefore, the
proposed cost share weight for the PE GPCIs is 47.439 percent. For the
employee compensation portion of the PE GPCIs, we used the nonphysician
employee compensation category weight of 19.153 percent. The fixed
capital category weight of 8.410, for which the CPI for owner's
equivalent rent is the price proxy, was used for the office rent
component. To determine the medical equipment, supplies, and other
miscellaneous expenses component, we removed professional liability
(4.295 percent), nonphysician employee compensation (19.153 percent),
and fixed capital (8.410 percent) from the PE category weight (51.734
percent). Therefore, the proposed cost share weight for the medical
equipment, supplies, and other miscellaneous expenses component is
19.876 percent.
Furthermore, the physician compensation cost category and its
weight of 48.266 percent reflect the proposed work GPCI cost share
weight and the professional liability insurance weight of 4.295 percent
was used for the malpractice GPCI cost share weight. We believe our
analysis and evaluation of the weights assigned to each of the
categories within the PE GPCIs meets the statutory requirements of
section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of
ACA).
The proposed cost share weights for the CY 2011 GPCIs are displayed
in Table 22 below.

Table 22--Proposed Cost Share Weights for CY 2011 GPCI Update
------------------------------------------------------------------------
Proposed cost
Expense category Current cost share share weight
weight (percent) (percent)
------------------------------------------------------------------------
Physician Work.................. 52.466 48.266
Practice Expense................ 43.669 47.439
--Employee Compensation..... 18.654 19.153
--Office Rent............... 12.209 8.410
--Equipment, Supplies, Other 12.806 19.876
Malpractice Insurance........... 3.865 4.295
---------------------------------------
Total................... 100 100
------------------------------------------------------------------------

PE GPCI Floor for Frontier States
Section 10324(c) of ACA added a new subparagraph (I) under section
1848(e)(1) of the Act to establish a 1.0 PE GPCI floor for physicians'
services furnished in frontier States. In accordance with section
1848(e)(1)(I) of the Act (as added by section 10324(c) of ACA),
beginning in CY 2011, we will apply a 1.0 PE GPCI floor for physicians'
services furnished in States determined to be frontier States. The
statute requires us to define any State as a frontier State if at least
50 percent of the State's counties are determined to be frontier

[[Page 40086]]

counties, which the statute defines as counties that have a population
density less than 6 persons per square mile. However, section
1848(e)(1)(I) of the Act (as added by section 10324(c) of ACA) also
specifies that this provision shall not apply to States receiving a
non-labor related share adjustment under section 1886(d)(5)(H) of the
Act (which excludes Alaska and Hawaii from qualifying as a frontier
State).
Consistent with the proposed FY 2011 hospital inpatient prospective
payment system (IPPS) 1.0 wage index floor for frontier States (as
required by section 10324(a) of the ACA) (75 FR 30920 through 30921),
we are proposing to identify frontier counties by analyzing population
data and county definitions based upon the most recent annual
population estimates published by the U.S. Census Bureau. We divide
each county's population total by each county's reported land area
(according to the decennial census) in square miles to establish
population density. We also are proposing to update this analysis from
time to time, such as upon publication of a subsequent decennial
census, and if necessary, add or remove qualifying States from the list
of frontier States based on the updated analysis.
For a State that qualifies as a frontier State, in accordance with
section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the
ACA), we are proposing that physicians' services furnished within that
State would receive the higher of the applicable PE GPCI value
calculated according to the standard CY 2011 methodology or a minimum
value of 1.00. Furthermore, in accordance with section 1848(e)(1)(I) of
the Act (as added by section 10324(c) of the ACA), the frontier State
PE GPCI floor is not subject to budget neutrality and would only be
extended to physicians' services furnished within a frontier State.
For determining the proposed CY 2011 PFS PE GPCI values, the
frontier States are the following: Montana; Wyoming; North Dakota;
Nevada; and South Dakota (as reflected in Table 23).

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

(2) Summary of CY 2011 Proposed PE GPCIs
The PE GPCIs include three components: employee compensation,
office rent, and medical equipment, supplies and miscellaneous expenses
as discussed below:
(i) Employee Compensation: We used the 2006 through 2008 BLS OES
data to determine the proposed employee compensation component of the
PE GPCIs. Employee compensation accounts for 40.4 percent of the total
PE GPCIs.
(ii) Office Rents: Consistent with the previous GPCI update, we
used the most recent residential apartment rental data produced by HUD
(2010) at the 50th percentile as a proxy for the relative cost
differences in physician office rents. Office rent accounts for 17.7
percent of the PE GPCIs.
(iii) Medical Equipment, Supplies, and other Miscellaneous
Expenses: We assumed that items such as medical equipment and supplies
have a national market and that input prices do not vary among
geographic areas. As discussed in previous GPCI updates in the CY 2005
and CY 2008 PFS proposed rules, specifically the fourth GPCI update (69
FR 47503) and fifth GPCI update (72 FR 38138), respectively, some price
differences may exist, but we believe these differences are more likely
to be based on volume discounts rather than on geographic market
differences. Medical equipment, supplies, and miscellaneous expenses
are factored into the PE GPCIs with a component index of 1.000. The
medical equipment, supplies, and other miscellaneous expense component
are 41.9 percent of the PE GPCIs.
c. Malpractice GPCIs
The malpractice GPCIs are calculated based on insurer rate filings
of premium data for $1 million to $3 million mature claims-made
policies (policies for claims made rather than services furnished
during the policy term). The proposed CY 2011 malpractice GPCI update
reflects 2006 and 2007 premium data.
d. General GPCI Update Process
The periodic review and adjustment of GPCIs is mandated by section
1848(e)(1)(C) of the Act. At each update, the proposed GPCIs are
published in the PFS proposed rule the year before they would take
effect in order to provide an opportunity for public comment and
further revisions in response to comments prior to implementation. As
mentioned above, the proposed CY 2011 updated GPCIs for the first year
of the 2-year transition and summarized GAFs are displayed in Addenda D
and E to this proposed rule.
3. Payment Localities
The current PFS locality structure was developed and implemented in
1997. There are currently 89 localities; 34 localities are Statewide
areas. There are 52 localities in the other 18 States, with 10 States
having 2 localities, 2 States having 3 localities, 1 State having 4
localities, and 3 States having 5 or more localities. The District of
Columbia, Maryland, and Virginia suburbs, Puerto Rico, and the Virgin
Islands are additional localities that make up the remainder of the
total of 89 localities. The development of the current locality
structure is described in detail in the CY 1997 PFS proposed rule (61
FR 34615) and the subsequent final rule with comment period (61 FR
59494).
As we have previously noted in the CYs 2008 and 2009 proposed rules
(72 FR 38139 and 73 FR 38513), any changes to the locality
configuration must be made in a budget neutral manner within a State
and can lead to significant redistributions in payments. For many
years, we have not considered making changes to localities without the
support of a State medical association in order to demonstrate
consensus for the change among the professionals whose payments would
be affected (with some increasing and some decreasing). However, we
have recognized that, over time, changes in demographics or local
economic conditions may lead us to conduct a more comprehensive

[[Page 40087]]

examination of existing payment localities.
For the past several years, we have been involved in discussions
with physician groups and their representatives about recent shifts in
relative demographics and economic conditions, most notably within the
current California payment locality structure. We explained in the CY
2008 PFS final rule with comment period that we intended to conduct a
thorough analysis of potential approaches to reconfiguring localities
and would address this issue again in future rulemaking. For more
information, we refer readers to the CY 2008 PFS proposed rule (72 FR
38139) and subsequent final rule with comment period (72 FR 66245).
As a follow-up to the CY 2008 PFS final rule with comment period,
we contracted with Acumen to conduct a preliminary study of several
options for revising the payment localities on a nationwide basis. The
contractor's interim report was posted on the CMS Web site on August
21, 2008, and we requested comments from the public. The report
entitled, ``Review of Alternative GPCI Payment Locality Structures,''
remains accessible from the CMS PFS Web page under the heading
``Interim Study of Alternative Payment Localities under the PFS.'' The
report may also be accessed directly from the following link: http://www.cms.hhs.gov/PhysicianFeeSched/10_Interim_Study.asp#TopOfPage.
We accepted public comments on the interim report through November
3, 2008. The alternative locality configurations discussed in the
report are described briefly below in this section.

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

This option uses the Office of Management and Budget (OMB's)
Metropolitan Statistical Area (MSA) designations for the payment
locality configuration. MSAs would be considered as urban CBSAs.
Micropolitan Areas (as defined by OMB) and rural areas would be
considered as non-urban (rest of State) CBSAs. This approach would be
consistent with the IPPS pre-reclassification CBSA assignments and with
the geographic payment adjustments used in other Medicare payment
systems. This option would increase the number of PFS localities from
89 to 439.

Option 2: Separate High-Cost Counties From Existing Localities
(Separate Counties)

Under this approach, higher cost counties are removed from their
existing locality structure and they would each be placed into their
own locality. This option would increase the number of PFS localities
from 89 to 214, using a 5 percent GAF differential to separate high-
cost counties.

Option 3: Separate MSAs From Statewide Localities (Separate MSAs)

This option begins with statewide localities and creates separate
localities for higher cost MSAs (rather than removing higher cost
counties from their existing locality as described in Option 2). This
option would increase the number of PFS localities from 89 to 130,
using a 5 percent GAF differential to separate high-cost MSAs.

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

This option creates tiers of counties (within each State) that may
or may not be contiguous but share similar practice costs. This option
would increase the number of PFS localities from 89 to 140, using a 5
percent GAF differential to group similar counties into statewide
tiers.
As discussed in Acumen's interim report, all four studied
alternative locality configurations would increase the number of
localities and separate higher cost areas from rural ``rest of state''
areas. As a result, payments to urban areas would increase, while rural
areas would see a decrease in payment because they would no longer be
grouped with higher cost ``urbanized'' areas. A number of public
commenters on the draft report expressed support for Option 3 (separate
MSAs from Statewide localities) because the commenters believed this
alternative would improve payment accuracy over the current locality
configuration and could mitigate possible payment reductions to rural
areas as compared to Option 1 (CMS CBSAs). Therefore, Acumen is
conducting a more in-depth analysis of the dollar impacts that would
result from the application of Option 3.
For a detailed discussion of the public comments on the
contractor's interim locality study report, we refer readers to the CY
2010 PFS proposed rule (74 FR 33534) and subsequent final rule with
comment period (74 FR 61757).

E. PFS Update for CY 2010

1. Rebasing and Revising of the Medicare Economic Index (MEI)
a. Background
The Medicare Economic Index (MEI) is required by section 1842(b)(3)
of the Act, which states that prevailing charge levels beginning after
June 30, 1973 may not exceed the level from the previous year except to
the extent that the Secretary finds, on the basis of appropriate
economic index data, that such higher level is justified by year-to-
year economic changes. Beginning July 1, 1975, and continuing through
today, the MEI has met this requirement by reflecting the weighted-
average annual price change for various inputs needed to provide
physicians' services. The MEI is a fixed-weight input price index, with
an adjustment for the change in economy-wide, private nonfarm business
multifactor productivity. This index is comprised of two broad
categories: (1) Physician's own time; and (2) physician's practice
expense (PE).
The current form of the MEI was detailed in the November 25, 1992
Federal Register (57 FR 55896) and was based in part on the
recommendations of a Congressionally-mandated meeting of experts held
in March 1987. Since that time, the structure of the MEI has remained
essentially unchanged, with three exceptions. First, the MEI was
rebased in 1998 (63 FR 58845), which moved the cost structure of the
index from 1992 data to 1996 data. Second, the methodology for the
productivity adjustment was revised in the CY 2003 PFS final rule (67
FR 80019) to reflect the percentage change in the 10-year moving
average of economy-wide private nonfarm business multifactor
productivity. Third, the MEI was rebased in 2003 (68 FR 63239), which
moved the cost structure of the index from 1996 data to 2000 data.
We are proposing to rebase and revise the MEI and incorporate it
into the CY 2011 PFS update. The terms ``rebasing'' and ``revising'',
while often used interchangeably, actually denote different activities.
Rebasing refers to moving the base year for the structure of costs of
an input price index, while revising relates to other types of changes
such as changing data sources, cost categories, or price proxies used
in the input price index. As is always the case with a rebasing and
revising exercise, we have attempted to use the most recently
available, relevant, and appropriate information to develop the
proposed MEI cost category weights and price proxies. In the following
sections

[[Page 40088]]

of this proposed rule, we detail our proposals regarding the updated
cost weights for the MEI expense categories, our rationale for
selecting the price proxies in the MEI, and the results of the proposed
rebasing and revising of the MEI.
b. Use of More Current Data
The MEI was last rebased and revised in 2003 in the CY 2004 PFS
final rule with comment period (68 FR 63239). The current base year for
the MEI is 2000, which means that the cost weights in the index reflect
physicians' expenses in 2000. However, we believe it is desirable to
periodically rebase and revise the index so that the expense shares and
their associated price proxies reflect more current conditions. For
this reason, we propose to rebase the MEI to reflect appropriate
physicians' expenses in 2006.
We are proposing several changes to the expenses that are eligible
to be included in the MEI. For instance, we are proposing to remove all
costs related to drug expenses as drugs are not paid for under the PFS
nor are they included in the definition of ``physicians' services'' for
purposes of the Sustainable Growth Rate (SGR) system that is used to
update the PFS. The details of the decision regarding the removal of
physician-administered drugs from the SGR system can be found in the CY
2010 PFS proposed rule and finalized in the CY 2010 final rule with
comment period (74 FR 33651 and 74 FR 61961, respectively).
Additionally, we are proposing to remove costs associated with
separately billable supplies. The rationale for removing the separately
billable supplies is discussed further below in section III.E.1.X of
this proposed rule.
We are proposing to revise the cost categories in the MEI by
expanding the Office Expense category into nine detailed categories
with additional price proxies associated with these categories.
Additionally, we will continue to adjust the MEI for economy-wide
multifactor productivity based on the 10-year moving average of total
private nonfarm business multi-factor productivity.
c. Rebasing and Revising Expense Categories in the MEI
The MEI is used in conjunction with the SGR system to update the
PFS and represents the price component of that update. The proposed
expense categories in the index, along with their respective weights,
are primarily derived from data collected in the 2006 AMA Physician
Practice Information Survey (PPIS) for self-employed physicians and
selected self-employed non-Medical Doctor (non-MD) specialties. We
included data from the following specialties in the MEI cost weight
calculations (optometrists, oral surgeons, podiatrists, and
chiropractors) consistent with the definition of the term ``physician''
in section 1861(r) of the Act. In summary, the term ``physician'' when
used in connection with the performance of functions or actions an
individual is legally authorized to perform means the following: (1) A
doctor of medicine or osteopathy; (2) a doctor of dental surgery or of
dental medicine; (3) a doctor of podiatric medicine; (4) a doctor of
optometry; or (5) a chiropractor. For a complete definition, please see
section 1861(r) of the Act. We weighted the expense data from the
above-referenced specialties with the self-employed physician expense
data using physician counts by specialty.
The AMA data from the PPIS were used to determine expenditure
weights for total expenses, physicians' earnings, physicians' benefits,
employed physician payroll, nonphysician compensation, office expenses,
professional liability insurance (PLI), medical equipment, medical
supplies, and all other expenses. To further disaggregate into
subcategories reflecting more detailed expenses, we used data from the
2002 Bureau of Economic Analysis (BEA) Benchmark Input-Output table (I/
O), the 2006 Bureau of the Census Current Population Survey (CPS), the
2006 Bureau of Labor Statistics (BLS) Occupational Employment Survey
(OES) and Employment Cost for Employee Compensation Survey (ECEC), and
the 2006 Internal Revenue Service (IRS) Statistics of Income (SOI)
data. The development of each of the cost categories using these
sources is described in detail below.
(1) Developing the Weights for Use in the MEI
Developing a rebased and revised MEI requires selecting a base year
and determining the appropriate expense categories. We are proposing to
rebase the MEI to CY 2006. We choose CY 2006 as the base year for two
primary reasons: (1) CY 2006 is the most recent year for which data
were available; and (2) we believe that the CY 2006 data provide a
representative distribution of physicians' compensation and PEs.
Compared to the 2000-based MEI, we are proposing to include 9 new
cost categories (along with their respective weights) that disaggregate
the costs under the broader Office Expenses cost category. The 2000-
based MEI did not break these expenses into individual categories. A
more detailed discussion is provided below in this section. In
addition, we are proposing to exclude the Pharmaceutical cost category
as pharmaceuticals are neither paid for under the PFS nor are they
included in the definition of ``physicians' services'' for purposes of
calculating the physician update via the SGR system (for more details
see the CY 2010 PFS final rule with comment period (74 FR 61961 through
61962)). Lastly, we are proposing to exclude the expenses associated
with separately billable supplies since these items are not paid for
under the PFS.
We determined the number and composition of expense categories
based on the criteria used to develop the current MEI and other CMS
input price index expenditure weights. These criteria are timeliness,
reliability, relevance, and public availability. Table 24 lists the set
of mutually exclusive and exhaustive cost categories that make up the
proposed rebased and revised MEI.

Table 24--Proposed 2006 MEI Cost Categories, Weights, and Price Proxies Compared to the 2000 MEI Cost Categories
and Weights
----------------------------------------------------------------------------------------------------------------
Proposed 2006-
Cost category expense 2000 Expense Proposed 2006 price proxies
weights 1 2 weights
----------------------------------------------------------------------------------------------------------------
Total......................................... 100.00 100.000 ................................
-----------------------------------------------------------------
Physician's Own Time \3\...................... 48.266 52.466 ................................
Wages and Salaries........................ 43.880 42.730 AHE Total Nonfarm Private.\5\

[[Page 40089]]

Benefits 3 4.............................. 4.386 9.735 ECI-Benefits Total Nonfarm
Private.\6\
Physician's Practice Expense.................. 51.734 47.534 ................................
Nonphysician Employee Compensation........ 19.153 18.654 ................................
Nonphysician Employee Wages and Salaries.. 13.752 13.809 ................................
Prof/Tech Wages....................... 6.006 5.887 ECI-Wages/Salaries: Private
Professional &Technical.
Managerial Wages...................... 1.446 3.333 ECI-Wages/Salaries: Private
Managerial.
Clerical Wages........................ 4.466 3.892 ECI-Wages/Salaries: Private
Clerical.
Services Wages........................ 1.834 0.696 ECI-Wages/Salaries: Private
Service.
Nonphysician Employee Benefits \4\........ 5.401 4.845 ECI-Ben: Private Blend.
Office Expenses........................... 20.035 12.209 ................................
Utilities................................. 1.139 .............. CPI Fuel & Utilities.\7\
Chemicals............................. 0.679 .............. PPI for Other Basic Organic
Chemical Manufacturing
PPI325190.\8\
Paper................................. 0.616 .............. PPI for converted paper.
Rubber & Plastics..................... 0.563 .............. PPI for rubber and plastics.
Telephone............................. 1.415 .............. CPI for Telephone Services.
Postage............................... 0.661 .............. CPI for Postage.
All Other Labor-Related............... 4.718 .............. ECI Compensation Services
Occupations (ECIPCSONS).
Fixed Capital......................... 8.410 .............. CPI for Owner's Equivalent Rent.
Moveable Capital...................... 1.834 .............. PPI for Machinery and Equipment.
PLI....................................... 4.295 3.865 CMS-Prof. Liab. Phys. Premiums.
Medical Equipment......................... 1.978 2.055 PPI-Medical Instruments & Equip.
Pharmaceuticals and Medical Materials and 1.760 4.320 ................................
Supplies.
Pharmaceuticals............................... .............. 2.309 ................................
Medical Materials and Supplies........ 1.760 2.011 PPI Surg. Appliances and
Supplies/CPI(U) Med Supplies.
Other Professional Expenses............... 4.513 6.433 CPI-U All Items Less Food and
Energy.
----------------------------------------------------------------------------------------------------------------
(1) Due to rounding, weights may not sum to 100.000 percent.
(2) Sources: 2006 Physician Practice Information Survey (PPIS), Center for Health Policy Research, American
Medical Association; 2006 Employment Cost for Employee Compensation, U.S. Department of Labor, Bureau of Labor
Statistics; 2006 Occupational Employment Statistics (OES), BLS; U.S. Department of Commerce, Bureau of
Economic Analysis 2002 Benchmark Input Output Tables, and U.S. Department of Commerce, Bureau of the Census,
2006 Current Population Survey.
(3) Includes employed physician payroll.
(4) Includes paid leave.
(5) Average Hourly Earnings (AHE).
(6) Employment Cost Index (ECI).
(7) Consumer Price Index (CPI).
(8) Producer Price Index (PPI).

The development of each of the cost categories in the proposed 2006
MEI is described, in detail, below.
(2) Physician's Own Time
The component of the MEI that reflects the physician's own time is
represented by the net income portion of business receipts. The
proposed 2006 cost weight associated with the physician's own time
(otherwise referred to as the Physician's Compensation cost weight) is
based on 2006 AMA PPIS data for mean physician net income (physician
compensation) for self-employed physicians and for the selected self-
employed specialties referenced previously in this rule.
We are proposing to continue to add employed physician compensation
to self-employed physician compensation in order to calculate an
aggregate Physician Compensation cost weight. By including the
compensation of employed physicians in the physician compensation
expense category, these expenses will be adjusted by the appropriate
price proxies for a physician's own time. The proposed 2006 Physician
Compensation cost weight is 48.266 percent as compared to a 52.466
percent share in the 2000-based MEI. We split the physician
compensation component into subcategories: Wages & Salaries and
Benefits. For Physician Compensation, the ratio for Wages & Salaries
and Benefits was calculated using data from the PPIS. Self-employed
physician wages & salaries accounted for 92.3 percent of physician
earnings while physician benefits accounted for the remaining 7.8
percent. For employed physician payroll, the distribution for wages &
salaries and benefits for 2006 was 85.8 percent and 14.2 percent,
respectively. This ratio was determined by calculating a weighted
average of available SOI data for partnerships, corporations, and S-
corporations specific to physicians and outpatient care centers. Based
on these proposed methods, the proposed 2006 Physician Wages & Salaries
cost weight is 43.880 percent and the proposed 2006

[[Page 40090]]

Physician Benefits cost weight is 4.386 percent.
(3) Physician's Practice Expenses
To determine the remaining individual Practice Expenses cost
weights, we use mean expense data from the 2006 PPIS survey. The
detailed explanations for the derivation of the individual weights
under Practice Expenses are listed below.
(A) Nonphysician Employee Compensation
The cost weight for Nonphysician Employee Compensation was
developed using the 2006 AMA PPIS mean expenses for these costs. We
further divided this cost share into Wages & Salaries and Benefits
using 2006 BLS Employer Costs for Employee Compensation (ECEC) data for
the Health Care and Social Assistance (private industry). Although this
survey does not contain data specifically for offices of physicians,
data are available to help determine the shares associated with wages &
salaries and benefits for private industry health care and social
assistance services (which include hospitals, nursing homes, offices of
physicians, and offices of dentists). We believe these data provide a
reasonable estimate of the split between wages and benefits for
employees in physicians' offices. Data for 2006 in the ECEC for Health
Care and Social Assistance indicate that wages and benefits are 71.8
percent and 28.2 percent of compensation, respectively. The 2000-based
MEI included a wage and benefit split of 74.0 percent and 26.0 percent
of compensation.
As in the 2000-based MEI, we are proposing to use 2006 Current
Population Survey (CPS) data and 2006 BLS Occupational Employment
Statistics (OES) data to develop cost weights for wages for
nonphysician occupational groups. We determined total annual earnings
for offices of physicians using employment data from the CPS and mean
annual earnings from the OES. To arrive at a distribution for these
separate categories, we determined annual earnings for each of the four
categories (which are Professional & Technical workers, Managers,
Clerical workers, and Service workers), using the Standard Occupational
Classification (SOC) system. We then determined the overall share of
the total for each. The proposed distribution, as well as the
distribution from the 2000-based MEI are presented in Table 25.

Table 25--Percent Distribution of Nonphysician Payroll Expense by
Occupational Group: 2006 and 2000
------------------------------------------------------------------------
2000
BLS Occupational Group 2006 Expenditure Expenditure
shares shares
------------------------------------------------------------------------
Total............................... 100.000 100.000
-----------------------------------
Professional & Technical Workers 43.671 42.635
Managers........................ 10.517 24.138
Clerical Workers................ 32.477 28.187
Service Workers................. 13.336 5.040
------------------------------------------------------------------------
Values may not sum to 100 due to rounding.

The decrease in the Management expenditure share is directly
related to a decrease in the total number of employees in Management
occupations in physicians' offices, in particular, ``Medical and health
service managers.'' The decrease in expenditure share may also be due,
in part to the methods used in this rebasing. That is, for the 2006-
based MEI, we are using data limited to ``Offices of physicians.'' In
the 2000-based version of the index, the only data that were available
to inform these estimates were inclusive of physician offices and
clinics (``Offices of physicians and clinics''). An examination of 2006
CPS and OES data comparing ``Outpatient care centers'' to ``Offices of
physicians'' indicates that there is a higher share of management
occupations in the ``Outpatient care centers'' than in ``Offices of
physicians.''
The increase in the Service Workers expenditures share is
attributable to a substantive increase in the number of employees in
service occupations, particularly, ``Medical assistants and other
health care support occupations''.
(B) Office Expenses
The aggregate Office Expenses cost weight was derived using the
2006 AMA PPIS and is explained in more detail below in this section.
This calculation resulted in a 20.035 percent share of total costs in
2006 compared to a 12.209 percent share in the 2000-based index.
For the 2006-based MEI, we propose to further disaggregate the
Office Expenses into more detailed cost categories using the BEA 2002-
Benchmark I/O data for Offices of physicians, dentists, and other
health practitioners (NAICS 621A00). We used this data to develop the
nine detailed 2002 costs weights as a percent of total office expenses,
as measured by the BEA I/O data. The total Office Expenses cost
category was calculated by matching the BEA I/O data as closely as
possible to the AMA survey data, the latter of which defined office
expenses as ``office (non-medical) equipment and office (non-medical)
supplies, as well as rent, mortgage, interest, maintenance,
refrigeration, storage, security, janitorial, depreciation on medical
buildings used in your practice, utilities, or other office computer
systems (including information management systems/electronic medical
record systems) and telephone.''
We then aged the 2002 weights forward to 2006 to derive the 2006
detailed office expense cost weights as a percent of total Office
Expenses. The methodology we used to age the data forward involved
applying the annual price changes from each respective price proxy to
the appropriate cost categories. We repeated this practice for each
year of the interval. We then applied the resulting 2006 distributions
to the aggregate 2006 AMA Office Expenses weight to yield the detailed
2006 Office Expenses' weights as a percent of total expenses.
We are proposing to introduce these new, more detailed weights for
the 2006-based index based on our intent to derive an increased level
of precision while maintaining appropriate levels of aggregation in the
market basket. The proposed proxies are described in section X. of this
proposed rule. The following is a description of what is included in
each of the detailed cost categories.
Utilities: The Utilities cost weight includes expenses
classified in the fuel,

[[Page 40091]]

oil and gas, water and sewage, and electricity industries. The proposed
cost weight for utilities is 1.139 percent.
Paper: The Paper cost weight includes expenses classified
in the paper (including but not limited to paper, paperboard, and
sanitary paper products) and printing industries. The proposed cost
weight for paper is 0.616 percent.
Chemicals: The Chemicals cost weight includes expenses
classified in the basic organic and inorganic chemical manufacturing
industry (accounting for about 45 percent of the chemical expenses), as
well as other chemical industries including but not limited to
industrial gas manufacturing and all other chemical product
manufacturing. The proposed cost weight for chemicals is 0.679 percent.
Rubber and Plastics: The Rubber and Plastics cost weight
includes expenses classified in the rubber and plastic industries,
including but not limited to, urethane and other foam product
manufacturing and other plastic and rubber manufacturing industries.
The proposed cost weight for Rubber and Plastics is 0.563 percent.
Telephone: The telephone cost weight includes expenses
classified in the telecommunications (accounting for the majority of
the telephone expenses) and cable industries. The proposed cost weight
for Telephone services is 1.415 percent.
Postage: The Postage cost weight includes postal service
expenses. The proposed cost weight for Postage is 0.661 percent.
All Other Services: The All Other Services cost weight
includes other service expenses including, but not limited to,
nonresidential maintenance and repair, machinery repair, janitorial,
and security services. This cost weight does not include expenses
associated with professional services such as accounting, billing,
legal and marketing which are included in the All Other Expenses cost
weight derived using the AMA PPIS survey. The proposed cost weight for
All Other Services is 4.718 percent.
Fixed Capital: The Fixed Capital cost weight includes
expenses for building leases and depreciation. The proposed cost weight
for Fixed Capital is 8.410 percent.
Moveable Capital: The Moveable Capital cost weight
includes expenses for non-medical equipment including but not limited
to, computer equipment and software, as well as the rental and leasing
of automotive and industrial machinery equipment. The proposed cost
weight for Moveable Capital is 1.834 percent.
(C) Professional Liability Insurance (PLI) Expense
The weight for PLI expense was derived from the 2006 AMA survey and
was calculated as the mean PLI expense expressed as a percentage of
total expenses. This calculation resulted in a 4.513 percent share of
total costs in 2006 compared to a 3.865 percent share in the 2000-based
index. The increase in the weight for PLI reflects the current prices
of premiums, as well as an update to the level of coverage purchased by
physicians in 2006 compared to 2000.
(D) Medical Equipment Expenses
The proposed weight for Medical Equipment was calculated using the
2006 AMA PPIS mean expense data. This calculation resulted in a 1.978
percent share of total costs in 2006 compared to a 2.055 percent share
in the 2000-based index. By definition, this category includes the
expenses related to depreciation, maintenance contracts, leases/rental
of medical equipment used in diagnosis or treatment of patients. The
category would also include the tax-deductible portion of the purchase
price or replacement value of medical equipment, if not leased.
(E) Medical Supplies Expenses
The proposed weight for Medical Supplies was calculated using the
2006 AMA PPIS mean expense data. This calculation resulted in a 1.760
percent share of total costs in 2006 compared to a 2.011 percent share
in the 2000-based index. By definition, this category includes the
expenses related to medical supplies such as sterile gloves, needles,
bandages, specimen containers, and catheters. Additionally, we are
proposing to exclude the expenses related to separately billable
supplies as these expenses are not paid for under the PFS. The Medical
Supply cost category does not include expenses related to drugs.
(F) All Other Professional Expenses
The proposed weight for All Other Professional expenses was
calculated using the 2006 AMA PPIS mean expense data. This calculation
resulted in a 4.513 percent share of total costs in 2006 compared to a
6.433 percent share in the 2000-based index. By definition, this
category includes the expenses related to tax-deductible expenses for
any other expenses not reported in another category from the PPIS.
These expenses would include fees related to legal, marketing,
accounting, billing, office management services, professional
association memberships, maintenance of certification or licensure,
journals and continuing education, professional car upkeep and
depreciation, and any other professional expenses not reported
elsewhere on the PPIS.
d. Selection of Price Proxies for Use in the MEI
After the proposed 2006 cost weights for the rebased and revised
MEI were developed, we reviewed all of the price proxies to evaluate
their appropriateness. As was the case in the development of the 2000-
based MEI (68 FR 63239), most of the proxy measures we considered are
based on BLS data and are grouped into one of the following five
categories:
Producer Price Indices (PPIs): PPIs measure price changes
for goods sold in markets other than retail markets. These fixed-weight
indexes are a measure of price change at the intermediate or final
stage of production. They are the preferred proxies for physician
purchases as these prices appropriately reflect the product's first
commercial transaction.
Consumer Price Indices (CPIs): CPIs measure change in the
prices of final goods and services bought by consumers. Like the PPIs,
they are fixed-weight indexes. Since they may not represent the price
changes faced by producers, CPIs are used if there are no appropriate
PPIs or if the particular expenditure category is likely to contain
purchases made at the final point of sale.
Average Hourly Earnings (AHEs): AHEs are available for
production and nonsupervisory workers for specific industries, as well
as for the nonfarm business economy. They are calculated by dividing
gross payrolls for wages & salaries by total hours. The series reflects
shifts in employment mix and, thus, is representative of actual changes
in hourly earnings for industries or for the nonfarm business economy.
ECIs for Wages & Salaries: These ECIs measure the rate of
change in employee wage rates per hour worked. These fixed-weight
indexes are not affected by employment shifts among industries or
occupations and thus, measure only the pure rate of change in wages.
ECIs for Employee Benefits: These ECIs measure the rate of
change in employer costs of employee benefits, such as the employer's
share of Social Security taxes, pension and other retirement plans,
insurance benefits (life, health, disability, and accident), and paid
leave. Like ECIs for wages & salaries, the ECIs for employee benefits
are not affected by employment shifts among industries or occupations.

[[Page 40092]]

When choosing wage and price proxies for each expense category, we
evaluate the strengths and weaknesses of each proxy variable using the
following four criteria.
Relevance: The price proxy should appropriately represent
price changes for specific goods or services within the expense
category. Relevance may encompass judgments about relative efficiency
of the market generating the price and wage increases.
Reliability: If the potential proxy demonstrates a high
sampling variability, or inexplicable erratic patterns over time, its
viability as an appropriate price proxy is greatly diminished. Notably,
low sampling variability can conflict with relevance--since the more
specifically a price variable is defined (in terms of service,
commodity, or geographic area), the higher the possibility of high
sampling variability. A well-established time series is also preferred.
Timeliness of actual published data: For greater
granularity and the need to be as timely as possible, we prefer monthly
and quarterly data to annual data.
Public availability: For transparency, we prefer to use
data sources that are publicly available.
The BLS price proxy categories previously described meet the
criteria of relevance, reliability, timeliness, and public
availability. Below we discuss the proposed price-wage proxies for the
rebased and revised MEI (as shown in Table 23).
(1) Expense Categories in the MEI
(A) Physician's Own Time (Physician Compensation)
In the proposed revised and rebased MEI, we are using the AHE for
the private nonfarm economy as the proxy for the Physician Wages &
Salaries component (BLS series code: CEU0500000008).
As discussed extensively in the November 2, 1998 final rule (63 FR
58848), and again in the December 31, 2002 final rule (67 FR 80019), we
believe that this price proxy represents the most appropriate proxy for
use in the MEI. The AHE for the nonfarm business economy reflects the
impacts of supply, demand, and economy-wide productivity for the
average worker in the economy. As such, use of this proxy is consistent
with the original legislative intent that the change in the physicians'
earnings portion of the MEI follow the change in general earnings for
the economy. Since earnings are expressed per hour, a constant quantity
of labor input per unit of time is reflected. Finally, the use of the
AHE data is also consistent with our using the BLS economy-wide private
nonfarm business sector multifactor productivity measures since
economy-wide wage increases reflect economy-wide productivity
increases.
The current 2000-based MEI uses the ECI for Total Benefits (BLS
series code: CIU2030000000000I) for total private industry as the price
proxy for Physician Benefits. We are proposing to use the same proxy
for the 2006-based MEI. This means that both the wage and benefit
proxies for physician earnings are derived from the private nonfarm
business sector and are computed on a per-hour basis.
(B) Nonphysician Employee Compensation
For the 2006-based MEI, we are proposing to use Current Population
Survey (CPS) data on employment by occupation and earnings from the BLS
Occupational Employment Statistics for NAICS 6211, Office of
Physicians, to develop labor cost shares for the nonphysician
occupational groups shown in Table 23. The 2000-based MEI was based on
CPS data for the Standard Industrial Classification 801 and 803, which
included both office of physicians and outpatient care centers.
Beginning in 2003, BLS began publishing CPS data on a NAICS basis which
provided data for office of physicians (NAICS 6211)and outpatient care
centers (NAICS 6214) separately. We believe using data for office of
physicians is appropriate for the 2006-based MEI. The BLS maintains an
ECI for each selected industry group. We propose to use these ECIs as
price proxies for nonphysician employee wages in the same manner they
are used in the current MEI.
As described in the CY 2008 PFS proposed rule (72 FR 38190), as a
result of the discontinuation of the White Collar Benefit ECI for
private workers, we are currently using a composite ECI benefit index.
We are proposing to continue to use the composite ECI for nonphysician
employees in the proposed rebased and revised MEI; however, we are
proposing to revise the weights within that blend in order to reflect
the more recent 2006 data. Table 26 lists the four ECI series and
corresponding weights used to construct the 2006 composite benefit
index.

Table 26--CMS Composite Price Index for Nonphysician Employee Benefits
------------------------------------------------------------------------
2006
ECI series Weight
(%)
------------------------------------------------------------------------
Benefits, Private, Professional & Related.................... 44
Benefits, Private, Management, Business, Financial........... 11
Benefits, Private, Office & Administrative Support........... 32
Benefits, Private, Service Occupations....................... 13
------------------------------------------------------------------------

(C) Utilities
For the 2006-based MEI, we are proposing to use the CPI for Fuel
and Utilities (BLS series code CUUR0000SAH2) to measure the
price growth of this cost category. This cost category was not broken-
out separately in the 2000-based MEI.
(D) Chemicals
For the 2006-based MEI, we are proposing to use the PPI for Other
Basic Organic Chemical Manufacturing (BLS series code
PCU32519-32519) to measure the price changes of this cost
category. We are proposing this industry-based PPI because BEA's 2002
benchmark I/O data show that the majority of the office of physicians'
chemical expenses are attributable to Other Basic Organic Chemical
Manufacturing (NAICS 32519). This cost category was not broken-out
separately in the 2000-based MEI.
(E) Paper
For the 2006-based MEI, we are proposing to use the PPI for
Converted Paper and Paperboard (BLS series code WPU0915) to
measure the price growth of this cost category. This cost category was
not broken-out separately in the 2000-based MEI.
(F) Rubber and Plastics
For the 2006-based MEI, we are proposing to use the PPI for Rubber
and Plastic Products (BLS series code WPU07) to measure the
price growth of this cost category. This cost category was not broken-
out separately in the 2000-based MEI.
(G) Telephone
For the 2006-based MEI, we are proposing to use the CPI for
Telephone Services (BLS series code CUUR0000SEED) to measure
the price growth of this cost category. This cost category was not
broken-out separately in the 2000-based MEI.

[[Page 40093]]

(H) Postage
For the 2006-based MEI, we are proposing to use CPI for Postage
(BLS series code CUUR0000SEEC01) to measure the price growth
of this cost category. This cost category was not broken-out separately
in the 2000-based MEI.
(I) All Other Services
For the 2006-based MEI, we are proposing to use the ECI for
Compensation for Service Occupations (private industry) (BLS series
code CIU2010000300000I) to measure the price growth of this
cost category. This cost category was not broken-out separately in the
2000-based MEI.
(J) Fixed Capital
For the 2006-based MEI, we are proposing to use the CPI for Owner's
Equivalent Rent (BLS series code CUUS0000SEHC) to measure the
price growth of this cost category. This price index represents about
50 percent of the CPI for Housing which was used to in the 2000-based
MEI to proxy total office expenses.
(K) Moveable Capital
For the 2006-based MEI, we are proposing to use the PPI for
Machinery and Equipment (series code WPU11) to measure the
price growth of this cost category. This cost category was not broken-
out separately in the 2000-based MEI.
(L) Professional Liability Insurance
In order to accurately reflect the price changes associated with
PLI, each year, we solicit PLI premium data for physicians from a
sample of commercial carriers. This information is not collected
through a survey form, but instead is requested directly from, and
provided by (on a voluntary basis), several national commercial
carriers. As we require for our other price proxies, the professional
liability price proxy is intended to reflect the pure price change
associated with this particular cost category. Thus, it does not
include changes in the mix or level of liability coverage. To
accomplish this result, we obtain premium information from a sample of
commercial carriers for a fixed level of coverage, currently $1 million
per occurrence and a $3 million annual limit. This information is
collected for every State by physician specialty and risk class.
Finally, the State-level, physician-specialty data are aggregated by
effective premium date to compute a national total, using counts of
physicians by State and specialty as provided in the AMA publication,
Physician Characteristics and Distribution in the U.S.
The resulting data provide a quarterly time series, indexed to a
base year consistent with the MEI, and reflect the national trend in
the average professional liability premium for a given level of
coverage, generally $1 million/$3 million of claims-made mature
policies. From this series, quarterly and annual percent changes in PLI
are estimated for inclusion in the MEI.
The most comprehensive data on professional liability costs are
held by the State insurance commissioners, but these data are available
only with a substantial time lag and hence, the data currently
incorporated into the MEI are much timelier. We believe that, given the
limited data available on professional liability premiums, the
information and methodology described above adequately reflect the PLI
price trends facing physicians.
(M) Medical Equipment
The Medical Equipment cost category includes depreciation, leases,
and rent on medical equipment. We are proposing to use the PPI for
Medical Instruments and Equipment (BLS series code: WPU1562) as the
price proxy for this category, consistent with the price proxy used in
the 2000-based MEI and other CMS input price indexes.
(N) Medical Materials and Supplies
As is used in the 2000-based MEI, we are proposing to use a blended
index comprised of 50/50 blend of the PPI Surgical Appliances (BLS
series code: WPU156301) and the CPI-U for Medical Equipment and
Supplies (BLS series code: CUUR0000SEMG). We believe physicians
purchase the types of supplies contained within these proxies,
including such items as bandages, dressings, catheters, I.V. equipment,
syringes, and other general disposable medical supplies, via wholesale
purchase, as well as at the retail level. Consequently, we are
proposing to combine the two aforementioned indexes to reflect those
modes of purchase.
(O) Other Professional Expenses
This category includes the residual subcategory of other
professional expenses such as accounting services, legal services,
office management services, continuing education, professional
association memberships, journals, professional car expenses, and other
professional expenses. Given this heterogeneous mix of goods and
services, we are proposing to use the CPI-U for All Items Less Food and
Energy, consistent with the price proxy used in the 1996 and 2000-based
MEI.
(2) Productivity Adjustment to the MEI
The MEI has been adjusted for changes in productivity since its
inception. In the CY 2003 PFS final rule (67 FR 80019), we implemented
a change in the way the MEI was adjusted to account for those changes
in productivity The MEI used for the 2003 physician payment update
incorporated changes in the 10-year moving average of private nonfarm
business (economy-wide) multifactor productivity that were applied to
the entire index. Previously, the index incorporated changes in
productivity by adjusting the labor portions of the index by the 10-
year moving average of economy-wide private nonfarm business labor
productivity.
We are proposing to continue to use the current method for
adjusting the full MEI for multifactor productivity in the rebased and
revised MEI.
As described in the CY 2003 PFS final rule, we believe this
adjustment is appropriate because it explicitly reflects the
productivity gains associated with all inputs (both labor and non-
labor). We believe that using the 10-year moving average percent change
in economy-wide multifactor productivity is appropriate for deriving a
stable measure that helps alleviate the influence that the peak (or a
trough) of a business cycle may have on the measure. The adjustment
will be based on the latest available historical economy-wide nonfarm
business multifactor productivity data as measured and published by
BLS.
e. Results of Rebasing
Table 27 illustrates the results of updating the MEI from the
following changes to the weights for the Physician Compensation,
Practice Expenses (excluding PLI), and PLI.

Table 27--Percent Distribution of Selected Physician Expenses Used To
Calibrate RVUs: CYs 2006 and 2000
------------------------------------------------------------------------
CY 2006 CY 2000
weight weight
(%) (%)
------------------------------------------------------------------------
Physician Compensation (Own Time)................. 48.266 52.466
Practice Expenses (less PLI)...................... 47.439 43.669
PLI............................................... 4.295 3.865
------------------------------------------------------------------------

The rebased and revised MEI has several differences as compared to
the 2000-based MEI; these changes have been discussed in detail in
prior

[[Page 40094]]

sections of this rule. Table 28 shows the average calendar year percent
change from CY 2004 to CY 2011 for both the 2000- and 2006-based MEIs.
The 2006-based MEI annual percent changes differ from the 2000-based
MEI annual percent changes by 0.0 to 0.8 percentage point. In the 5
most recent years (CYs 2007-2011), the annual percent change in the
rebased and revised MEI was within 0.3 percentage point of the percent
change in the 2000-based MEI. In the earlier years, there were bigger
differences between the annual percent change in the rebased and
revised MEI and the 2000-based MEI. The majority of these differences
can be attributed to the lower benefit cost weight, as measured by the
2006 AMA data, and the exclusion of the drug cost weight. The remaining
differences are attributable to the higher cost weight for PLI, as
measured by the 2006 AMA data.

Table 28--Annual Percent Change in the Current and Proposed Revised and
Rebased MEI
------------------------------------------------------------------------
Proposed 2006- Current 2000-
Update year A based MEI based MEI
------------------------------------------------------------------------
CY 2004................................. 2.4 2.7
CY 2005................................. 2.1 2.9
CY 2006................................. 2.0 2.5
CY 2007................................. 1.7 2.0
CY 2008................................. 1.9 1.8
CY 2009................................. 1.7 1.7
CY 2010................................. 1.4 1.2
CY 2011 B............................... 0.3 0.3
Avg. Change for CYs 2004-2011........... 1.7 1.9
------------------------------------------------------------------------
A Update year based on historical data through the second quarter of the
prior calendar year. For example, the 2010 update is based on
historical data through the second quarter 2009.
B Based on the 1st quarter 2010 forecast by HIS Global Insight. With
historical data through the 4th quarter 2009.

As shown in Table 29, the projection of the proposed rebased and
revised MEI for the CY 2011 PFS proposed rule is an increase of 0.3
percent, identical to the projected increase using the 2000-based MEI.
In the CY 2011 PFS final rule, we will incorporate historical data
through the second quarter of 2010; therefore, the current estimated
increase of 0.3 percent for 2011 may differ in the final rule.

Table 29--Forecasted Annual Percent Change in the Current and Proposed
Revised and Rebased MEI for CY 2011
------------------------------------------------------------------------
Proposed 2006-
based MEI 2000-based MEI
------------------------------------------------------------------------
CY 2011................................. 0.3 0.3
------------------------------------------------------------------------

Table 30--Forecasted Annual Percent Change in the Proposed Revised and
Rebased MEI CY 2011, All Categories \1\
------------------------------------------------------------------------
Projected CY
Cost categories 2006 Weight 2011 percent
\2\ (%) changes
------------------------------------------------------------------------
MEI Total, productivity adjusted........ 100.000 0.3
Productivity: 10[dash]year moving N/A 1.3
average of MFP.........................
MEI Total, without productivity 100.000 1.6
adjustment.............................
Physician Compensation (Own Time) 48.266 2.4
\3\................................
Wages and Salaries.............. 43.880 2.5
Benefits........................ 4.386 1.5
Practice Expenses................... 51.734 0.9
Nonphysician Compensation....... 19.153 1.5
Nonphysician Wages.......... 13.752 1.5
P&T..................... 6.006 1.2
Management.............. 1.446 1.0
Clerical................ 4.466 1.8
Services................ 1.834 2.0
Nonphysician Benefits....... 5.401 1.4
Other Practice Expenses......... 26.308 0.4
Office Expenses............. 20.035 0.8
Utilities............... 1.139 -3.0
Chemicals............... 0.679 -1.1
Paper................... 0.616 -1.0
Rubber & Plastics....... 0.563 -0.7
Telephone............... 1.415 1.1
Postage................. 0.661 5.5
All Other Services...... 4.718 2.0

[[Page 40095]]

Fixed Capital........... 8.410 0.9
Moveable Capital........ 1.834 -0.1
PLI \4\..................... 4.295 -2.2
Medical Equipment........... 1.978 0.8
Medical supplies............ 1.760 0.5
All Other Expenses.............. 4.513 1.4
------------------------------------------------------------------------
\1\ The forecasts are based upon the latest available Bureau of Labor
Statistics data as of December 2009.
\2\ The weights shown for the MEI components are the 2006 base-year
weights, which may not sum to subtotals or totals because of rounding.
The MEI is a fixed-weight, Laspeyres-type input price index whose
category weights indicate the distribution of expenditures among the
inputs to physicians' services for CY 2006. To determine the MEI level
for a given year, the price proxy level for each component is
multiplied by its 2006 weight. The sum of these products (weights
multiplied by the price index levels) overall cost categories yields
the composite MEI level for a given year. The annual percent change in
the MEI levels is an estimate of price change over time for a fixed
market basket of inputs to physicians' services.
\3\ The measures of productivity, average hourly earnings, Employment
Cost Indexes, as well as the various Producer and Consumer Price
Indexes can be found on the Bureau of Labor Statistics Web site at
http://stats.bls.gov.
\4\ Derived from a CMS survey of several major commercial insurers N/A
Productivity is factored into the MEI categories as an adjustment to
the price variables; therefore, no explicit weight exists for
productivity in the MEI.

In addition to the proposed revisions to the MEI mentioned earlier
in this section, we are also proposing to convene a technical advisory
panel later this year to review all aspects of the MEI, including the
inputs, input weights, price-measurement proxies, and productivity
adjustment. We will ask the panel to assess the relevance and accuracy
of these inputs to current physician practices. The panel's analysis
and recommendations will be considered in future rule making to ensure
that the MEI accurately and appropriately meets its intended statutory
purpose. We are requesting comments from the physician community and
other interested members of the public on any other specific issues
that should be considered by the technical panel.
f. Adjustments to the RVU Shares To Match the Proposed Rebased MEI
Weights
As described in the previous section, we are proposing to rebase
the MEI for CY 2011 based on the most current data and establish new
weights for physician work, PE, and malpractice under the MEI. As
stated in the previous section, the MEI was rebased to a CY 1996 base
year beginning with the CY 1999 MEI (63 FR 58845), and to a CY 2000
base year beginning with the CY 2004 MEI (68 FR 63239). For both the CY
1999 and CY 2004 rebasing, we made adjustments to ensure that our
estimates of aggregate PFS payments for work, PE, and malpractice were
in proportion to the weights for these categories in the rebased MEI
(63 FR 58829 and 69 FR 1095).
Consistent with our past practice when the MEI has been rebased, we
are proposing to make adjustments to ensure that estimates of aggregate
CY 2011 PFS payments for work, PE, and malpractice are in proportion to
the weights for these categories in the rebased CY 2011 MEI.
Our proposal would necessitate increasing the proportion of
aggregate CY 2011 PFS payments for PE and malpractice and decreasing
the proportion for work. This could be accomplished by applying
adjustments directly to the work, PE, and malpractice RVUs. However, we
are cognizant of the public comments made during prior rulemaking on
issues related to scaling the work RVUs. Many commenters have indicated
a preference for the work RVUs to remain stable over time and for any
necessary adjustments that would otherwise be made broadly to the work
RVUs to be accomplished in an alternative manner. For example, in past
5-Year Reviews of the work RVUs, many commenters have cited stability
in the work RVUs, among other reasons, in their requests that any
required budget neutrality adjustments not be made directly to the work
RVUs. Given these prior comments, we are proposing to make the
necessary MEI rebasing adjustments without adjusting the work RVUs.
Instead, we are proposing to increase the PE RVUs by an adjustment
factor of 1.168 and the malpractice RVUs by an adjustment factor of
1.413. The RVUs in Addendum B to this proposed rule reflect the
application of these adjustment factors. We note that an application of
the 1.413 adjustment factor to the malpractice RVUs for services with
malpractice RVUs of 0.01 will, due to rounding, result in malpractice
RVUs of 0.01.
Section 1848(c)(2)(B)(ii)(II) of the Act requires that changes to
RVUs cannot cause the amount of expenditures for a year to differ by
more than $20 million from what expenditures would have been in the
absence of the changes. Therefore, as required by section
1848(c)(2)(B)(ii) of the Act, we are proposing to make an adjustment of
0.921 to the CY 2011 conversion factor to ensure that the 1.168
adjustment to the PE RVUs and the 1.413 adjustment to the malpractice
RVUs do not cause an increase in CY 2011 PFS expenditures. The current
law estimate of the CY 2011 CF is $26.6574.

III. Code-Specific Issues for the PFS

A. Therapy Services

1. Outpatient Therapy Caps for CY 2011
Section 1833(g) of the Act applies an annual, per beneficiary
combined cap on expenses incurred for outpatient physical therapy and
speech-language pathology services under Medicare Part B. A similar
separate cap for outpatient occupational therapy services under
Medicare Part B also applies. The caps do not apply to expenses
incurred for therapy services furnished in an outpatient hospital
setting. The caps were in effect during 1999, from September 1, 2003
through December 7, 2003, and beginning January 1, 2006. The caps are a
permanent provision, that is, there is no end date specified in the
statute for therapy caps. Beginning January 1, 2006, the Deficit
Reduction Act (Pub. L. 109-171) (DRA) provided for exceptions to the
therapy caps until December 31, 2006. The exceptions

[[Page 40096]]

process for therapy caps has been extended through December 31, 2009
pursuant to three subsequent amendments (in MEIA-TRHCA, MMSEA, and
MIPPA).
Section 1833(g)(5) of the Act (as amended by section 3103 of the
ACA) extended the exceptions process for therapy caps through December
31, 2010. We will announce the amount of the therapy cap for CY 2011 in
the CY 2011 PFS final rule with comment period. The annual change in
the therapy cap is computed by multiplying the cap amount for CY 2010,
which is $1,860, by the MEI for CY 2011, and rounding to the nearest
$10. This amount is added to the CY 2010 cap to obtain the CY 2011 cap.
The agency's authority to provide for exceptions to therapy caps
(independent of the outpatient hospital exception) will expire on
December 31, 2010, unless the Congress acts to extend it. If the
current exceptions process expires, the caps will be applicable in
accordance with the statute, except for services furnished and billed
by outpatient hospitals.
2. Alternatives to Therapy Caps
a. Background
In section 4541 of the Balanced Budget Act of 1997 (Pub. L. 105-33)
(BBA), the Congress enacted the financial limitations on outpatient
therapy services (the ``therapy caps'' discussed above for physical
therapy, occupational therapy, and speech-language pathology). At the
same time, the Congress requested that the Secretary submit a Report to
Congress that included recommendations on the establishment of a
revised coverage policy for outpatient physical therapy services and
outpatient occupational therapy services under the statute. The
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113) (BBRA) placed
the first of a series of moratoria on implementation of the limits. In
addition, it required focused medical review of claims and revised the
report requirements in section 4541(d)(2) of the BBA to request a
report that included recommendations on the following: (A) The
establishment of a mechanism for assuring appropriate utilization of
outpatient physical therapy services, outpatient occupational therapy
services, and speech-language pathology services; and (B) the
establishment of an alternative payment policy for such services based
on classification of individuals by diagnostic category, functional
status, prior use of services (in both inpatient and outpatient
settings), and such other criteria as the Secretary determines
appropriate, in place of the limits.
In 1999, therapy services were not defined, but services documented
as therapy were billed and reported when furnished by a variety of
individuals in many different settings. These services were not
identified in a way that would allow analysis of utilization or
development of alternative payment policies.
We have studied therapy services with the assistance of a number of
contractors over the past 11 years. Reports of these projects are
available on the CMS Web site at http://www.cms.gov/TherapyServices/.
On November 9, 2004, we delivered the Report to Congress, Number
137953, ``Medicare Financial Limitations on Outpatient Therapy
Services'' that referenced two utilization analyses. We periodically
updated the utilization analyses and posted other contracted reports in
order to further respond to the requirements of the BBRA. Subsequent
reports highlighted the expected effects of limiting services in
various ways and presented plans to collect data about patient
condition using available tools. The general belief was that if patient
condition could be reliably determined, an objective payment policy
could be developed that would ensure appropriate payment for
appropriately utilized services.
Over the past decade, significant progress has been made in
identifying the outpatient therapy services that are billed to
Medicare, the demographics of the beneficiaries who utilize those
services, the types of services, the HCPCS codes used to bill the
services, the allowed and paid amounts of the services, and the
settings, geographic locations, and provider types where services are
furnished.
Some of the information that is necessary to ensure appropriate
utilization and develop objective and equitable payment alternatives to
therapy caps based on patient condition has proven difficult to
develop. The influence of prior use of inpatient services on outpatient
use of therapy services was not accessible due to systems issues and
differences in the policies, billing, and reporting practices for
inpatient and outpatient therapy services. The weakness of the ICD-9-CM
diagnostic codes in describing the condition of the rehabilitation
patient obscured analyses of claims to assess the need for therapy
services. The primary diagnosis on the claim is a poor predictor for
the type and duration of therapy services required, which complicates
assignment of patient cohorts for analysis. Although changes to the
guidance in the Medicare Benefit Policy Manual (Pub. 100-02) on
documentation of therapy services in 2005 improved the consistency of
records and facilitated chart review, it became increasingly obvious
that neither claims analysis nor chart review could serve as a reliable
and valid method to determine a patient's need for services or to form
the basis for equitable payment. We concluded that in order to develop
alternative payment approaches to the therapy caps, we needed a method
to identify patients with similar risk-adjusted conditions (cohorts)
and then we would identify the therapy services that are necessary for
the patients to attain the best outcomes with the most efficient use of
resources.
While we studied therapy utilization, a number of proprietary tools
were developed by researchers in the professional community to assess
the outcomes of therapy. Some tool sponsors collected sufficient
information to predict with good reliability the amount or length of
treatment that would result in the best expected outcomes. We
encouraged the use of these proprietary tools in manual instructions,
but proprietary tools do not serve CMS' purposes because modification
of proprietary tools may only be done by the tool sponsor. There now
are some versions of the tools in the public domain and they are being
utilized widely to identify patient conditions and, by some insurers,
to pay for efficient and effective treatment. Examples of such tools
including the National Outcomes Measurement System (NOMS) by the
American Speech-Language Hearing Association and Patient Inquiry by
Focus On Therapeutic Outcomes, Inc. (FOTO).
In 2006, Focus on Therapeutic Outcomes, Inc. delivered to CMS a
report titled, ``Pay for Performance for Physical Therapy and
Occupational Therapy,'' which is also available on the CMS Web site at
http://www.cms.gov/TherapyServices. The purpose of this project was to
simulate a pay-for-performance implementation, designed to align
financial incentives with the achievement of better clinical outcomes
from services that were delivered efficiently. The project, funded by
HHS/CMS Grant 18-P-93066/9-01, demonstrated the predictive
validity of the risk-adjusted pay-for-performance model and the
feasibility of reducing payments without affecting services to
beneficiaries who need them.
b. Current Activities
The Tax Relief and Health Care Act of 2006 (TRHCA) extended the
therapy cap

[[Page 40097]]

exceptions process through December 31, 2007 and provided funds used
for two CMS projects related to developing alternative payment
approaches for therapy services that are based on beneficiary needs. A
5-year project titled ``Development of Outpatient Therapy
Alternatives'' (DOTPA), awarded to RTI International, was initiated in
order to develop a comprehensive and uniform therapy-related data
collection instrument, assess its feasibility, and determine the subset
of the measures that we could routinely and reliably collect in support
of payment alternatives. While DOTPA will identify measurement items
relevant to payment, the project will not deliver a standardized
measurement tool. We may either develop a tool or allow other tools to
be used for payment purposes when they include those items that
identify the following: (a) Beneficiary need; and (b) outcomes (that is
effectiveness of therapy services). In addition to therapy caps, the
DOTPA project addresses our interest in value-based purchasing by
identifying components of value, including beneficiary need and the
effectiveness of therapy services.
The DOTPA project reports are available on the contractor's Web
site at http://optherapy.rti.org/. The data collection design and
instrument development have been completed, and a Paperwork Reduction
Act (PRA) package was submitted for approval of the data collection
forms by the Office of Management and Budget (OMB). The Federal
Register notice for the second round of public comment on this package
was published on April 23, 2010 (75 FR 21296). Once the PRA package is
approved, the contractor will begin data collection. While approval is
pending, the contractor is recruiting potential participants in the
data collection, developing training materials for participants, and
updating the project web site. We are not seeking public comments on
the DOTPA project in this proposed rule.
The TRCHA also funded the 2-year project contracted to Computer
Sciences Corporation (CSC) titled ``Short Term Alternatives for Therapy
Services'' (STATS). STATS will provide recommendations regarding
alternative payment approaches to therapy caps that could be considered
before completion of the DOTPA project. The STATS project draws upon
the analytical and clinical expertise of contractors and stakeholders
to consider policies, measurement tools, and claims data that are
currently available to provide further information about patient
condition and the outcomes of therapy services. The final report, due
in the fall of CY 2010, will include recommended actions we could take
within 2 or 3 calendar years to replace the current cap limits on
therapy services with a policy that pays appropriately for necessary
therapy services.
c. Potential Short-Term Approaches to Therapy Caps
On June 30, 2009, we received a draft of the CSC report titled
``STATS Outpatient Therapy Practice Guidelines,'' a summary of expert
workgroup discussions, and several short-term payment alternatives for
consideration. CSC discussed options based on the assumption that
short-term policy changes should facilitate the development of adequate
function and/or outcomes reporting tools. In the long-term, CSC
recommended that payment be based on function or quality measurements
that adequately perform risk adjustment for episode-based payment
purposes.
Based on the draft report, additional stakeholder input, and
subsequent communications with the contractor, in this proposed rule we
are discussing several potential alternatives to the therapy caps that
could lead to more appropriate payment for medically necessary and
effective therapy services that are furnished efficiently. We are
soliciting public comments on this proposed rule regarding all aspects
of these alternatives, including the potential associated benefits or
problems, clinical concerns, practitioner administrative burden,
consistency with other Medicare and private payer payment policies, and
claims processing considerations. We are not proposing either short-
term or long-term payment alternatives to the therapy caps at this
time. However, we refer readers to section II.C.4.(c) of this proposed
rule for our CY 2011 proposal to expand the MPPR policy to ``always
therapy'' services furnished in a single session in order to pay more
appropriately for therapy services, taking into consideration the
expected efficiencies when services are furnished together. While we
are not proposing the adoption of an MPPR policy for therapy services
specifically as an alternative to the therapy caps, we acknowledge that
by paying more appropriately for combinations of therapy services that
are commonly furnished in a single session, practitioners would be able
to furnish more medically necessary therapy services to a given
beneficiary before surpassing the caps. This proposed policy would have
the potential to reduce the number of beneficiaries impacted by the
therapy caps in a given year.
The three specific short-term options that we are discussing in
this proposed rule would not require statutory changes. Some would
require moderate reporting changes that would yield more detailed
information about patient function and progress to inform future
payment approaches and facilitate the medical review of services above
the therapy caps at the present time. Others require new coding and
bundled per-session payment that would be a first step toward episode-
based payment. They are not necessarily independent of each other.
Under each of these alternatives, administrative simplification with
respect to current policies, such as HCPCS code edits and ``ICD-9-CM to
HCPCS code'' crosswalk edits that serve to limit utilization without
regard to the patient's clinical presentation, could be pursued in the
context of these options.
The first option would modify the current therapy caps exceptions
process to capture additional clinical information regarding therapy
patient severity and complexity in order to facilitate medical review.
This approach would complement the DOTPA project, which is identifying
items to measure patient condition and outcomes. We believe the first
option may have the greatest potential for rapid implementation that
could yield useful information in the short-term. We are especially
interested in detailed public comments on this option that could inform
a potential proposal to adopt such an alternative through future
rulemaking. The second option would involve introducing additional
claims edits regarding medical necessity, in order to reduce
overutilization. The third option would be to adopt a per-session
bundled payment that would vary based on patient characteristics and
the complexity of evaluation and treatment services furnished in the
session. Each option would require significant provider and contractor
education, and all would necessitate major claims processing systems
changes. Moreover, some of the options may affect beneficiaries by
changing the type or amount of services covered by Medicare or the
beneficiary's cost sharing obligations.
Option (1): Revise therapy caps exceptions process by requiring the
reporting of new patient function-related Level II HCPCS codes and
severity modifiers.
This option would require that clinicians submit beneficiary
function-related nonpayable HCPCS codes to replace the -KX modifier
(Specific

[[Page 40098]]

required documentation on file). Codes would not be submitted on every
claim, but at episode onset and at periodic intervals (for example,
progress report intervals of 12 sessions or 30 days--whichever is
less). Codes would be submitted for all patients in order for the
claims to be paid and not only those claims approaching or surpassing
the therapy caps. The current -KX modifier is not useful to identify
claims exceeding therapy caps, because it is used for services both
before and after the caps are exceeded, and it must be used on the
entire claim for facilities. New codes also would not identify claims
above the cap, but they would perform the same function as the current
-KX modifier to signal that documentation in the medical record
supported medical necessity that should lead to an exception to the
therapy caps. The codes would also provide more information for medical
review.
Six Level II HCPCS G-codes representing functions addressed in the
plan of care and 5 (or 7) modifiers representing severity/complexity
would be utilized to report information on the claim.
Examples of six new function-related G-codes:
GXXXU--Impairments to body functions and/or structures--
current.
GXXXV--Impairments to body functions and/or structures--
goal.
GXXXW--Activity limitations and/or participation
restrictions--current.
GXXXX--Activity limitations and/or participation
restrictions--goal.
GXXXY--Environmental barriers--current.
GXXXZ--Environmental barriers--goal.
Two potential severity/complexity scales have been suggested that
would require the adoption of 5 or 7 new severity modifiers,
respectively. Under one scenario, modifiers based on the International
Classification of Function could identify severity as follows:
None (0 to 4 percent);
MILD (5 to 24 percent);
MODERATE (25 to 49 percent);
SEVERE (50 to 95 percent); or
COMPLETE (96 to 100 percent).
Alternatively, a proportional severity/complexity scale would use 7
modifiers to describe impairments, limitations, or barriers:
0 percent;
1 to 19 percent;
20 to 39 percent;
40 to 59 percent;
50 to 79 percent;
80 to 99 percent; or
100 percent.
Implementation of this general approach would require 6 months to 2
years to modify claims processing for the current therapy caps and
exceptions processing of claims, and to develop, pilot test, and refine
coding before applying the approach nationally. While therapists
initially would need to learn the new codes and update their billing
systems, ultimately their reporting burden would be reduced because the
-KX modifier would not be required on each claim line for patients with
expenditures approaching or exceeding the therapy caps. This option
could potentially result in a small reduction in outpatient therapy
expenditures due to increased Medicare contractor scrutiny of episodes
where functional severity scores did not change over time, or to other
atypical reporting patterns associated with the new codes.
In the long-term, these codes and modifiers could be mapped to
reliable and validated measurement tools (either currently available
tools in the public domain or newly developed tools from items on the
DOTPA instrument or the Continuity Assessment Record and Evaluation
(CARE) tool). When statistically robust patient condition information
has been collected from claims data, it may be possible to develop
Medicare payment approaches for outpatient therapy services that would
pay appropriately and similarly for efficient and effective services
furnished to beneficiaries with similar conditions who have good
potential to benefit from the services furnished. At a minimum, the new
codes would allow contractors to more easily identify and limit the
claims for beneficiaries that show no improvement over reasonable
periods of time.
Option (2): Enhance existing therapy caps exceptions process by
applying medical necessity edits when per-beneficiary expenditures
reach a predetermined value.
The existing automatic process for exceptions, and the revised
exceptions process described in Option 1 above, pay practitioners
indefinitely for services if they attest on the claim by appending a
specific modifier to therapy HCPCS codes that the services being
furnished are medically necessary and that supporting documentation is
included in the medical record. Unless the contractor uses claims edits
or does post payment review, these processes do not identify or limit
unusually high annual per-beneficiary utilization. High utilization is
not limited to beneficiaries with multiple or complex conditions. We
could use existing therapy utilization data to develop annual per-
beneficiary medical necessity payment edits, such as limits to the
number of services per session, per episode, or per diagnostic
grouping, for exceptions to the therapy caps which could be set at
benchmark payment levels that only a small percentage of beneficiaries
would surpass in a single year. Once these levels were reached,
additional claims would be denied and practitioners would need to
appeal those denials if they wished to challenge Medicare's nonpayment.
This alternative would require 1 to 2 years to implement as an
expansion of existing policy, and its effects could be anticipated by
analysis of the current utilization of therapy services. Additional
practitioner burden would be incurred in the small number of cases
exceeding the per-beneficiary expenditure edits when the practitioner
chooses to appeal the medical necessity denial.
Option (3): Introduce per-session ``Evaluation/Assessment and
Intervention'' (E&I) codes to bundle payment for groups of current
therapy HCPCS codes into a single per-session payment.
As discussed in section II.C.4.(c) of this proposed rule, multiple
therapy services are often furnished in a single session, and we are
proposing to expand the MPPR policy to ``always therapy'' services in
CY 2011 in order to take into consideration the efficiencies that occur
when multiple services (the typical therapy scenario) are furnished in
one session to a beneficiary. Furthermore, we note that section
1848(c)(2)(K) of the Act (as added by section 3134 of the ACA)
regarding potentially misvalued codes under the PFS specifies that the
Secretary may make appropriate coding changes, which may include
consolidation of individual services into bundled codes for payment
under the PFS, as part of her review and adjustment of the relative
values for services identified as potentially misvalued.
This option would require that practitioners submit a single new
Level II HCPCS code to represent all the therapy services currently
reported and paid separately for an outpatient therapy session. Payment
for the HCPCS code would be based on patient characteristics (as
identified through prior CMS contractor analyses) and the complexity of
the evaluation/assessment and intervention services furnished during
the session. The new coding requirements would not disrupt the current
exceptions process or the revised exceptions process described in
Option (1) above. Approximately 12 E&I codes would be needed, taking
into consideration the basic algorithm shown in Table 31.

[[Page 40099]]

Table 31--Evaluation/Assessment & Intervention Level II HCPCS Codes
----------------------------------------------------------------------------------------------------------------
Evaluation/Assessment complexity
-----------------------------------------------------------------------------
Minimal Moderate Significant
----------------------------------------------------------------------------------------------------------------
Intervention Level:
None.......................... E&I Code 1 E&I Code 2 E&I Code 3.
Minimal....................... E&I Code 4 E&I Code 5 E&I Code 6.
Moderate...................... E&I Code 7 E&I Code 8 E&I Code 9.
Significant................... E&I Code 10 E&I Code 11 E&I Code 12.
----------------------------------------------------------------------------------------------------------------

We would need to develop and test operational definitions for each
E&I code so that practitioners would be able to properly report
services and appropriate relative values could be established for each
per-session code. We believe that a pilot study might reveal that the
different practice patterns for the three therapy professions (physical
therapy, occupational therapy, and speech-language pathology) could
necessitate separate relative value determinations for each E&I code by
type of therapy service furnished. As a result, up to 36 total new
Level II HCPCS codes could be needed (12 per discipline).
We anticipate that the definitions of E&I codes 1 through 3 and 7
through 12 would describe services that may only be furnished by a
``clinician'' (therapist, physician, or nonphysician practitioner). E&I
codes 1 through 3 would be reported for sessions that consisted only of
evaluations. In addition, the definitions of E&I codes 4 through 6
would describe services that could be furnished by or under the
permissible supervision of all qualified outpatient therapy
professionals. Based upon historical therapy utilization patterns, the
vast majority of E&I codes submitted would likely fall in the 4 through
9 code range. We would expect the RVUs under the PFS for all E&I codes
to take into consideration the efficiencies when multiple services
(those that would be currently reported under multiple CPT codes) are
furnished.
This option would require 2 to 4 years to add new codes and conduct
a short-term pilot study to refine coding and value the 12 new HCPCS
codes (or 36 if they are specific to each therapy discipline). There
would be significant initial practitioner administrative burden to
learn new codes and update billing systems. However, ultimately, with
elimination of the practitioner's reporting of 76 different codes and
many of the associated claims processing edits, the administrative
burden of reporting therapy services to Medicare would be minimized.
This bundled approach to reporting and payment could result in more
appropriate valuation of therapy services that reflects efficiencies
when individually reported services are furnished in the same session.
As a result, it could lead to reduced therapy expenditures, as well as
a reduction in the number of beneficiaries affected by the therapy caps
in a given year.
In conclusion, we emphasize that we continue to be committed to
developing alternatives to the therapy caps that would provide
appropriate payment for medically necessary and effective therapy
services furnished to Medicare beneficiaries based on patient needs,
rather than the current therapy caps which establish financial
limitations on Medicare payment for therapy services in some settings
regardless of medical necessity. The Congress has repeatedly intervened
to allow exceptions to these caps for certain time periods, and the
current exceptions are automatically processed based on a
practitioner's attestation that medical necessity is documented in the
chart for an individual patient. We believe that, ultimately, payment
for therapy services should incentivize the most effective and
efficient care, consistent with Medicare's focus on value in its
purchasing.
Therefore, we are soliciting public comments on potential
alternatives to the therapy caps, including those discussed in this
section of this proposed rule. The STATS contractor has worked closely
with a broad variety of clinicians, administrators, scientists,
researchers, and other contractors to develop the 3 alternatives
presented this discussion. We welcome all public comments on this
propose rule from interested stakeholders, including individual
therapists from both facility and nonfacility settings treating Part B
(outpatient) beneficiaries. Among the topics of interest to us are the
following:
Recommendations for alternative payment policies (options
discussed in this proposed rule or others) that address patient needs,
while minimizing payment for inefficient services or those of limited
patient benefit;
Assessment of the practitioner burden associated with the
recommended policies;
Likelihood that recommended changes would minimize fraud,
abuse, and waste;
Whether the recommendations could assist CMS in obtaining
meaningful information on patient function and how that information
could be utilized;
Whether measurement tools relevant to assessing the need
for therapy services exist in the public domain and how they might be
utilized;
What function information should be collected and how it
could be utilized to ensure necessary care, while minimizing payment
for inefficient services or those of limited patient benefit; and
How therapist behavior, plans of care, or patient
scheduling would be affected by the recommended alternatives.
We are committed to finding alternatives to the current therapy cap
limitations on expenditures for outpatient therapy services that will
ensure that beneficiaries continue to receive those medically necessary
therapy services that maximize their health outcomes. We continue to
dedicate our resources to identifying alternatives that would encourage
the most efficient and cost-effective treatments. We believe motivated
therapists, with attention to the most cost-effective practices, can
incorporate practice efficiencies that benefit patients by achieving
the best possible results at the lowest cost.
Our STATS and DOTPA projects, which are currently engaged in data
collection and analysis to inform short-term and long-term alternatives
to the therapy caps, respectively, lay the foundation for future
payment alternatives for outpatient therapy services. We are optimistic
that the STATS project will identify short-term, feasible alternatives
that may be tested in the future. The DOTPA project will create a tool
and test its use to collect patient condition information that can then
be applied to identify patient need

[[Page 40100]]

for therapy services. Together, these projects may provide the basis
for a long-term plan to reshape Medicare's payment policy for
outpatient therapy services to align with the value-based purchasing
principles that are now guiding principles of the Medicare program. We
encourage the public to provide comments so that we may consider all
perspectives as we continue our work in this important area.

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

1. Background
Section 4105(a) of BBA provided coverage for DSMT in outpatient
settings without limiting this coverage to hospital outpatient
departments. DSMT services consist of educational and training services
furnished to an individual with diabetes by a certified provider in an
outpatient setting.
Section 4105(a) of the BBA stipulated that training would be
furnished by a ``certified provider'' which is a physician or other
individual or entity that also provides other items or services for
which payment may be made under Medicare. This program is intended to
educate beneficiaries in the successful self-management of diabetes.
The program includes instructions in self-monitoring of blood glucose;
education about diet and exercise; an insulin treatment plan developed
specifically for the patient who is insulin-dependent; and motivation
for patients to use the skills for self-management. DSMT services are
reported under HCPCS codes G0108 (Diabetes outpatient self-management
training services, individual, per 30 minutes) and G0109 (Diabetes
outpatient self-management training services, group session (2 or
more), per 30 minutes).
2. Proposed Payment for DSMT Services
In accordance with section 4105(a) of the BBA, Medicare payment for
outpatient DSMT services is made under the PFS as specified in Sec.
414.1 through Sec. 414.48. When we created HCPCS codes G0108 and
G0109, the only direct costs included in the PE were registered nurse
labor. Section 410.144(a)(4)(a) states that the DSMT team includes at
least a registered dietitian and a certified diabetes educator. We did
not establish work RVUs for DSMT services because we believed training
would typically be performed by individuals other than a physician,
such as a registered nurse (65 FR 83130). However, since that time, we
have received requests from a number of stakeholders, including the
American Association of Clinical Endocrinologists (AACE), the American
Association of Diabetes Educators (AADE), and the Juvenile Diabetes
Research Foundation, to include physician work in valuing DSMT services
that is similar to the physician work that has been included in medical
nutrition therapy (MNT) services since CY 2007 and kidney disease
education (KDE) services since CY 2010. The stakeholders argued that
because physicians coordinate DSMT programs, provide patient
instruction, and communicate with referring physicians, physician work
should be included in the RVUs for DSMT services. The stakeholders also
requested that we reconsider the direct PE inputs for DMST services and
include clinical labor for diabetes educators at a higher hourly rate
instead of registered nurse labor. In addition, they stated that the
supplies and equipment in the PE for DSMT services should be the same
as for KDE services, with additional direct PE inputs for a diabetic
educator curriculum, data tracking software, and DSMT program
accreditation.
For CY 2011, we are proposing to assign physician work RVUs to DSMT
services that are comparable, as adjusted for the service times of the
HCPCS codes, to the work RVUs for MNT services. We are proposing that
HCPCS G0108 for 30 minutes of individual DSMT services would be
crosswalked to CPT code 97803 (Medical nutrition therapy; re-assessment
and intervention, individual, face-to-face with the patient, each 15
minutes) for purposes of assigning work RVUs, with the physician work
RVUs for CPT code 97803 multiplied by two to account for the greater
time associated with HCPCS code G0108 (that is, 30 minutes). We are
also proposing that HCPCS G0109 for 30 minutes of group DSMT services
would be crosswalked to CPT code 97804 (Medical nutrition therapy;
group (2 or more individuals(s)), each 30 minutes) for purposes of
assigning work RVUs. The rationale for the proposed work RVUs for the
DSMT HCPCS G-codes is based on the similarity of DSMT services to MNT
services in the individual (CPT code 97803) and group (CPT code 97804)
setting.
For CY 2011, we are also proposing to modify the PE inputs for DSMT
services to reflect the current equipment and supplies for the KDE
HCPCS G-codes implemented in the CY 2010 PFS final rule with comment
period (74 FR 61901) (that is, HCPCS codes G0420 (Face-to-face
educational services related to the care of chronic kidney disease;
individual, per session, per one hour) and G0421 (Face-to-face
educational services related to the care of chronic kidney disease;
group, per session, per one hour)), based on the similarity in the
equipment and supplies necessary for DSMT and KDE services. We have
made adjustments to some of the equipment times for the 30 minute DSMT
individual and group services as compared to the 1 hour individual and
group KDE services. We are also including a diabetic educator
curriculum and data tracking software in the PE inputs for DSMT
services, but it is our general practice not to include program
accreditation costs in those PE inputs. With respect to clinical labor,
rather than changing the current labor type for DSMT services, we are
proposing to utilize the same approach as we adopted for MNT services
when we provided physician work RVUs for those services in CY 2007 (71
FR 69645). Specifically, we are removing all of the clinical labor from
the group DSMT code and most of the clinical labor from the individual
DSMT code, given that we are proposing work RVUs for both DSMT codes
for CY 2011.
We believe these proposals would value DSMT services more
consistently with other similar services that are paid under the PFS.
As a result of our proposed CY 2011 changes, the proposed work RVUs for
HCPCS codes G0108 and G0109 are 0.90 and 0.25, respectively. As
described above, we are also proposing to modify the direct PE inputs
for these codes for CY 2011.

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

1. End-Stage Renal Disease Home Dialysis Monthly Capitation Payment
Services (CPT Codes 90963, 90964, 90965, and 90966)
In the CY 2004 PFS final rule with comment period (68 FR 63216), we
established new Level II HCPCS G-codes for end-stage renal disease
(ESRD) monthly capitation payment (MCP) services. For center-based
patients, payment for the G-codes varied based on the age of the
beneficiary and the number of face-to-face visits furnished each month
(for example, 1 visit, 2-3 visits and 4 or more visits). Under the MCP
methodology, the lowest payment applied when a physician provided one
visit per month; a higher payment was provided for two to three visits
per month. To receive the highest payment, a physician would have to
provide at least four ESRD-related visits per month. However, payment
for home dialysis MCP services only varied by the age of beneficiary.
Although we did not initially specify a frequency of required

[[Page 40101]]

visits for home dialysis MCP services, we stated that we ``expect
physicians to provide clinically appropriate care to manage the home
dialysis patient'' (68 FR 63219).
Effective January 1, 2009, the CPT Editorial Panel created new CPT
codes to replace the G-codes for monthly ESRD-related services, and we
accepted the new codes for use under the PFS in CY 2009. The CPT codes
for monthly ESRD-related services for home dialysis patients include
the following, as displayed in Table 32: 90963, 90964, 90965, and
90966. In addition, the clinical vignettes used for the valuation of
CPT codes 90963, 90964, 90965, and 90966 include scheduled (and
unscheduled) examinations of the ESRD patient.
Given that we pay for a physician (or practitioner) to evaluate the
ESRD patient over the course of an entire month under the MCP, we
believe that it is clinically appropriate for the physician (or
practitioner) to have at least one in-person, face-to-face encounter
with the patient per month. Therefore, we are proposing to require the
MCP physician (or practitioner) to furnish at least one in-person
patient visit per month for home dialysis MCP services (as described by
CPT codes 90963 through 90966). This requirement would be effective for
home dialysis MCP services beginning January 1, 2011. We believe this
requirement reflects appropriate, high quality medical care for ESRD
patients being dialyzed at home and generally would be consistent with
the current standards of medical practice.
2. Daily and Monthly ESRD-Related Services (CPT Codes 90951 through
90970)
In CY 2008, the AMA RUC submitted recommendations for valuing the
new CY 2009 CPT codes displayed in Table 32 that replaced the MCP HCPCS
G-codes for monthly ESRD-related services. We accepted these codes for
use under the PFS.

Table 32--MCP Codes Recognized Under the PFS
------------------------------------------------------------------------
MCP code Long descriptor
------------------------------------------------------------------------
90951.................... End-stage renal disease (ESRD) related
services monthly, for patients younger than
2 years of age to include monitoring for the
adequacy of nutrition, assessment of growth
and development, and counseling of parents;
with 4 or more face-to-face physician visits
per month.
90952.................... End-stage renal disease (ESRD) related
services monthly, for patients younger than
2 years of age to include monitoring for the
adequacy of nutrition, assessment of growth
and development, and counseling of parents;
with 2-3 face-to-face physician visits per
month.
90953.................... End-stage renal disease (ESRD) related
services monthly, for patients younger than
2 years of age to include monitoring for the
adequacy of nutrition, assessment of growth
and development, and counseling of parents;
with 1 face-to-face physician visit per
month.
90954.................... End-stage renal disease (ESRD) related
services monthly, for patients 2-11 years of
age to include monitoring for the adequacy
of nutrition, assessment of growth and
development, and counseling of parents; with
4 or more face-to-face physician visits per
month.
90955.................... End-stage renal disease (ESRD) related
services monthly, for patients 2-11 years of
age to include monitoring for the adequacy
of nutrition, assessment of growth and
development, and counseling of parents; with
2-3 face-to-face physician visits per month.
90956.................... End-stage renal disease (ESRD) related
services monthly, for patients 2-11 years of
age to include monitoring for the adequacy
of nutrition, assessment of growth and
development, and counseling of parents; with
1 face-to-face physician visit per month.
90957.................... End-stage renal disease (ESRD) related
services monthly, for patients 12-19 years
of age to include monitoring for the
adequacy of nutrition, assessment of growth
and development, and counseling of parents;
with 4 or more face-to-face physician visits
per month.
90958.................... End-stage renal disease (ESRD) related
services monthly, for patients 12-19 years
of age to include monitoring for the
adequacy of nutrition, assessment of growth
and development, and counseling of parents;
with 2-3 face-to-face physician visits per
month.
90959.................... End-stage renal disease (ESRD) related
services monthly, for patients 12-19 years
of age to include monitoring for the
adequacy of nutrition, assessment of growth
and development, and counseling of parents;
with 1 face-to-face physician visit per
month.
90960.................... End-stage renal disease (ESRD) related
services monthly, for patients 20 years of
age and older; with 4 or more face-to-face
physician visits per month.
90961.................... End-stage renal disease (ESRD) related
services monthly, for patients 20 years of
age and older; with 2-3 face-to-face
physician visits per month.
90962.................... End-stage renal disease (ESRD) related
services monthly, for patients 20 years of
age and older; with 1 face-to-face physician
visit per month.
90963.................... End-stage renal disease (ESRD) related
services for home dialysis per full month,
for patients younger than 2 years of age to
include monitoring for the adequacy of
nutrition, assessment of growth and
development, and counseling of parents.
90964.................... End-stage renal disease (ESRD) related
services for home dialysis per full month,
for patients 2-11 years of age to include
monitoring for the adequacy of nutrition,
assessment of growth and development, and
counseling of parents.
90965.................... End-stage renal disease (ESRD) related
services for home dialysis per full month,
for patients 12-19 years of age to include
monitoring for the adequacy of nutrition,
assessment of growth and development, and
counseling of parents.
90966.................... End-stage renal disease (ESRD) related
services for home dialysis per full month,
for patients 20 years of age and older.
------------------------------------------------------------------------

There are four additional CPT codes for ESRD-related services that
are reported on a per-day basis. These daily CPT codes are: 90967 (End-
stage renal disease (ESRD) related services for dialysis less than a
full month of service, per day; for patients younger than 2 years of
age); 90968 (End-stage renal disease (ESRD) related services for
dialysis less than a full month of service, per day; for patients 2-11
years of age); 90969 (End-stage renal disease (ESRD) related services
for dialysis less than a full month of service, per day; for patients
12-19 years of age); and 90970 (End-stage renal disease (ESRD) related
services for dialysis less than a full month of service, per day; for
patients 20 years of age and older).
For the MCP codes displayed in Table 32, the AMA RUC initially

[[Page 40102]]

recommended 36 minutes of clinical labor time for the pre-service
period. They also recommended an additional 6 minutes in the post-
period for CPT codes 90960, 90961, 90962, and 90966. For the four codes
describing daily services (CPT codes 90967 through 90970), the AMA RUC
recommended including 1.2 minutes of clinical labor per day, which is
the prorated amount of pre-service clinical labor included in the
monthly codes. The AMA RUC also recommended that CPT codes 90952 and
90953 be contractor-priced.
In the CY 2009 PFS final rule with comment period (73 FR 69898), we
asked the AMA RUC to reconsider their recommended PE inputs in the
interest of making certain that they accurately reflected the typical
direct PE resources required for these services. In addition, we asked
the AMA RUC to review the physician times for CPT codes 90960 and 90961
that are used in the calculation of the PE RVUs. We accepted the work
values for the new CPT codes for ESRD-related services that were
recommended by the AMA RUC.
Since CY 2009, we have continued to calculate the PE RVUs for the
entire series of MCP codes displayed in Table 32 by using the direct PE
inputs from the predecessor HCPCS G-codes, except for CPT codes 90952
and 90953 which are contractor-priced. We have also continued to use
the physician time associated with the predecessor HCPCS G-codes for
CPT codes 90960 and 90961 for purposes of calculating the PE RVUs.
In CY 2009, the AMA RUC submitted new recommendations for CPT codes
90951 and 90954 through 90970. For each of the MCP codes (CPT code
90951 and CPT codes 90954 through 90966), the AMA RUC recommended an
increased pre-service clinical staff time of 60 minutes. For each of
the daily dialysis service codes (CPT codes 90967 through 90970), the
AMA RUC recommended an increased clinical labor time of two minutes,
which is the prorated amount of clinical labor included in the monthly
codes. The AMA RUC also recommended an additional 38 minutes of
physician time for CPT codes 90960 and 90961. This resulted in a total
physician time of 128 minutes and 113 minutes, respectively, for these
codes. The AMA RUC continued to recommend that CPT codes 90952 and
90953 be contractor-priced.
For CY 2011, we are proposing to accept these AMA RUC
recommendations as more accurate reflections of the typical direct PE
resources required for these services. Therefore, we are proposing to
develop the PE RVUs for CPT code 90951 and CPT codes 90954 through
90970 using the direct PE inputs as recommended by the AMA RUC and
reflected in the proposed CY 2011 PE database, which is available on
the CMS Web site under the supporting data files for the CY 2011 PFS
proposed rule at: http://www.cms.gov/PhysicianFeeSched/. We are also
proposing to use the AMA RUC-recommended physician times for CPT codes
90960 and 90961. Consistent with the AMA RUC's recommendations, we are
proposing to continue to contractor-price CPT codes 90952 and 90953.

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

When a portable x-ray is furnished to a single patient, as many as
four component HCPCS codes may be billed and paid for the service,
including the portable x-ray transportation (HCPCS code R0070
(Transportation of portable x-ray equipment and personnel to home or
nursing home, per trip to facility or location, one patient seen)); the
portable x-ray set-up (HCPCS code Q0092 (Set-up of portable x-ray
equipment)); and the professional and technical components of the x-ray
service itself (CPT 70000 series). Currently, the direct PE database
contains x-ray equipment in both the radiology codes in the 70000
series of CPT and HCPCS code Q0092, the code for the set-up of a
portable x-ray. In the technical component of the x-ray service is the
direct PE input of a radiology room which contains x-ray equipment for
the various radiology codes in the 70000 series of CPT. In addition,
portable x-ray equipment is included as a direct PE input for HCPCS
code Q0092. Thus, x-ray equipment currently is recognized within the
direct PE values for two of the HCPCS codes that would be reported for
the portable x-ray service, resulting in an overvaluation of the
comprehensive portable x-ray service.
Therefore, for CY 2011 we are proposing to remove portable x-ray
equipment as a direct PE input for HCPCS code Q0092, in order to pay
more appropriately for the x-ray equipment used to furnish a portable
x-ray service. We believe the resulting payment for the comprehensive
portable x-ray service would more appropriately reflect the resources
used to furnish portable x-ray services by providing payment for the x-
ray equipment solely through payment for the technical component of the
x-ray service that is furnished.

E. Pulmonary Rehabilitation Services (HCPCS Code G0424)

In the CY 2010 PFS proposed rule (74 FR 33614), we proposed to
create new HCPCS G-code G0424 (Pulmonary rehabilitation, including
aerobic exercise (includes monitoring), per session, per day) to
describe the services of a pulmonary rehabilitation (PR) program as
specified in section 144(a) of the Medicare Improvements for Patients
and Providers Act of 2008 (MIPPA). Using CPT code 93797 (Cardiac rehab
without telemetry) as a reference code, we proposed to assign 0.18 work
RVUs and 0.01 malpractice RVUs to G0424. To establish PE RVUs, we
reviewed the PE inputs of similar services, particularly those of the
respiratory therapy HCPCS codes G0237 (Therapeutic procedures to
increase strength or endurance or respiratory muscles, face to face,
one on one, each 15 minutes (includes monitoring)) and G0238
(Therapeutic procedures to improve respiratory function, other than
described by G0237, one on one, face to face, per 15 minutes (includes
monitoring)), as well as the cardiac rehabilitation codes, CPT codes
93797 and 93798 (Physician services for outpatient cardiac
rehabilitation; with continuous ECG monitoring (per session)). In the
CY 2010 PFS final rule with comment period (74 FR 61886), we finalized
our proposal with modifications to the code descriptor and PE inputs,
as recommended by some commenters.
Based on commenters' recommendations from the CY 2010 PFS final
rule with comment period and further information furnished by
stakeholders, we are proposing to increase the work RVUs for HCPCS code
G0424 to 0.28 for CY 2011 to be comparable to the work RVUs for cardiac
rehabilitation with monitoring (CPT code 93798) in view of the
monitoring required for HCPCS code G0424.
In addition, we are also proposing to increase the clinical labor
time for the respiratory therapist from 15 minutes to 30 minutes and to
crosswalk the PE equipment inputs for HCPCS code G0424 to those for
respiratory treatment services (HCPCS code G0238), which include a 1-
channel ECG and a pulse oximeter. We would retain the treadmill
currently assigned to HCPCS code G0424 and adjust the equipment time to
45 minutes. While several public commenters recommended this equipment,
these commenters also requested a full 60 minutes of respiratory
therapist time be included in the PE for HCPCS code G0424, comparable
to the 15 minutes of

[[Page 40103]]

respiratory therapist time included in the one-on-one codes for 15
minutes of respiratory treatment services (HCPCS codes G0237 and
G0238). However, because PR services reported under HCPCS code G0424
can be furnished either individually or in groups, we believe that 30
minutes of respiratory therapist time would be more appropriate for
valuing the typical PR service.

F. Application of Tissue-Cultured Skin Substitutes to Lower Extremities
(HCPCS Codes GXXX1 and GXXX2)

There are currently two biological products, Apligraf and
Dermagraft, which are FDA-approved for the treatment of diabetic foot
ulcers. While commonly used by podiatrists for this purpose, these
products are also used by other specialists in the treatment of other
clinical conditions, such as burns.
Many Medicare contractors have established local coverage
determinations specifying the circumstances under which these services
are covered. In the case of diabetic foot ulcers, clinical studies of
Apligraf weekly application were based on up to 5 treatments over a 12-
week period. In contrast, Dermagraft was applied weekly, up to 8
treatments over a 12-week period.
The skin substitute CPT codes were reviewed and new codes were last
created by the CPT Editorial Panel for CY 2006. There are currently 2
skin repair CPT codes that describe Apligraf application, one primary
code, CPT code 15340 (Tissue cultured allogeneic skin substitute; first
25 sq cm or less) and one add-on code, CPT code 15341 (Tissue cultured
allogeneic skin substitute; each additional 25 sq cm, or part thereof
(List separately in addition to code for primary procedure)) and 4
codes that describe Dermagraft application, two initial codes based on
body area, CPT codes 15360 (Tissue cultured allogeneic dermal
substitute, trunk, arms, legs; first 100 sq cm or less, or 1 percent of
body area of infants and children) and 15365 (Tissue cultured
allogeneic dermal substitute, face, scalp, eyelids, mouth, neck, ears,
orbits, genitalia, hands, feet, and/or multiple digits; first 100 sq cm
or less, or 1 percent of body area of infants and children) and two
add-on codes, CPT codes 15361 (Tissue cultured allogeneic dermal
substitute, trunk, arms, legs; each additional 100 sq cm, or each
additional 1 percent of body area of infants and children, or part
thereof (List separately in addition to code for primary procedure))
and 15366 (Tissue cultured allogeneic dermal substitute, face, scalp,
eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or
multiple digits; each additional 100 sq cm, or each additional 1
percent of body area of infants and children, or part thereof (List
separately in addition to code for primary procedure)).
Several stakeholders have expressed concern about the
appropriateness and equity of the coding and payment for these
services, given their similar uses and the office resources required
when the products are applied repeatedly over a number of weeks for
treatment of lower extremity ulcers. They are concerned that current
coding, with the associated payment policies and relative values, does
not provide for appropriate payment for the services based on how they
are furnished. In addition, some stakeholders believe that the current
coding and payment provides a financial incentive for the selection of
one tissue-cultured product over another, rather than facilitating
clinical decisionmaking based solely on the most clinically appropriate
product for the patient's case. For example, the Dermagraft and
Apligraf application codes have 90-day and 10-day global periods,
respectively, and their current values include several follow-up office
visits. When patients are treated periodically with repeated
applications of the products over several weeks, the patients may be
seen in follow-up by the physician. However, those encounters would not
be evaluation and management visits but, instead, would be procedural
encounters that would typically be valued differently under the PFS
than the follow-up office visits currently included in the values for
the Dermagraft and Apligraf application codes. Furthermore, while
different stakeholders have indicated that debridement and site
preparation are variably performed when these products are applied, the
CPT codes for Dermagraft application allow separate reporting of these
preparation services when they are performed, while the Apligraf
application codes bundle these services. Since CY 2006, the PFS has
accepted the RUC work and PE recommendations for the Dermagraft and
Apligraf application codes and has paid accordingly.
With respect to Medicare payment policy, some Medicare contractors
allow the use of modifier -58 (Staged or related procedure or service
by the same physician during the postoperative period) to be reported
with the skin substitute application codes and provide full payment for
the service each time it is performed, even if the subsequent
application(s) is within the global period of the service. Other
contractors do not allow the use of modifier -58, and therefore,
provide a single payment for a series of applications over 90 days or
10 days, as applicable to the particular code reported for the
product's initial application.
Because of the current inconsistencies in valuing similar skin
substitute application services and the common clinical scenarios for
their use for Medicare beneficiaries, we believe that it would be
appropriate to temporarily create Level II HCPCS G-codes to report
application of tissue-cultured skin substitutes applied to the lower
extremities in order to provide appropriate and consistent payment for
the services as they are commonly furnished. Therefore, we are
proposing to create two new HCPCS G-codes for CY 2011, GXXX1
(Application of tissue cultured allogeneic skin substitute or dermal
substitute; for use on lower limb, includes the site preparation and
debridement if performed; first 25 sq cm or less) and GXXX2
(Application of tissue cultured allogeneic skin or dermal substitute;
for use on lower limb, includes the site preparation and debridement if
performed; each additional 25 sq cm), that would be recognized for
payment under the PFS for the application of Apligraf or Dermagraft to
the lower limb. These codes would not allow separate reporting of CPT
codes for site preparation or debridement. We emphasize that we would
expect that the use of these HCPCS G-codes for payment under Medicare
would be temporary, while stakeholders work through the usual channels
to establish appropriate coding for these services that reflects the
current common clinical scenarios in which the skin substitutes are
applied. Furthermore, we would expect to receive recommendations from
the AMA RUC for appropriate work values and direct practice expense
inputs for the applicable codes, according to the usual process for new
or revised codes.
Under the PFS, as a temporary measure, the HCPCS G-codes would be
assigned a 0-day global period so payment would be made each a time a
covered service was furnished. We are proposing to base payment on the
physician work relative values and the direct PE inputs for the
existing CPT codes for Apligraf application, with adjustments for the
global period differences because the HCPCS G-codes and the Apligraf
application CPT codes. These CPT codes resemble the new HCPCS G-codes
in terms of wound size description and the inclusion of site
preparation and debridement in their current values so we believe they

[[Page 40104]]

appropriately represent the physician work involved in the proposed
HPCPCS G-codes. However, we would adjust the work RVUs of the Apligraf
application codes to derive the HCPCS G-code proposed CY 2011 work
values by extracting the values for any office visits and discharge day
management services because the HCPCS G-codes have a 0-day global
period. In addition, we would adjust the direct PE inputs of the
Apligraf application codes to develop the proposed CY 2011 direct PE
inputs of the HPCPS G-codes that have a 0-day global period.
Our crosswalks and adjustments result in proposed CY 2011 work RVUs
of 2.22 for HPCPCS code GXXX1 and 0.50 for HCPCPS GXXX2. The proposed
direct PE inputs for HCPCS codes GXXX1 and GXXX2 are included in the
direct PE database for the CY 2011 proposed rule that is posted on the
CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp.
We note that many Medicare contractors currently have local
coverage policies that specify the circumstances under which Medicare
covers the application of skin substitutes. The local coverage policies
may include diagnostic or prior treatment requirements, as well as
frequency limitations on the number and periodicity of treatments. We
expect that these policies would be updated in the context of the
temporary new HCPCS G-codes that we are proposing for use in CY 2011 to
report the application of tissue cultured allogeneic skin or dermal
substitutes. We are proposing to establish the HCPCS G-codes for
temporary use in CY 2011 in order to improve the consistency and
resource-based nature of PFS payments for skin substitute application
services that require similar resources. However, we note our continued
interest in ensuring that skin substitutes are properly utilized for
Medicare beneficiaries who will benefit from that treatment. We will
continue to monitor the utilization of these services and plan to
identify any concerning trends in utilization that contractors may want
to examine further through medical review or other approaches.

G. Canalith Repositioning (CPT Code 95992)

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

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

To ensure that the PE RVUs are consistent between the intranasal/
oral and injectable immunization administration CPT codes that describe
services that utilize similar PE resources, we are proposing to
crosswalk the PE values for CPT code 90471 (Immunization administration
(includes percutaneous, intradermal, subcutaneous, or intramuscular
injections); one vaccine (single or combination vaccine/toxoid)) to CPT
codes 90467 (Immunization administration younger than age 8 years
(includes intranasal or oral routes of administration) when the
physician counsels the patient/family; first administration (single or
combination vaccine/toxoid), per day) and 90473 (Immunization
administration by intranasal or oral route; one vaccine (single or
combination vaccine/toxoid)).
Similarly, we are also proposing to crosswalk the PE values for CPT
code 90472 (Immunization administration (includes percutaneous,
intradermal, subcutaneous, or intramuscular injections); each
additional vaccine (single or combination vaccine/toxoid) (List
separately in addition to code for primary procedure)) to CPT codes
90468 (Immunization administration younger than age 8 years (includes
intranasal or oral routes of administration) when the physician
counsels the patient/family; each additional administration (single or
combination vaccine/toxoid), per day (List separately in addition to
code for primary procedure)) and 90474 (Immunization administration by
intranasal or oral route; each additional vaccine (single or
combination vaccine/toxoid) (List separately in addition to code for
primary procedure)).

I. Refinement Panel Process

As discussed in the November 25, 1992 PFS final rule (57 FR 55938),
we adopted a refinement panel process to assist us in reviewing the
public comments on interim physician work RVUs for CPT codes with that
status in each year and developing final work values for the subsequent
year. Our decision to convene multispecialty panels of physicians was
based on our need to balance the interests of those who commented on
the work RVUs against the budgetary and redistributive effects that
could occur if we accepted extensive increases in work RVUs across a
broad range of services. The refinement panel reviews and discusses the
work involved in each procedure and then each member individually rates
the work of the procedure. Since 1992, the refinement panels'
recommendation to change a work value or to retain the interim value
has hinged solely on the outcome of a statistical test on the ratings
(an F-test).
Depending on the number and range of codes that public commenters,
typically specialty societies, request be subject to refinement, we
establish refinement panels with representatives from 4 groups of
physicians: Clinicians representing the specialty most identified with
the procedures in question; physicians with practices in related
specialties; primary care physicians; and contractor medical directors
(CMDs). Typically the refinement panels meet in the summer prior to the
promulgation of the final rule finalizing the RVUs for the codes.

[[Page 40105]]

Typical panels have included 8 to 10 physicians across the 4 groups.
Over time, the statistical test used to evaluate the RVU ratings of
individual panel members have become less reliable as the physicians in
each group have tended to select a previously discussed value, rather
than independently evaluating the work. In addition, the resulting RVUs
have occasionally exhibited rank order anomalies (that is, a more
complex procedure is assigned lower RVUs than a less complex
procedure).
Most recently, section 1848(c)(2)(K) of the Act (as added by
section 3134 of the ACA) authorizes the Secretary to review potentially
misvalued codes and make appropriate adjustments to the relative
values. In addition, MedPAC has encouraged CMS to critically review the
values assigned to the services under the PFS. MedPAC has stated its
belief that CMS has historically relied too heavily on specialty
societies to identify services that are misvalued by accepting so many
recommendations of the RUC.
We believe the refinement panel process continues to provide
stakeholders with a meaningful opportunity for review and discussion of
the interim work RVUs with a clinically diverse group of experts that
then provides informed recommendations to CMS. Therefore, we would like
to continue the refinement process, including the established
composition that includes representatives from the 4 groups of
physicians, but with administrative modification and clarification.
Specifically, for refinement panels beginning in CY 2011 (that is, for
those codes with CY 2011 interim values that would be subject to
refinement during CY 2011), we are proposing to eliminate the use of
the F-test and instead base revised RVUs on the median work value of
the panel members' ratings. We believe this approach will simplify the
refinement process administratively, while resulting in a final panel
recommendation that reflects the summary opinion of the panel members
based on a commonly used measure of central tendency that is not
significantly affected by outlier values. In addition, we are
clarifying that we have the final authority to set the RVUs, and
therefore, may make adjustments to the work RVUs resulting from
refinement if policy concerns warrant their modification.

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

In the CY 2010 PFS final rule with comment period (74 FR 61755), we
indicated that we continued to have concerns about the issue of
developing PE RVUs for services that are utilized 24 hours a day, 7
days a week (24/7), such as those that require certain monitoring
system equipment. The PE equipment methodology was developed for
equipment that is in use during standard physician's office business
hours and not this type of 24/7 equipment. We stated that we would
conduct further analysis of this issue. Services that were contractor-
priced in CY 2009 remained contractor-priced in CY 2010. We also
indicated that any proposed changes will be communicated through future
rulemaking.
Since publication of the CY 2010 PFS final rule with comment
period, we have focused our additional analysis on four of the CPT
codes that commenters have brought to our attention because they
involve concurrent, remote, 24/7 attended monitoring of multiple
patients from a central location: CPT code 93012 (Telephonic
transmission of post-symptom electrocardiogram rhythm strip(s); 24-hour
attended monitoring, per 30 day period of time; tracing only); CPT code
93229 (Wearable mobile cardiovascular telemetry with
electrocardiographic recording, concurrent computerized real time data
analysis and greater than 24 hours of accessible ECG data storage
(retrievable with query) with ECG triggered and patient selected events
transmitted to a remote attended surveillance center for up to 30 days;
technical support for connection and patient instructions for use,
attended surveillance, analysis and physician prescribed transmission
of daily and emergent data reports); CPT code 93268 (Wearable patient
activated electrocardiographic rhythm derived event recording with
presymptom memory loop, 24-hour attended monitoring, per 30 day period
of time; includes transmission, physician review and interpretation);
and CPT 93271 code (Wearable patient activated electrocardiographic
rhythm derived event recording with presymptom memory loop, 24-hour
attended monitoring, per 30 day period of time; monitoring, receipt of
transmissions, and analysis).
Of these four codes, CPT code 93229 is currently contractor-priced
in CY 2010, meaning that the local Medicare contractors determine
payment rates for the service within the PFS geographic areas in their
jurisdiction. The three services that are currently nationally-priced
on the PFS are in the first year of a 4-year transition to lower
payment rates based on the use of the PPIS data adopted in the CY 2010
PFS final rule with comment period. We refer readers to section II.A.2.
of this proposed rule for a description of the general PFS PE
methodology that is the basis for the following discussion of
approaches to establishing PE RVUs for these four CPT codes.
We examined several alternative methods for developing PE RVUS upon
which PFS payment rates for these four CPT codes could be based. Each
of these services involves transmission of information from multiple
patients who wear individual monitoring devices that transmit patient-
specific information to centralized equipment that is simultaneously in
use for multiple patients. We believe it would be most consistent with
the principles underlying the PFS PE methodology to classify the
centralized monitoring equipment as an indirect cost since it is
servicing multiple patients at the same time. After classifying this
equipment as an indirect cost, we used our standard methodology to
calculate an indirect practice cost index value for each code based on
the PE/HR survey data of the historical mix of specialties providing
these services. Establishing payment rates for these codes based on
this approach would result in decreases in the payment rates for these
services, including the typical contractor's price for CPT code 93229.
For the three services that are nationally priced, these decreases
would be relative to the lower payment rates based on the use of the
PPIS data after the 4-year transition.
We also received PE/HR data from the Remote Cardiac Services
Provider Group (RCSPG), a group of IDTF suppliers of these types of
services. For sensitivity analysis purposes, we substituted these data
for the PE/HR data of the specialties performing these services, while
continuing to treat the centralized monitoring equipment as an indirect
cost. We found that establishing payment rates for these codes based on
the approach of using the submitted RCSPG PE/HR data would again result
in decreases in the payment rates for these services, including the
typical contractor's price for CPT code 93229. As in the prior
alternative, the decreases for the nationally priced codes would be
relative to the payment rates reflecting the 4-year transition to the
PPIS data.
Although we believe that it would be most consistent with the
principles underlying the PE methodology to classify the centralized
monitoring equipment as an indirect cost, we also performed a
sensitivity analysis of the payment rates if the centralized monitoring
equipment were classified as a direct cost. In this simulation, we

[[Page 40106]]

assumed that the centralized monitoring equipment was in year-round
use, 7 days per week for 24 hours per day. We found that establishing
payment rates for these codes based on the approach of classifying the
centralized monitoring equipment as a direct cost would again result in
decreases in the payment rates for the nationally priced services
relative to their payment rates after the 4-year transition to the use
of the PPIS data, as well as to the typical current contractor's price
for CPT code 93229.
Finally, we considered proposing contractor-pricing for all four of
these services for CY 2011. However, we are cognizant of past public
comments on this issue that have requested that all of these services
be priced nationally on the PFS, including the one service (CPT code
93229) that is currently contractor-priced.
We also considered that the services currently priced nationally on
the PFS are scheduled to receive lower payment rates under the 4-year
transition to the PPIS data and that the contractor's price for CPT
93229 was recently reduced in the area where the majority of the
billings for this service currently occur.
After taking all these factors into consideration, we are not
proposing CY 2011 methodological or direct cost input changes for CPT
codes 93012, 93268, or 93271--the services that are currently
nationally priced under the PFS. We are also proposing to continue
contractor-pricing for CPT 93229 for CY 2011. We continue to be
interested in public comments on this issue, including responses to our
analysis of alternative approaches to establishing PE RVUs for 24/7
services, and further discussion of the issues we have identified in
our alternative pricing methodologies. In addition, while we have
focused the 24/7 services analysis to date on developing the PE RVUs
for remote cardiac monitoring services, there may be 24/7 services in
other areas of medicine, either currently paid under the PFS or in
development for the future. Therefore, we are also interested in public
comments on these current or emerging 24/7 services, including
descriptions of the similarities or differences between these other
services and remote cardiac monitoring services, particularly with
respect to the issues we have identified in our analysis of alternative
approaches to establishing PE RVUs for remote cardiac monitoring
services under the PFS.

IV. Medicare Telehealth Services for the Physician Fee Schedule

A. Billing and Payment for Telehealth Services

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

[[Page 40107]]

presented by a practitioner at the originating site.
2. Current Telehealth Billing and Payment Policies
As noted above, Medicare telehealth services can only be furnished
to an eligible telehealth beneficiary in an originating site. An
originating site is defined as one of the specified sites where an
eligible telehealth individual is located at the time the service is
being furnished via a telecommunications system. In general,
originating sites must be located in a rural HPSA or in a county
outside of an MSA. The originating sites authorized by the statute are
as follows:

Offices of a physician or practitioner
Hospitals
CAHs
RHCs
FQHCs
Hospital-Based or Critical Access Hospital-Based Renal
Dialysis Centers (including Satellites)
SNFs
CMHCs

Currently approved Medicare telehealth services include the
following:

Initial inpatient consultations
Follow-up inpatient consultations
Office or other outpatient visits
Individual psychotherapy
Pharmacologic management
Psychiatric diagnostic interview examination
End Stage Renal Disease (ESRD) related services
Individual medical nutrition therapy (MNT)
Neurobehavioral status exam
Individual health and behavior assessment and intervention
(HBAI)

In general, the practitioner at the distant site may be any of the
following, provided that the practitioner is licensed under State law
to furnish the service being furnished via a telecommunications system:

Physician
Physician assistant (PA)
Nurse practitioner (NP)
Clinical nurse specialist (CNS)
Nurse midwife
Clinical psychologist
Clinical social worker
Registered dietitian or nutrition professional

Practitioners furnishing Medicare telehealth services are located
at a distant site, and they submit claims for telehealth services to
the Medicare contractors that process claims for the service area where
their distant site is located. Section 1834(m)(2)(A) of the Act
requires that a practitioner who furnishes a telehealth service to an
eligible telehealth individual be paid an amount equal to the amount
that the practitioner would have been paid if the service had been
furnished without the use of a telecommunications system. Distant site
practitioners must submit the appropriate HCPCS procedure code for a
covered professional telehealth service, appended with the -GT (Via
interactive audio and video telecommunications system) or -GQ (Via
asynchronous telecommunications system) modifier. By reporting the -GT
or -GQ modifier with a covered telehealth procedure code, the distant
site practitioner certifies that the beneficiary was present at a
telehealth originating site when the telehealth service was furnished.
The usual Medicare deductible and coinsurance policies apply to the
telehealth services reported by distant site practitioners.
Section 1834(m)(2)(B) of the Act provides for payment of a facility
fee to the originating site. To be paid the originating site facility
fee, the provider or supplier where the eligible telehealth individual
is located must submit a claim with HCPCS code Q3014 (Telehealth
originating site facility fee), and the provider or supplier is paid
according to the applicable payment methodology for that facility or
location. The usual Medicare deductible and coinsurance policies apply
to HCPCS code Q3014. By submitting HCPCS code Q3014, the originating
site authenticates that it is located in either a rural HPSA or non-MSA
county or is an entity that participates in a Federal telemedicine
demonstration project that has been approved by (or receives funding
from) the Secretary of Health and Human Services as of December 31,
2000 as specified in section 1834(m)(4)(C)(i)(III) of the Act.
As described above, certain professional services that are commonly
furnished remotely using telecommunications technology, but that do not
require the patient to be present in-person with the practitioner when
they are furnished, are covered and paid in the same way as services
delivered without the use of telecommunications technology when the
practitioner is in-person at the medical facility furnishing care to
the patient. Such services typically involve circumstances where a
practitioner is able to visualize some aspect of the patient's
condition without the patient being present and without the
interposition of a third person's judgment. Visualization by the
practitioner can be possible by means of x-rays, electrocardiogram or
electroencephalogram tracings, tissue samples, etc. For example, the
interpretation by a physician of an actual electrocardiogram or
electroencephalogram tracing that has been transmitted via telephone
(that is, electronically, rather than by means of a verbal description)
is a covered physician's service. These remote services are not
Medicare telehealth services as defined under section 1834(m). Rather,
these remote services that utilize telecommunications technology are
considered physicians' services in the same way as services that are
furnished in-person without the use of telecommunications technology;
they are paid under the same conditions as in-person physicians'
services (with no requirements regarding permissible originating
sites), and should be reported in the same way (that is, without the -
GT or -GQ modifier appended).

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

As noted above, in the December 31, 2002 Federal Register (67 FR
79988), we established a process for adding services to or deleting
services from the list of Medicare telehealth services. This process
provides the public with an ongoing opportunity to submit requests for
adding services. We assign any request to make additions to the list of
Medicare telehealth services to one of the following categories:
Category 1: Services that are similar to professional
consultations, office visits, and office psychiatry services. In
reviewing these requests, we look for similarities between the
requested and existing telehealth services for the roles of, and
interactions among, the beneficiary, the physician (or other
practitioner) at the distant site and, if necessary, the telepresenter.
We also look for similarities in the telecommunications system used to
deliver the proposed service, for example, the use of interactive audio
and video equipment.
Category 2: Services that are not similar to the current
list of telehealth services. Our review of these requests includes an
assessment of whether the use of a telecommunications system to deliver
the service produces similar diagnostic findings or therapeutic
interventions as compared with the in-person delivery of the same
service. Requestors should submit evidence showing that the use of a
telecommunications system does not affect the diagnosis or treatment
plan as compared to in-person delivery of the requested service.

[[Page 40108]]

Since establishing the process to add or remove services from the
list of approved telehealth services, we have added the following to
the list of Medicare telehealth services: Individual HBAI services;
psychiatric diagnostic interview examination; ESRD services with 2 to 3
visits per month and 4 or more visits per month (although we require at
least 1 visit a month to be furnished in-person by a physician, CNS,
NP, or PA in order to examine the vascular access site); individual
MNT; neurobehavioral status exam; and initial and follow-up inpatient
telehealth consultations for beneficiaries in hospitals and skilled
nursing facilities (SNFs).
Requests to add services to the list of Medicare telehealth
services must be submitted and received no later than December 31 of
each calendar year to be considered for the next rulemaking cycle. For
example, requests submitted before the end of CY 2010 are considered
for the CY 2012 proposed rule. Each request for adding a service to the
list of Medicare telehealth services must include any supporting
documentation the requester wishes us to consider as we review the
request. Because we use the annual PFS rulemaking process as a vehicle
for making changes to the list of Medicare telehealth services,
requestors should be advised that any information submitted is subject
to public disclosure for this purpose. For more information on
submitting a request for an addition to the list of Medicare telehealth
services, including where to mail these requests, we refer readers to
the CMS Web site at http://www.cms.gov/telehealth/.

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

We received requests in CY 2009 to add the following services as
Medicare telehealth services effective for CY 2011: (1) Individual
kidney disease education (KDE) services; (2) individual diabetes self-
management training (DSMT) services; (3) group KDE, DSMT, MNT, and HBAI
services; (4) initial, subsequent, and discharge day management
hospital care services; (5) initial, subsequent, discharge day
management, and other nursing facility care services; (6)
neuropsychological testing services; (7) speech-language pathology
services; and (8) home wound care services. The following presents a
discussion of these requests, including our proposals for additions to
the CY 2011 telehealth list.
1. Individual KDE Services
The American Society of Nephrology, Dialysis Patient Citizens,
AMGEN, and Kidney Care Partners submitted requests to add individual
KDE services, reported by HCPCS code G0420 (Face-to-face educational
services related to the care of chronic kidney disease; individual, per
session, per one hour), to the list of approved telehealth services for
CY 2011 on a category 1 basis.
Individual KDE services, covered under the new Medicare KDE benefit
effective for services furnished beginning in CY 2010, are defined as
face-to-face educational services provided to a patient with stage IV
chronic kidney disease (CKD). We believe the interaction between a
practitioner and a beneficiary receiving individual KDE services is
similar to the education, assessment, and counseling elements of
individual MNT services, reported by HCPCS code G0270 (Medical
nutrition therapy; reassessment and subsequent intervention(s)
following second referral in same year for change in diagnosis, medical
condition or treatment regimen (including additional hours needed for
renal disease), individual, face to face with the patient, each 15
minutes); CPT code 97802 (Medical nutrition therapy; initial assessment
and intervention, individual, face-to-face with the patient, each 15
minutes); and CPT code 97803 (Medical nutrition therapy; re-assessment
and intervention, individual, face-to-face with the patient, each 15
minutes), all services that are currently on the telehealth list.
Therefore, we are proposing to add HCPCS code G0420 to the list of
telehealth services for CY 2011 on a category 1 basis. Consistent with
this proposal, we are also proposing to revise our regulations at Sec.
410.78(b) and Sec. 414.65(a)(1) to include individual KDE as a
Medicare telehealth service.
2. Individual DSMT Services
The Tahoe Forest Health System and the Marshfield Clinic submitted
requests to add individual DSMT services, reported by HCPCS code G0108
(Diabetes outpatient self-management training services, individual, per
30 minutes), to the list of telehealth services for CY 2011 on a
category 1 basis. In the CY 2009 PFS final rule with comment period (73
FR 69743), we stated that we believe individual DSMT services are not
analogous to individual MNT services because of the element of skill-
based training that is encompassed within individual DSMT services that
is not an aspect of individual MNT services (or any other services
currently approved for telehealth). Due to the statutory requirement
that DSMT services include teaching beneficiaries the skills necessary
for the self-administration of injectable drugs, we have stated our
belief that DSMT, whether provided to an individual or a group, must be
evaluated as a category 2 service as specified in the CY 2009 PFS
proposed rule (73 FR 38516). We have considered several previous
requests to add DSMT to the list of Medicare telehealth services. We
have not added individual DSMT to the list of telehealth services
because we believe that skill-based training, such as teaching patients
how to inject insulin, would be difficult to accomplish effectively
without the physical presence of the teaching practitioner (70 FR 45787
and 70157, and 73 FR 38516 and 69743).
In considering the new request to add individual DSMT services to
the list of telehealth services in CY 2011, we have taken into account
requestors' argument that individual DSMT services are highly similar
to individual MNT services and that injection training constitutes just
a small proportion of DSMT services. Except for the component of
individual DSMT services that involves instruction in self-
administration of injectable drugs for eligible beneficiaries, we agree
with the requestors that individual DSMT services are similar to
individual MNT services, which are currently on the list of Medicare
telehealth services. We note that Medicare coverage of DSMT services
was initially authorized in the Balanced Budget Act of 1997. After more
than a decade of Medicare coverage, the most recent information shows
that DSMT continues to be significantly underutilized in the context of
the eligible population of Medicare beneficiaries. While we are
uncertain to what extent geographic barriers to care contribute to this
underutilization, given the morbidity associated with poorly managed
diabetes and the growing evidence-base regarding effective DSMT
services, we believe it is very important to facilitate Medicare
beneficiary access to these underutilized services. While we have
previously been concerned about treating the components of DSMT
services differently in the context of considering DSMT services for
the telehealth list, we believe that our concern regarding the skill-
based injection training component of DSMT services can be addressed by
imposing a requirement that a minimum portion of the training be
furnished in-person.

[[Page 40109]]

We note that for beneficiaries who meet the coverage criteria, Medicare
covers 10 hours of DSMT services in the year following the initial
training, as described in the Medicare Benefit Policy Manual (Pub. 100-
02, Chapter 15, Section 300.3). Taking into consideration the initial
year coverage of DSMT services, we are proposing that a minimum of 1
hour of instruction in injection training must be furnished in-person
during the year following the initial DSMT service. Imposing this
condition would allow us to expand access to DSMT services by adding
individual DSMT services to the list of telehealth services, while
ensuring effective injection training for beneficiaries.
Therefore, we are proposing to add HCPCS code G0108 to the list of
telehealth services beginning in CY 2011. We are also proposing that,
as a condition of payment for individual DSMT services furnished as
telehealth services to an eligible telehealth individual, a minimum of
1 hour of in-person instruction in the self-administration of
injectable drugs must be furnished to the individual during the year
following the initial DSMT service. The injection training may be
furnished through either individual or group DSMT services. By
reporting the -GT or -GQ modifier with HCPCS code G0108 as a telehealth
service, the distant site practitioner would certify that the
beneficiary has received or will receive 1 hour of in-person DSMT
services for purposes of injection training during the year following
the initial DSMT service. Consistent with this proposal, we are
proposing to revise our regulations at Sec. 410.78(b) and Sec.
414.65(a)(1) to include individual DSMT services as a Medicare
telehealth service, with the exception of 1 hour of in-person
instruction in self-administration of injectable drugs which must be
furnished to the eligible telehealth individual as individual or group
DSMT services during the year following the initial DSMT service.
We note that, as specified in Sec. 410.141(e), individual DSMT
services may be furnished by a physician, individual, or entity that
furnishes other services for which direct Medicare payment may be made
and that submits necessary documentation to, and is accredited by, an
accreditation organization approved by CMS. However, consistent with
the statutory requirements of section 1834(m)(1) of the Act and as
provided in Sec. 410.78(b)(1) and (b)(2) of our regulations, Medicare
telehealth services, including individual DSMT furnished as a
telehealth service, could only be furnished by a licensed PA, NP, CNS,
certified nurse-midwife, clinical psychologist, clinical social worker,
or registered dietitian or nutrition professional.
3. Group KDE, MNT, DSMT, and HBAI Services
The American Society of Nephrology, Dialysis Patient Citizens,
AMGEN, Tahoe Forest Health Systems, Kidney Care Partners, the American
Telemedicine Association, and the Marshfield Clinic submitted requests
to add one or more of the following group services to the telehealth
list for CY 2011:
Group KDE services, reported by HCPCS code G0421 (Face-to-
face educational services related to the care of chronic kidney
disease; group, per session, per one hour);
Group MNT services, reported by CPT code 97804 (Medical
nutrition therapy; group (2 or more individual(s)), each 30 minutes);
Group DSMT services, reported by HCPCS code G0109
(Diabetes outpatient self-management training services, group session
(2 or more), per 30 minutes); and/or
Group HBAI services, reported by CPT code 96153 (Health
and behavior intervention, each 15 minutes, face-to-face; group (2 or
more patients)) and 96154 (Health and behavior intervention, each 15
minutes, face-to-face; family (with the patient present)).
When furnished as individual services, HBAI and MNT services are
currently on the list of Medicare telehealth services. Furthermore, we
are proposing to add individual KDE and DSMT services to the list of
Medicare telehealth services beginning in CY 2011 as described above.
In the CY 2007 and CY 2010 PFS rulemaking cycles (70 FR 45787 and
70157, and 74 FR 33543 and 61764), we stated that we did not believe
that group services could be appropriately delivered through
telehealth. We have observed that currently there are no group services
approved as Medicare telehealth services and that there is a different
interactive dynamic between the practitioner and his or her patients in
group services as compared to individual services. We previously have
considered requests to add various group services to the list of
Medicare telehealth services on a category 2 basis because we have
believed that, especially given the interactive dynamic between
practitioners and their patients, group services are not similar to
other services on the list of Medicare telehealth services. Therefore,
we have maintained that it is necessary to evaluate the addition of
group services by comparing diagnostic findings or therapeutic
interventions when services are furnished via telehealth versus when
services are furnished in-person.
We continue to believe that the group dynamic may be a critical and
defining element for certain services, and that this characteristic
precludes many group services from being considered on a category 1
basis for addition to the list of Medicare telehealth services. For
example, we believe that due to the therapeutic nature of the group
dynamic that is integral to group psychotherapy, group psychotherapy is
fundamentally different from other Medicare telehealth services and,
therefore, could not be considered on a category 1 basis for addition
to the telehealth services list. For the same reason, in the absence of
evidence to the contrary, we do not believe group psychotherapy
services could be appropriately delivered through telehealth.
However, upon further consideration, with regard to the particular
group education and training services for which we received requests
for addition to the Medicare telehealth services list, we believe the
group dynamic is not central to the core education and training
components of these particular services, specifically DSMT, MNT, KDE,
and HBAI services. We believe that these group services are
sufficiently similar to the individual, related services that are
already on the telehealth services list or are proposed for addition
beginning in CY 2011. Specifically, we believe that for these group
services, which consist principally of an information exchange for the
purpose of education and training, the roles of, and interactions
between, the patients and the practitioner are sufficiently similar to
the related individual education and training services that the
services can be furnished appropriately as a telehealth service.
Therefore, we are proposing to add HCPCS code G0421 for group KDE
services, CPT code 97804 for group MNT services, HCPCS code G0109 for
group DSMT services, and CPT codes 96153 and 96154 for group HBAI
services to the Medicare telehealth services list on a category 1
basis. Furthermore, because the concerns we raised above regarding
adequate injection training with the addition of individual DSMT are
also present for group DSMT, we are proposing to require the same
minimum of 1 hour of in-person instruction for injection training
within the year following the initial DSMT service for any beneficiary
that receives DSMT services via

[[Page 40110]]

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

[[Page 40111]]

initial hospital care codes describe the first visit to the
hospitalized patient by the admitting practitioner who may or may not
have seen the patient in the decision-making phase regarding
hospitalization. We believe it is critical that the initial hospital
visit by the admitting practitioner be conducted in-person to ensure
that the practitioner with ongoing treatment responsibility
comprehensively assesses the patient's condition upon admission to the
hospital through a thorough in-person examination. Therefore, we are
not proposing to add initial hospital care services to the Medicare
telehealth services list for CY 2011.
We have again considered adding subsequent hospital care services
reported by CPT codes 99231 through 99233 to the telehealth list for CY
2011 on a category 1 basis. In the CY 2005 and CY 2008 PFS proposed
rules (69 FR 47511 and 72 FR 38155), we stated that the potential
acuity of patients in the hospital setting precludes consideration of
subsequent hospital visits as similar to existing telehealth services.
However, as stated earlier, we also note that HCPCS codes for initial
and follow-up inpatient consultation services are on the list of
telehealth services. These E/M services are furnished to high acuity
hospitalized patients, although not by the admitting practitioner
himself or herself. However, in light of the increasingly prevalent
care model that entails multidisciplinary team care for patients with
complex medical illnesses that involve multiple body systems,
consulting practitioners may often play a key, intensive, and ongoing
role in caring for hospitalized patients. Therefore, we believe that
subsequent hospital care visits by a patient's admitting practitioner
may sufficiently resemble follow-up inpatient consultation services to
consider these subsequent hospital care services on a category 1 basis
for the telehealth list. While we still believe the potential acuity of
hospital inpatients is greater than those patients likely to receive
currently approved Medicare telehealth services, we also believe that
it would be appropriate to permit some subsequent hospital care
services to be furnished through telehealth in order to ensure that
hospitalized patients have frequent encounters with their admitting
practitioner. However, we also continue to believe that the majority of
these visits should be in-person to facilitate the comprehensive,
coordinated, and personal care that medically volatile, acutely ill
patients require on an ongoing basis.
Therefore, we are proposing that subsequent hospital care services,
specifically CPT codes 99231, 99232, and 99233, be added to the list of
telehealth services on a category 1 basis for CY 2011, but with some
limitations on the frequency that these services may be furnished
through telehealth. Because of our concerns regarding the potential
acuity of hospital inpatients, we are proposing to limit the provision
of subsequent hospital care services through telehealth to once every 3
days. We are confident that admitting practitioners will continue to
make appropriate in-person visits to all patients who need such care
during their hospitalization. Consulting practitioners should continue
to use the inpatient telehealth consultation HCPCS G-codes,
specifically G0406, G0407, G0408, G0425, G0426, or G0427 when reporting
consultations furnished to inpatients via telehealth.
Consistent with this proposal, we are proposing to revise Sec.
410.78(b) and Sec. 414.65(a)(1) to include subsequent hospital care
services as Medicare telehealth services, with the limitation of one
telehealth subsequent hospital care service every 3 days.
We also considered adding hospital discharge day management
services to the list of telehealth services. These services, reported
by CPT codes 99238 and 99239, include the final examination of the
patient, discussion of the hospital stay, instructions for continuing
care to all relevant caregivers, and preparation of discharge records,
prescriptions, and referral forms. These services are furnished when a
practitioner deems it medically reasonable and necessary to assess a
patient's readiness for discharge and to prepare a patient for
discharge from an acute care environment to a less intensive setting.
There are no services on the current list of telehealth services that
resemble such preparation of a patient for discharge. We believe it is
especially important that, if a practitioner furnishes a discharge day
management service, the service be furnished in-person in order to
allow the practitioner to comprehensively assess the patient's status
in preparation for discharge so that the patient will have a higher
likelihood of making a successful transition to the less intensive
setting. Therefore, we are not considering hospital discharge day
management services for addition to the Medicare telehealth services
list on a category 1 basis.
We have reviewed the documentation submitted by requestors in
support of adding these codes to the Medicare telehealth services list
on a category 2 basis. Most of the submitted studies were specific to
the treatment of patients with specific diagnoses and were not specific
to discharge services. Additionally, most of the studies concluded that
more research was required in order to establish medical equivalence
between telehealth and in-person services. The submitted documentation
did not provide the necessary evidence to alter our previous conclusion
that hospital discharge day management services should be provided in-
person in light of the acuity of hospitalized patients, their typically
complex post-hospitalization care needs, and the importance of patient
education by the admitting practitioner who had ongoing responsibility
for the patient's treatment during the hospital stay. Therefore, we are
not proposing to add hospital discharge day management services to the
list of telehealth services for CY 2011.
5. Initial, Subsequent, Discharge Day Management, and Other Nursing
Facility Care Services
The American Telemedicine Association and the Marshfield Clinic
submitted requests to add nursing facility care codes, covering the
spectrum of initial (reported by CPT codes 99304 (Level 1 initial
nursing facility care), 99305 (Level 2 initial nursing facility care)
and 99306 (Level 3 initial nursing facility care)); subsequent
(reported by CPT codes 99307 (Level 1 subsequent nursing facility
care), 99308 (Level 2 subsequent nursing facility care), 99309 (Level 3
subsequent nursing facility care), and 99310 (Level 4 subsequent
nursing facility care)); discharge day management (reported by CPT
codes 99315 (Nursing facility discharge day management; 30 minutes or
less) and 99316 (Nursing facility discharge day management; more than
30 minutes)); and other (reported by CPT code 99318 (Evaluation and
management of a patient involving an annual nursing facility
assessment)) services, to the Medicare telehealth services list
beginning in CY 2011. The requests for the addition of these services
expressed concerns regarding limited access to care if we do not allow
these services to be furnished through telehealth, and requested that
CMS acknowledge the recent Congressional inclusion of nursing
facilities as telehealth originating sites by adding these codes to the
list of Medicare telehealth services.
In the CY 2010 PFS proposed and final rules (74 FR 33544 and 74 FR
61762), we discussed concerns about potential disparities in patient
acuity between nursing facility services and the current list of
Medicare telehealth

[[Page 40112]]

services. We have also declined to add HCPCS codes to the Medicare
telehealth services list that are used exclusively to describe
Federally-mandated nursing facility visits. As discussed in the CY 2010
PFS proposed rule (74 FR 33543), the long-term care regulations at
Sec. 483.40(c) require that residents of SNFs receive initial and
periodic personal visits. These regulations ensure that at least a
minimal degree of personal contact between a practitioner and a SNF
resident is maintained, both at the point of admission to the facility
and periodically during the course of the resident's stay. We continue
to believe that these federally-mandated visits should be conducted in-
person, and not as Medicare telehealth services. Therefore, in the CY
2010 PFS final rule with comment period, we revised Sec. 410.78 to
preclude physicians and other practitioners from furnishing the
physician visits required under Sec. 483.40(c) through telehealth.
We reviewed the use of telehealth for each of the subcategories of
nursing facility services included in the requests for CY 2011. We
identified the E/M services that fulfill Federal requirements for
personal visits under Sec. 483.40(c), and we are not proposing for CY
2011 to add any HCPCS codes to the Medicare telehealth services list
that are used exclusively to describe these Federally-mandated visits.
These codes include the CPT codes for initial nursing facility care
(CPT codes 99304 through 99306) that are used to report the initial E/M
visit that fulfills Federally-mandated requirements under Sec.
483.40(c) and other nursing facility service (CPT code 99318) that is
only payable by Medicare if the visit is substituted for a federally-
mandated visit under Sec. 483.40(c).
The nursing facility discharge day management services reported
under CPT code 99315 and 99316 are E/M visits that prepare a nursing
facility resident for discharge from the facility. There are no
Medicare requirements that such a service be furnished. If a
practitioner chooses to furnish this service, we continue to believe
that an in-person visit is most appropriate in order to ensure the
resident is prepared for discharge from the nursing facility. These
services are furnished when a practitioner deems it medically
reasonable and necessary to assess a patient's readiness for and to
prepare a patient being discharged from the monitored nursing facility
environment to another typically less intensive setting. There are no
services on the current list of telehealth services that resemble such
preparation of a patient for discharge. As in the case of hospital
discharge day management services, we believe it is especially
important that, if a practitioner furnishes a nursing facility
discharge day management service, the service be furnished in-person.
The practitioner must be able to comprehensively assess the patient's
status in preparation for discharge so that the patient will have a
higher likelihood of making a successful transition from the nursing
facility to another setting. Therefore, we are not considering nursing
facility discharge day management services for addition to the Medicare
telehealth services list on a category 1 basis. When we considered the
addition of these services under category 2, we had no evidence that
nursing facility discharge services furnished through telehealth are
equivalent to in-person discharge services. Therefore, we are not
proposing to add nursing facility discharge day management services to
the CY 2011 telehealth list.
Subsequent nursing facility services, reported by CPT codes 99307
through 99310, may be used to report either a federally-mandated
periodic visit under Sec. 483.40(c) or another E/M visit, prior to or
after the initial nursing facility care visit, as long as the
subsequent nursing facility care visit is medically reasonable and
necessary for the resident's care. While we continue to believe that
many SNF residents have complex medical care needs, we believe that it
is appropriate to consider the addition of these codes to the
telehealth list on a category 1 basis. As we state above in the context
of our discussion of subsequent hospital care services, the HCPCS codes
for initial and follow-up inpatient consultation services for nursing
facility patients are on the list of Medicare telehealth services, and
subsequent nursing facility services are similar to those services.
These E/M services are furnished to high acuity, complex SNF patients,
although not by the admitting practitioner himself or herself.
Therefore, we believe that subsequent nursing facility visits by a
patient's admitting practitioner sufficiently resemble follow-up
inpatient consultation services to consider them on a category 1 basis
for the telehealth list. We have concluded that it would be appropriate
to permit some subsequent nursing facility care services to be
furnished through telehealth to ensure that complex nursing facility
patients have frequent encounters with their admitting practitioner,
although we continue to believe that the federally-mandated visits
should be in-person to facilitate the comprehensive, coordinated, and
personal care that these complex patients require on an ongoing basis.
Therefore, we are proposing that subsequent nursing facility care
services, specifically CPT codes 99307, 99308, 99309 and 99310, be
added to the list of Medicare telehealth services on a category 1 basis
beginning in CY 2011, with some limitations on furnishing these
services through telehealth. Because of our concerns regarding the
potential acuity and complexity of SNF inpatients, we are proposing to
limit the provision of subsequent nursing facility care services
furnished through telehealth to once every 30 days. We are especially
interested in public comments, including any evidence regarding
patterns of high quality care and clinical outcomes, regarding this
proposal to limit the provision of subsequent nursing facility care
services furnished through telehealth to once every 30 days. We remain
committed to ensuring that SNF inpatients receive appropriate in-person
visits and that Medicare pays only for medically reasonable and
necessary care. Currently and continuing in CY 2011, an unlimited
number of initial and follow-up consultation services may be furnished
through telehealth to these patients so we believe that only a limited
number of subsequent nursing facility care services by the admitting
practitioner would be appropriate for SNF inpatients. Finally, we are
specifying that subsequent nursing facility care services reported for
a Federally-mandated periodic visit under Sec. 483.40(c) may not be
furnished through telehealth. In light of this proposal for CY 2011, we
remain confident that admitting practitioners will continue to make
appropriate in-person visits to all patients who need such care during
their SNF stay.
Consistent with this proposal, we are proposing to revise Sec.
410.78(b) and Sec. 414.65(a)(1) to include subsequent nursing facility
care services as Medicare telehealth services, with the limitation of
one telehealth subsequent nursing facility care service every 30 days.
Federally-mandated periodic visits may not be furnished through
telehealth, as specified currently in Sec. 410.78(e)(2).
6. Neuropsychological Testing
The American Telemedicine Association submitted a request to add
neuropsychological testing services, described by CPT codes 96119
(Neuropsychological testing (e.g., Halstead-Reitan Neuropsychological
Battery, Wechsler Memory Scales and Wisconsin Card Sorting Test), per
hour

[[Page 40113]]

of the psychologist's or physician's time, both face-to-face time
administering tests to the patient and time interpreting these test
results and preparing the report); and 96119 (Neuropsychological
testing (e.g., Halstead-Reitan Neuropsychological Battery, Wechsler
Memory scales and Wisconsin Card Sorting Test), with qualified health
care professional interpretation and report, administered by
technician, per hour of technician time, face-to-face), to the list of
telehealth services for CY 2011 based on their similarity to other
telehealth services.
In the CY 2008 PFS final rule with comment period (72 FR 66251), we
stated that we have received conflicting comments and data regarding
the appropriateness of furnishing neuropsychological testing via
telehealth. While we appreciate the recent request for addition of
these same services to the Medicare telehealth services list, we do not
believe that these services are similar to services currently on the
Medicare telehealth services list and, therefore, we conclude that they
would not be appropriate for consideration or addition under category
1. In this year's request for the addition of the these services, we
received no information to indicate that the diagnostic findings of
neuropsychological testing through telehealth are similar to those
based upon in-person testing, and therefore, that testing through
telehealth does not affect the patient's diagnosis. Therefore, we are
not proposing to add neuropsychological testing services to the list of
approved Medicare telehealth services for CY 2011.
7. Speech-Language Pathology Services
The Marshfield Clinic submitted a request to add various speech-
language pathology services to the list of approved telehealth services
for CY 2011. Speech-language pathologists are not permitted under
section 1842(b)(18)(C) of the Act to furnish and receive payment for
Medicare telehealth services. Therefore, we are not proposing to add
any speech-language pathology services to the list of Medicare
telehealth services for CY 2011. For further discussion of these
services in the context of telehealth, we refer readers to the CY 2005
and CY 2007 PFS proposed and final rules with comment period (69 FR
47512 and 66276, and 71 FR 48995 and 69657).
8. Home Wound Care Services
Wound Care Associates, LLC, submitted a request to add wound care
in the home setting to the list of Medicare telehealth services. A
patient's home is not permitted under current statute to serve as an
originating site for Medicare telehealth services. Therefore, we are
not proposing to add home wound care services to the list of Medicare
telehealth services for CY 2011.

D. Summary of CY 2011 Telehealth Proposals

In summary, we are proposing to add the following requested
services to the list of Medicare telehealth services for CY 2011:
Individual and group KDE services (HCPCS codes G0420 and
G0421, respectively);
Individual and group DSMT services, with a minimum of 1
hour of in-person instruction to be furnished in the year following the
initial DSMT service to ensure effective injection training (HCPCS
codes G0108 and G0109, respectively);
Group MNT and HBAI services (CPT codes 97804, and 96153
and 96154, respectively);
Subsequent hospital care services, with the limitation for
the patient's admitting practitioner of one telehealth visit every 3
days (CPT codes 99231, 99232, and 99233); and
Subsequent nursing facility care services, with the
limitation for the patient's admitting practitioner of one telehealth
visit every 30 days (CPT codes 99307, 99308, 99309, and 99310).
Furthermore, we are proposing to revise Sec. 410.78(b) and Sec.
414.65(a)(1) accordingly. Specifically, we are proposing to add
individual and group KDE services, individual and group DSMT services,
group MNT services, group HBAI services, and subsequent hospital care
and nursing facility care services to the list of telehealth services
for which payment will be made at the applicable PFS payment amount for
the service of the practitioner. In addition, we have reordered the
listing of services in these two sections and removed ``initial and
follow-up inpatient telehealth consultations furnished to beneficiaries
in hospitals and SNFs'' in Sec. 410.78(b) because these are described
by the more general term ``professional consultations'' that is in the
same section. Finally, we are continuing to specify that the physician
visits required under Sec. 483.40(c) may not be furnished as
telehealth services.

V. Provisions of the Patient Protection and Affordable Care Act of 2010

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

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

Section 3002 of ACA makes a number of changes to the Physician
Quality Reporting Initiative (PQRI), including authorizing incentive
payments through 2014, and requiring a penalty beginning in 2015, for
eligible professionals who do not satisfactorily submit quality data.
For a more detailed discussion of the provisions of section 3002 of the
ACA, please refer to section VI.G.1. of this proposed rule.

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

1. Background
As required under section 1848(n) of the Act, as added by section
131(c) of MIPPA, we established and implemented by January 1, 2009, the
Physician Resource Use Measurement & Reporting (RUR) Program for
purposes of providing confidential reports to physicians that measure
the resources involved in furnishing care to Medicare beneficiaries.
Section 1848(n) of the Act also authorizes CMS to include information
on the quality of care furnished to Medicare beneficiaries by a
physician or group of physicians.
We are continuing a phased implementation of the program. Phase I
was discussed in the CY 2010 proposed and final rules (74 FR 33589, and
74 FR 61844, respectively), and has been completed. Phase I consisted
of several activities including extensive data analysis to inform
decisions about topics such as measures, attribution, and risk
adjustment and formative testing of report design with practicing
physicians. We concluded Phase I by sending to individual practicing
physicians in 12 geographic areas \1\ several hundred reports that
contained per capita and episode-based cost information.
---------------------------------------------------------------------------

\1\ The 12 geographic areas are: Boston, MA, Syracuse, NY,
Northern New Jersey, Greenville, SC, Miami, FL, Little Rock, AR,
Indianapolis, IN, Cleveland, OH, Lansing, MI, Phoenix, AZ, Seattle,
WA, and Orange County, CA.
---------------------------------------------------------------------------

Phase I of the Program focused on providing confidential feedback
on resource use measures. Section 1848(n)(1)(A)(iii) of the Act states
that the Secretary may also include information on the quality of care

[[Page 40114]]

furnished to Medicare beneficiaries by physicians (or groups of
physicians) in the feedback reports. We believe that providing
physicians with feedback on both quality and cost is consistent with
the direction of other CMS value based purchasing (VBP) initiatives. As
a result, we decided to include quality measures in Phase II of the
program and, in particular, we considered measures used in PQRI and
claims-based measures such as GEM measures (74 FR 61846).
Section 1848(n)(1)(A)(ii) also states that the Secretary may
provide reports at the physician group level. Accordingly, as part of
Phase II of the program, we will also include reporting to group
practices, defined as more than one physician practicing medicine
together (74 FR 61846). In addition, we noted that the definition
applies to the following types of physician groups: (1) Formally
established single or multi-specialty group practices; (2) physicians
practicing in defined geographic regions; and (3) physicians practicing
within facilities or larger systems of care (74 FR 61846). As we
continue with Phase II, we plan to report to both physician group
practices and their affiliated practitioners, recognizing that many
physicians practice in arrangements other than solo practices. We
believe that using both group and individual level reporting will also
allow us to gain experience with the sample size issues that arise when
individual physicians have too few Medicare beneficiaries with specific
conditions to generate reliable information. (See the CY 2010 final
rule with comment period (74 FR 61844) for a detailed discussion of
plans for Phase II.)
2. Effect of the ACA of 2010 on the Program
The ACA contains two provisions relevant to the RUR program.
Section 3003 continues the confidential feedback program and requires
the Secretary, beginning in 2012, to provide reports that compare
patterns of resource use of individual physicians to other physicians.
In addition, section 3007 of the ACA requires the Secretary to apply a
separate, budget-neutral payment modifier to the Fee-For-Service
physician fee schedule payment formula. The payment modifier, which
will be phased in beginning January 1, 2015 through January 1, 2017,
will provide for differential payment under the fee schedule to a
physician or groups of physicians, and later, possibly to other
eligible professionals, based upon the relative quality and cost of
care of their Medicare beneficiaries. Accordingly, our goal is to have
Medicare physicians receive a confidential feedback report prior to
implementation of the payment modifier. We view these two provisions as
complementary, as we expect the work done for the confidential feedback
program under section 3003 of the ACA will inform our implementation of
the payment modifier under section 3007 of the ACA. The approach used
in the confidential feedback reports will serve as the foundation for
implementing the payment modifier. Specifically, throughout future
phases of reports under the RUR program, we will continue to enhance
our measures and methods and improve the content of the reports based
on both our research and the feedback of stakeholders before the
payment modifier begins to affect physician payments in 2015.
We plan to engage in a large-scale effort to garner widespread
stakeholder involvement with regard to how we continue to build and
expand the confidential feedback program and transition to
implementation of the payment modifier. We recognize that such a
payment modifier may have an impact on the delivery of care to Medicare
beneficiaries. Reports that will be produced in the future based on
changes as a result of section 3003 of the ACA will contain both cost
and quality data, and work done to improve these reports with regard to
fair and actionable measures in each of these domains will aid our
decision making in how to apply the payment modifier. We intend to seek
stakeholder input on various aspects of program design, including cost
and quality measures, methodologies for compositing measures, and
feedback report content and delivery. Such feedback may be gathered
through rulemaking, open door forums, or other mechanisms.
3. Phase II Proposed Changes
We anticipate that reports in Phase II of the RUR Program will be
distributed in the fall of 2010. We are proposing, however, several
changes to the program parameters for Phase II that were finalized in
prior rules. First, we plan to discontinue our use of commercially-
available proprietary episode grouping software. In particular, section
3003 of the ACA requires that the Secretary develop a Medicare-specific
episode grouper by January 1, 2012, the details of which must be made
public. This grouper will address the limitations found in the
proprietary software.
We recognize that episode-specific cost information is meaningful
and actionable for physicians, and we plan to provide such information
in feedback reports after the public grouper software is developed.
Prior to that, we may consider other potential interim options for
grouping to provide such information. We believe that our use of
proprietary episode grouping software in previous phases of the program
had limitations. These software products were not intended for use with
Medicare claims data, and we discovered several problems with the data
outputs. Specifically, the groupers do not work well to create episodes
for beneficiaries with multiple chronic conditions, which is a
significant portion of Medicare beneficiaries.
For example, when a beneficiary with a chronic disease is
hospitalized for an acute condition, that beneficiary most likely also
receives treatments unrelated to the condition for which he or she is
hospitalized, but related to the chronic disease. The groupers, which
are proprietary and often referred to as ``black boxes,'' do not enable
users to understand the coding to determine how to accomodate these
issues. Therefore, CMS had to make several decisions about how to pre-
process the claims data so that the groupers could recognize and
attempt to deal with these issues in the clinical grouping logic. After
report production in Phase I, we discovered several problems with the
pre-processing, which resulted in inaccurate episode cost information
being disseminated.
Until a Medicare-specific episode grouping software is developed,
we plan to produce reports for Phase II that contain per capita cost
information. More specifically, instead of episode-specific cost
information, we plan to provide overall per capita cost information, as
well as per capita cost information for those beneficiaries with five
common chronic diseases: (1) Diabetes, (2) congestive heart failure,
(3) coronary artery disease, (4) chronic obstructive pulmonary disease,
and (5) prostate cancer. This information will not be specific to the
cost of treating the disease itself, but will provide total Part A/B
per capita cost information, as well as service category breakdowns,
for treating the subset of attributed beneficiaries with that disease.
Second, while commenters have been generally supportive of
including PQRI measures in the reports, we propose not including data
from PQRI in the reports. The current support contractor for this
program has only 2007 PQRI data. This was the first year of PQRI, and
participation was still quite low. Because of the low number of
physicians reporting under PQRI, and because providers have the
flexibility to choose which measures to report under

[[Page 40115]]

PQRI, we believe it would be difficult to make meaningful peer
comparisons for purposes of these reports. Instead, for Phase II, we
propose using the claims-based measures developed by CMS in the
Generating Medicare Physician Quality Performance Measurement Results
(GEM) project.\2\ This is a core set of 12 process quality measures
that can be calculated using only administrative claims data. However,
in future phases of the program, we intend to explore the possibility
of linking this program to the HITECH incentive program for meaningful
use of electronic health records, and the group practice reporting
option in PQRI. Both of these programs offer measures and measure sets,
as well as methods of reporting data which may be more conducive to
meaningful peer comparisons among physicians.
---------------------------------------------------------------------------

\2\ http://www.cms.gov/GEM.
---------------------------------------------------------------------------

Third, we propose to distribute reports electronically in Phase II,
by leveraging the infrastructure used to distribute PQRI feedback
reports. This infrastructure will enable groups to utilize an
electronic portal to download their Phase II reports. Individual
practitioners will be able to contact their MACs/fiscal intermediaries
to receive an e-mailed copy of their reports. We have received feedback
from physicians that the reports distributed in Phase I were too long
and cumbersome to manage in hard copy. Our intent is a condensed report
with electronic dissemination that allows for easier navigation. We are
seeking public comment on the above proposals.
4. Implementation of Sections 3003 and 3007 of the ACA
The Affordable Care Act provisions that we mention above contain
several important implementation dates. In addition to developing an
episode grouper by January 1, 2012, we are required to publish the cost
and quality measures we intend to use in determining the payment
modifier to be effective on January 1, 2012. We are also required to
begin implementing the program parameters through rulemaking in 2013.
The payment modifier is effective on January 1, 2015, with a phased
implementation so that all physicians paid under the physician fee
schedule will be subject to the modifier by January 1, 2017. On or
after January 1, 2017, we have the authority to also apply the payment
modifier to other eligible professionals.
In anticipation of implementing sections 3003 and 3007 of the ACA,
we intend to perform extensive data analysis and research, and to seek
stakeholder input on issues related to cost and quality measures so
that we can be prepared to publish, by January 1, 2012, those measures
we intend to use for the payment modifier. We intend for the work done
in determining measures for use in the payment modifier to inform the
continued dissemination of confidential feedback reports to both
individual physicians and physician groups. Specifically, the measures
chosen for use in the payment modifier will be candidates for inclusion
in future phases of the confidential feedback reports.
As mentioned above, Phase I included reports to several hundred
physicians. In Phase II we anticipate disseminating reports to about 40
large physician groups and the approximately 2,000 physicians
affiliated with those groups. We anticipate future phases of the
reports to include additional dissemination to increasing numbers of
practitioners and groups such that virtually every applicable Medicare
practitioner receives a report prior to implementation of the payment
modifier.
5. Comments Sought on Specific Statistical Issues Related to the ACA
Sections 3003 and 3007
We recognize that there are many important decisions to be made
when implementing a program that compares physicians to their peers,
especially when such information can lead to differential payment.
Since the inception of the RUR program, all data have been price
standardized which includes accounting for geographic adjustments. We
have identified important statistical issues in previous rules, and as
we have done in previous rules, CMS seeks input on several of these
topics as they relate to future phases of reports. These include, but
are not limited to: risk adjustment; attribution; benchmarking; peer
groups; minimum case sizes; cost and quality measures; and compositing
methods. To date, the public comments we have received have not led us
to a single methodology to propose for dealing with any of these
issues. Therefore, we do not make formal proposals in this proposed
rule. Specific parameters of the RUR program are based on the most
current information we have available to us. These parameters will
continue to evolve and we will continue to evaluate them as the state
of the art in these areas continues to improve. Therefore, we seek
public comment on these issues.
a. Risk Adjustment
The cost data used in Phase I will be risk adjusted. For the per
capita costs, we used the Hierarchical Condition Categories (HCC) model
developed for risk adjustment in Medicare Advantage plans. This model
takes into account beneficiary characteristics such as age, sex, and
Medicaid status, and then predicts costs for beneficiaries based on
their unique mix of health conditions. Several other socioeconomic
factors, such as the median income per capita in the county where the
physician practices, were used. For the episode costs, we used the risk
adjustment/severity levels in the proprietary grouper software.
The cost data in Phase II are risk adjusted using the HCC model,
but excluding the additional socioeconomic factors such as the median
income per capita in the county where the physician practices, as
mentioned above. Regression analyses indicated that these additional
socioeconomic factors did little to improve the fit of the model, so we
will not include them. And since there are no episode-based costs in
Phase II--only annual per capita costs--the HCC model will be the only
method used. Other methods of risk adjustment exist that we have not
used, such as the CC (complications and comorbidities) and MCC (major
complications and comorbidities) indicators implemented in the 2008 MS-
DRG system.
The quality data included in Phase II will not be risk adjusted
because the GEM measures are all clinical process measures, and it is
generally accepted that such measures need not be risk adjusted.
Beneficiaries should receive the indicated preventive services (for
example, breast cancer screening) regardless of their demographic
characteristics or presence or absence of health conditions.
We seek comment on the appropriate method for risk adjusting cost
data, as well as our reasoning for not risk adjusting clinical process
quality measures.
b. Attribution
Deciding which physician(s) is/are responsible for the care of
which beneficiaries is an important aspect of measurement. CMS must
strike a balance between only attributing cost information to
physicians for the services they personally delivered, and attributing
costs to physicians based on a more encompassing view of the services
provided to each beneficiary so as to encourage better care
coordination and accountability for patient outcomes.
There are several methods that are generally used for attributing
beneficiaries' costs to physicians for the purposes of measuring and
comparing

[[Page 40116]]

performance. In Phase I, we used two different attribution
methodologies. Half of the reports used the ``multiple-proportional''
attribution, in which a beneficiary's costs were summed, and then
divided among the physicians who treated that beneficiary in the same
proportion as their share of evaluation and management (E&M) services
provided. The other half of the reports used the ``plurality-minimum''
method, in which a beneficiary's entire cost (either for the episode or
for the year) was attributed to the physician who performed the
plurality of the E&M services, subject to a minimum percentage (in that
case, 10 percent).
In Phase II reports, we plan to use the ``plurality-minimum''
method with a minimum percentage threshold of E&M services of 20
percent for individual physicians and a minimum percentage threshold of
E&M services of 30 percent of the E&M services for physician group
level reports. These minimum threshold determinations were based on our
analysis of the claims data. We recognize that other attribution
methods exist, which may be either more or less appropriate given the
aspect of care one is measuring. For example, it may be desirable to
attribute the entire cost of a surgical episode to the performing
surgeon. Another method for attributing costs is referred to as
``multiple-even,'' in which the entire beneficiary's cost is attributed
to multiple physicians who treated the beneficiary.
We seek comment on the topic of attribution methodologies,
including both of those we have already used in the program, as well as
others that may or may not be mentioned here.
c. Benchmarking and Peer Groups
Determining the relevant comparisons to make among physicians is
also an important policy aspect of the program. CMS' research conducted
in Phase I of the program indicated that physicians prefer to be
compared only to those physicians most like them (that is, the
narrowest peer group). We recognize the importance of fair comparison,
but are also faced with the challenge that very narrow peer groups are
most often not large enough to make statistically significant
comparisons.
The individual-level reports in both phases of the program have
contained, or will contain, two peer group comparisons: (1) Physicians
in the same specialty in the same geographic area; and (2) physicians
in the same specialty across all 12 geographic areas. In each of these
peer groups, a physician is shown where he or she falls on a
distribution that specifically identified the 10th, 50th, and 90th
percentiles. These benchmarks were finalized on an interim basis in the
CY 2010 proposed rule (74 FR 33589).
In determining applicability for episode measures in Phase I, we
used a statistical reliability test. For per capita measures in Phase
I, a physician had to have 20 or more beneficiaries to be measured and
compared. There was no minimum peer group size requirement.
The original MIPPA mandate requires CMS to make comparisons among
physicians on cost, and gives the Secretary the authority to include
comparisons on quality. The use of quality measures in the program was
finalized in the CY 2010 final rule (74 FR 61846). In Phase II,
comparisons with appropriate peer groups will be made for both cost and
quality. Phase II reports will be provided only to those physicians
that have 30 or more patients for each of the cost measures. For the
quality measures, we plan to use the measure specifications in the GEM
project to define minimum case sizes, which are at least 11
beneficiaries. We also plan to impose a minimum peer group size of 30
in Phase II for both the cost and quality measures. A minimum sample
size of 30 is generally accepted in the research community as the
minimum sample size to represent a group and make comparisons.
We seek comment on the most appropriate and relevant peer groups
for comparison, including the appropriate minimum case sizes and
minimum peer group sizes. We are also interested in methodologies that
can account for small case sizes.
d. Cost and Quality Measures and Compositing Methods
As mentioned above, and in previous rules, section
1848(n)(1)(A)(ii) of the Act gives the Secretary the authority to
include both cost and quality information in the feedback reports. In
Phase I, we chose to use only cost information, and used both per
capita and episode cost measurements. As mentioned above, we previously
finalized the use of quality measures in Phase II (74 FR 61846), but
propose to discontinue our use of episode cost measurements. We have
yet to include any composite measures of cost or quality in the
feedback reports.
Section 3007 of the ACA requires CMS to pay physicians
differentially based on a modifier derived with composites of both
quality and cost measures. Accordingly, we will need to devise a
methodology in the future for compositing cost measures and quality
measures, including considering, among other things, possible
methodologies to develop a single score. In the future, episode-based
cost measures developed using the public Medicare-specific episode
grouper software also may be considered in developing a composite
score. Other domains of measures that may be considered include
patient-level utilization statistics (for example, emergency department
visits per 1,000 patients) and structural measures such as whether a
provider has adopted an electronic health record. We recognize that
measure composites are methodologically and operationally complex and,
therefore, we are seeking comment on this topic.
We plan to continue a phased approach in the future. Although we
will continue to move from phase-to-phase, any substantive changes to
the RUR program will be implemented through rulemaking. We also
anticipate continuing to gather feedback from stakeholders about the
important data-driven policy topics that affect the feedback reports.

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

Section 1848(e)(1)(E) of the Act (as amended by section 3102(a) of
the ACA) extends application of the 1.0 work GPCI floor for services
furnished through December 31, 2010. In addition, section 1848(e)(1) of
the Act (as amended by section 3102(b) of the ACA) specifies that for
CY 2010 and CY 2011, the employee wage and rent portions of the PE GPCI
must reflect only one-half of the relative cost differences for each
locality compared to the national average and includes a ``hold
harmless'' provision for any PFS locality that would receive a
reduction to its PE GPCI resulting from the limited recognition of cost
differences. Section 1848(e)(1) of the Act (as amended by section
3102(b) of the ACA) also requires an analysis of the current methods
and data sources used to determine the relative cost differences in
office rent and employee wages compared to the national average and the
cost share weights assigned to each PE GPCI component: Employee wages,
office rent, and supplies. Finally, section 1848(e)(1) of the Act (as
amended by section 3102(b) of the ACA) requires the Secretary to make
appropriate adjustments to the PE GPCI by no later than January 1,
2012. In addition, section 1848(e)(1) of the Act (as amended by section
10324(c) of the ACA) establishes a 1.0 PE GPCI floor for services
furnished in frontier states effective January 1, 2011. The

[[Page 40117]]

provisions of the ACA related to the GPCIs are discussed in detail in
section II.D. of this proposed rule.

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

Section 1833(g)(5) of the Act (as amended by section 3103 of the
ACA) extends the exceptions process for therapy caps through December
31, 2010. Therapy caps are discussed in detail in section III.A. of
this proposed rule.

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

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

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

1. Amendment to Section 1834(l)(13) of the Act
Section 146(a) of the MIPPA amended section 1834(l)(13)(A) of the
Act to specify that, effective for ground ambulance services furnished
on or after July 1, 2008 and before January 1, 2010, the ambulance fee
schedule amounts for ground ambulance services shall be increased as
follows:
For covered ground ambulance transports which originate in
a rural area or in a rural census tract of a metropolitan statistical
area, the fee schedule amounts shall be increased by 3 percent.
For covered ground ambulance transports which do not
originate in a rural area or in a rural census tract of a metropolitan
statistical area, the fee schedule amounts shall be increased by 2
percent.
Sections 3105(a) and 10311(a) of the ACA further amend section
1834(l)(13)(A) of the Act to extend the payment add-ons described above
for an additional year, such that these add-ons also apply to covered
ground ambulance transports furnished on or after January 1, 2010 and
before January 1, 2011. We are revising Sec. 414.610(c)(1)(i) to
conform the regulations to this statutory requirement. This statutory
requirement is self-implementing. A plain reading of the statute
requires only a ministerial application of the mandated rate increase,
and does not require any substantive exercise of discretion on the part
of the Secretary. For further information regarding the extension of
these payment add-ons, please see Transmittal 706 (Change Request 6972)
dated May 21, 2010.
2. Amendment to Section 146(b)(1) of MIPPA
Section 146(b)(1) of the MIPPA amended the designation of rural
areas for payment of air ambulance services. The statute specified that
any area that was designated as a rural area for purposes of making
payments under the ambulance fee schedule for air ambulance services
furnished on December 31, 2006, shall continue to be

[[Page 40118]]

treated as a rural area for purposes of making payments under the
ambulance fee schedule for air ambulance services furnished during the
period July 1, 2008 through December 31, 2009. Sections 3105(b) and
10311(b) of the ACA amend section 146(b)(1) of MIPPA to extend this
provision for an additional year, through December 31, 2010.
Accordingly, for areas that were designated as rural on December 31,
2006, and were subsequently re-designated as urban, we have re-
established the ``rural'' indicator on the ZIP Code file for air
ambulance services, effective January 1, 2010 through December 31,
2010. We are revising Sec. 414.610(h) to conform the regulations to
this statutory requirement. This statutory requirement is self-
implementing. A plain reading of the statute requires only a
ministerial application of a rural indicator, and does not require any
substantive exercise of discretion on the part of the Secretary. For
further information regarding the extension of this MIPPA provision,
please see Transmittal 706 (Change Request 6972) dated May 21, 2010.
3. Amendment to Section 1834(l)(12) of the Act
Section 414 of the MMA added paragraph (12) to section 1834(l) of
the Act, which specified that in the case of ground ambulance services
furnished on or after July 1, 2004, and before January 1, 2010, for
which transportation originates in a qualified rural area (as described
in the statute), the Secretary shall provide for a percent increase in
the base rate of the fee schedule for such transports. The statute
requires this percent increase to be based on the Secretary's estimate
of the average cost per trip for such services (not taking into account
mileage) in the lowest quartile of all rural county populations as
compared to the average cost per trip for such services (not taking
into account mileage) in the highest quartile of rural county
populations. Using the methodology specified in the July 1, 2004
interim final rule (69 FR 40288), we determined that this percent
increase was equal to 22.6 percent. As required by the MMA, this
payment increase was applied to ground ambulance transports that
originated in a ``qualified rural area''; that is, to transports that
originated in a rural area included in those areas comprising the
lowest 25th percentile of all rural populations arrayed by population
density. For this purpose, rural areas included Goldsmith areas (a type
of rural census tract). Sections 3105(c) and 10311(c) of the ACA amend
section 1834(l)(12)(A) of the Act to extend this rural bonus for an
additional year through December 31, 2010. Therefore, as directed by
the ACA, we are continuing to apply the rural bonus described above (in
the same manner as in previous years), to ground ambulance services
with dates of service on or after January 1, 2010 and before January 1,
2011 where transportation originates in a qualified rural area.
We are revising Sec. 414.610(c)(5)(ii) to conform the regulations
to this statutory requirement. This statutory requirement is self-
implementing. The statute requires a one-year extension of the rural
bonus (which was previously established by the Secretary), and does not
require any substantive exercise of discretion on the part of the
Secretary. For further information regarding the extension of this
rural bonus, please see Transmittal 706 (Change Request 6972) dated May
21, 2010.

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

Section 3107 of the ACA amends section 138(a)(1) of the MIPPA to
continue the 5 percent increase in Medicare payment for specified
mental health services through December 31, 2010. This payment increase
was originally authorized under section 138 of the MIPPA from July 1,
2008 until December 31, 2009. Accordingly, payment for the 24
psychiatry CPT codes in Table 33, representing ``specified services,''
remains increased by 5 percent until December 31, 2010.

Table 33--Specified Mental Health Services Subject to the Five Percent
Increase in Medicare Payment Through December 31, 2010
------------------------------------------------------------------------

-------------------------------------------------------------------------
Office or Other Outpatient Facility
Insight Oriented, Behavior Modifying and/or Supportive Psychotherapy
------------------------------------------------------------------------
90804 (Individual psychotherapy, insight oriented, behavior modifying
and/or supportive, in an office or outpatient facility, approximately
20 to 30 minutes face-to-face with the patient).
90805 (Individual psychotherapy, insight oriented, behavior modifying
and/or supportive, in an office or outpatient facility, approximately
20 to 30 minutes face-to-face with the patient; with medical evaluation
and management services).
90806 (Individual psychotherapy, insight oriented, behavior modifying
and/or supportive, in an office or outpatient facility, approximately
45 to 50 minutes face-to-face with the patient).
90807 (Individual psychotherapy, insight oriented, behavior modifying
and/or supportive, in an office or outpatient facility, approximately
45 to 50 minutes face-to-face with the patient; with medical evaluation
and management services).
90808 (Individual psychotherapy, insight oriented, behavior modifying
and/or supportive, in an office or outpatient facility, approximately
75 to 80 minutes face-to-face with the patient).
90809 (Individual psychotherapy, insight oriented, behavior modifying
and/or supportive, in an office or outpatient facility, approximately
75 to 80 minutes face-to-face with the patient; with medical evaluation
and management services).
------------------------------------------------------------------------
Interactive Psychotherapy
------------------------------------------------------------------------
90810 (Individual psychotherapy, interactive, using play equipment,
physical devices, language interpreter, or other mechanisms of non-
verbal communication, in an office or outpatient facility,
approximately 20 to 30 minutes face-to-face with the patient).
90811 (Individual psychotherapy, interactive, using play equipment,
physical devices, language interpreter, or other mechanisms of non-
verbal communication, in an office or outpatient facility,
approximately 20 to 30 minutes face-to-face with the patient; with
medical evaluation and management services).
90812 (Individual psychotherapy, interactive, using play equipment,
physical devices, language interpreter, or other mechanisms of non-
verbal communication, in an office or outpatient facility,
approximately 45 to 50 minutes face-to-face with the patient).
90813 (Individual psychotherapy, interactive, using play equipment,
physical devices, language interpreter, or other mechanisms of non-
verbal communication, in an office or outpatient facility,
approximately 45 to 50 minutes face-to-face with the patient; with
medical evaluation and management services).
90814 (Individual psychotherapy, interactive, using play equipment,
physical devices, language interpreter, or other mechanisms of non-
verbal communication, in an office or outpatient facility,
approximately 75 to 80 minutes face-to-face with the patient).

[[Page 40119]]

90815 (Individual psychotherapy, interactive, using play equipment,
physical devices, language interpreter, or other mechanisms of non-
verbal communication, in an office or outpatient facility,
approximately 75 to 80 minutes face-to-face with the patient; with
medical evaluation and management services).
------------------------------------------------------------------------
Inpatient Hospital, Partial Hospital or Residential Care Facility
Insight Oriented, Behavior Modifying and/or Supportive Psychotherapy
------------------------------------------------------------------------
90816 (Individual psychotherapy, insight oriented, behavior modifying
and/or supportive, in an inpatient hospital, partial hospital or
residential care setting, approximately 20 to 30 minutes face-to-face
with the patient).
90817 (Individual psychotherapy, insight oriented, behavior modifying
and/or supportive, in an inpatient hospital, partial hospital or
residential care setting, approximately 20 to 30 minutes face-to-face
with the patient; with medical evaluation and management services).
90818 (Individual psychotherapy, insight oriented, behavior modifying
and/or supportive, in an inpatient hospital, partial hospital or
residential care setting, approximately 45 to 50 minutes face-to-face
with the patient).
90819 (Individual psychotherapy, insight oriented, behavior modifying
and/or supportive, in an inpatient hospital, partial hospital or
residential care setting, approximately 45 to 50 minutes face-to-face
with the patient; with medical evaluation and management services).
90821 (Individual psychotherapy, insight oriented, behavior modifying
and/or supportive, in an inpatient hospital, partial hospital or
residential care setting, approximately 75 to 80 minutes face-to-face
with the patient).
90822 (Individual psychotherapy, insight oriented, behavior modifying
and/or supportive, in an inpatient hospital, partial hospital or
residential care setting, approximately 75 to 80 minutes face-to-face
with the patient; with medical evaluation and management services).
------------------------------------------------------------------------
Interactive Psychotherapy
------------------------------------------------------------------------
90823 (Individual psychotherapy, interactive, using play equipment,
physical devices, language interpreter, or other mechanisms of non-
verbal communication, in an inpatient hospital, partial hospital or
residential care setting, approximately 20 to 30 minutes face-to-face
with the patient).
90824 (Individual psychotherapy, interactive, using play equipment,
physical devices, language interpreter, or other mechanisms of non-
verbal communication, in an inpatient hospital, partial hospital or
residential care setting, approximately 20 to 30 minutes face-to-face
with the patient; with medical evaluation and management services).
90826 (Individual psychotherapy, interactive, using play equipment,
physical devices, language interpreter, or other mechanisms of non-
verbal communication, in an inpatient hospital, partial hospital or
residential care setting, approximately 45 to 50 minutes face-to-face
with the patient).
90827 (Individual psychotherapy, interactive, using play equipment,
physical devices, language interpreter, or other mechanisms of non-
verbal communication, in an inpatient hospital, partial hospital or
residential care setting, approximately 45 to 50 minutes face-to-face
with the patient; with medical evaluation and management services).
90828 (Individual psychotherapy, interactive, using play equipment,
physical devices, language interpreter, or other mechanisms of non-
verbal communication, in an inpatient hospital, partial hospital or
residential care setting, approximately 75 to 80 minutes face-to-face
with the patient).
90829 (Individual psychotherapy, interactive, using play equipment,
physical devices, language interpreter, or other mechanisms of non-
verbal communication, in an inpatient hospital, partial hospital or
residential care setting, approximately 75 to 80 minutes face-to-face
with the patient; with medical evaluation and management services).
------------------------------------------------------------------------

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

The ACA included a self-implementing provision relating to SNFs.
Section 3108 adds physician assistants (PAs) to the list of
practitioners (that is, physicians, nurse practitioners (NPs), and
clinical nurse specialists) that can perform the required initial
certification and periodic recertifications under section 1814(a)(2)(B)
of the Act with respect to the SNF level of care. Accordingly, we are
proposing to make appropriate revisions to include PAs in Sec.
424.20(e)(2), in which we refer to NPs, clinical nurse specialists, and
PAs collectively as ``physician extenders.''

I. Section 3111: Payment for Bone Density Tests

Section 1848(b) of the Act (as amended by section 3111 of the ACA)
changes the payment calculation for dual-energy X-ray absorptiometry
(DXA) services described by two specified DXA CPT codes for CYs 2010
and 2011. This provision requires payment for these services at 70
percent of the product of the CY 2006 RVUs for these DXA codes, the CY
2006 conversion factor (CF), and the geographic adjustment for the
relevant payment year.
Effective January 1, 2007, the CPT codes for DXA services were
revised. The former DXA CPT codes 76075 (Dual energy X-ray
absorptiometry (DXA), bone density study, one or more sites; axial
skeleton (e.g., hips, pelvis, spine)); 76076 (Dual energy X-ray
absorptiometry (DXA), bone density study, one or more sites;
appendicular skeleton (peripheral) (e.g., radius, wrist, heel)); and
76077 (Dual energy X-ray absorptiometry (DXA), bone density study, one
or more sites; vertebral fracture assessment) were deleted and replaced
with new CPT codes 77080, 77081, and 77082 that have the same
respective code descriptors as the predecessor codes. Section 1848(b)
of the Act (as amended by section 3111 of the ACA) specifies that the
revised payment applies to two of the predecessor codes (CPT codes
76075 and 76077) and ``any succeeding codes,'' which are, in this case,
CPT codes 77080 and 77082.
Section 1848(b) (as amended by section 3111 of the ACA) revises the
payment for CPT codes 77080 and 77082 during CY 2010 and CY 2011. We
have provided payment in CY 2010 under the PFS for CPT codes 77080 and
77082 at the specified rates. We note that the RVUs included in
Addendum B to this proposed rule reflect the RVUs that result from
application of this statutory provision and the proposed CY 2011
conversion factor. Because the statute specifies a payment amount for
these services as described previously, we imputed RVUs for CY 2011 to
include in Addendum B that would provide the specified payment amount
for these services when multiplied by the CY 2011 CF. Specifically, we
divided the payment amount based on the statutory requirements by the
CY

[[Page 40120]]

2011 CF for this proposed rule, and distributed the imputed total RVUs
across the work, PE, and malpractice components proportionately to
their CY 2006 distribution. Therefore, these imputed RVUs for CPT codes
77080 and 77082 are displayed in Addendum B to this proposed rule.

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

Section 1833(a)(1)(K) of the Act (as amended by section 3114 of the
ACA) increases the amount of Medicare payment made under the PFS for
certified nurse-midwife (CNM) services. Currently, section
1833(a)(1)(K) of the Act specifies that the payment amount for CNM
services is 80 percent of the lesser of the actual charge or 65 percent
of the PFS amount. Under section 1833(a)(1)(K) of the Act (as amended
by section 3114 of the ACA), effective for services furnished on or
after January 1, 2011, Medicare payment for CNM services is increased
to 100 percent of the PFS amount (or 80 percent of the actual charge if
that is less). We are proposing to revise our regulations at Sec.
414.54 (Payment for certified nurse-midwives' services) accordingly to
reflect the increased payment for CNM services effective for services
furnished on or after January 1, 2011.
Although CNMs are currently paid under Medicare Part B for their
professional services, there is no mention of CNMs under the regulatory
provision that lists the providers and suppliers of services to whom
payment is made under the Medicare Part B program. Accordingly, we are
proposing to make a technical revision to Sec. 410.150 (To whom
payment is made) to specify that Medicare Part B pays CNMs for
professional services in all settings, as well as services and supplies
furnished incident to those services.
CNMs are authorized under the statute to be paid directly for
services that they are legally authorized to furnish under State law
and that are of the type that would otherwise be covered if furnished
by a physician or incident to a physician's services. Additionally,
there is no requirement under the CNM benefit for physician oversight
or supervision. Accordingly, CNMs are authorized to personally furnish
diagnostic tests that fall under their State scope of practice without
regard to the levels of physician supervision required under the
diagnostic tests benefit. Therefore, we are amending Sec. 410.32(b)(2)
(Exceptions to the levels of physician supervision required for
diagnostic tests) to include CNMs who furnish diagnostic tests that
fall within their State scope of practice.

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

Section 416 of the MMA established a reasonable cost payment for
outpatient clinical diagnostic laboratory tests furnished by hospitals
with fewer than 50 beds that are located in qualified rural areas for
cost reporting periods beginning during the 2-year period beginning on
July 1, 2004.
Section 105 of the Tax Relief and Health Care Act of 2006 (Pub. L.
109-432) (TRHCA) extended the 2-year period in section 416(b) of the
MMA for an additional cost-reporting year.
Section 107 of the Medicare, Medicaid, and SCHIP Extension Act of
2007 (Pub. L. 110-173) (MMSEA) extended the time period for cost
reporting periods beginning on July 1, 2004, and ending on June 30,
2008. For some hospitals with cost reports that began as late as June
30, 2008, this extension affected services performed as late as June
29, 2009, because this was the date those cost reports would have
closed.
Section 3122 of the ACA reinstitutes reasonable cost payment for
clinical diagnostic laboratory tests performed by hospitals with fewer
than 50 beds that are located in qualified rural areas as part of their
outpatient services for cost reporting periods beginning on or after
July 1, 2010, through June 30, 2011. For some hospitals with cost
reports that begin as late as June 30, 2011, this reinstitution of
reasonable cost payment could affect services performed as late as June
29, 2012, because this is the date those cost reports will close.

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

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

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

1. Adjustment in Practice Expense To Reflect Higher Presumed
Utilization
Section 1848(b)(4)(C) of the Act (as added by section 3135(a) of
the ACA) adjusts the utilization rate for expensive diagnostic imaging
equipment to 75 percent in the methodology for establishing the PE of
the associated procedures. As discussed further in section II.A.3.a. of
this proposed rule, effective January 1, 2011, we are proposing to
assign a 75 percent equipment utilization rate assumption to expensive
diagnostic imaging equipment used in services described by the HCPCS
codes displayed in Table 4.
In the CY 2010 PFS final rule with comment period (74 FR 61755), we
finalized a policy to increase the utilization rate to 90 percent for
expensive diagnostic equipment priced at more than $1 million (CT and
MRI scanners), providing for a 4-year transition to the 90 percent
utilization rate from the CY 2009 utilization rate of 50 percent.
Therefore, in CY 2010 we were transitioning to a 90 percent equipment
utilization rate assumption, applying a 25/75 blend of the new and old
PE RVUs, respectively, for the associated procedures. Section
1848(b)(4)(C) of the Act (as added by section 3135(a) of the ACA) does
not provide for any further transition and, therefore, we are assigning
a 75 percent equipment utilization rate assumption to CT and MRI
scanners, effective January 1, 2011. Under section 1848(b)(4) of the
Act (as amended by section 3135(a) of the ACA), this change in the
equipment utilization rate assumption from CY 2010 to CY 2011 is not
budget neutral under the PFS. The equipment utilization rate assumption
remains at 50 percent for all other equipment included in the PFS PE
methodology.

[[Page 40121]]

2. Adjustment in Technical Component ``Discount'' on Single-Session
Imaging to Consecutive Body Parts
Section 1848(b)(4)(D) of the Act (as added by section 3135(a) of
the ACA) increases the established PFS multiple procedure payment
reduction (MPPR) for the technical component (TC) of certain single-
session imaging services to consecutive body areas from 25 to 50
percent, effective July 1, 2010, and section 1848(c)(2)(B)(v)(VI) of
the Act (as added by section 3135(b) of the ACA) exempts this change
from the PFS budget neutrality provision. This policy is discussed in
detail in section II.C.4 of this proposed rule.
Effective January 1, 2006, we adopted an MPPR of 25 percent for the
technical component (TC) of certain diagnostic imaging procedures,
applied to the second and subsequent services when more than one
service in one of 11 imaging families, defined by imaging modality and
contiguous body area, is furnished in a single session (70 FR 70261
through 70263). The established imaging MPPR applies to TC-only
services and to the TC of global services. It does not apply to
professional component (PC) services. Under this policy, full payment
was made for the TC of the highest priced procedure, while payment was
made at 75 percent of the TC for each additional procedure. As of July
1, 2010, and continuing in CY 2011, payment is made at 50 percent of
the TC for each additional procedure, consistent with the statutory
provision.

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

1. Payment Rules for Power Wheelchairs
Durable medical equipment (DME) is defined at section 1861(n) of
the Act and includes wheelchairs necessary for use in the patient's
home. Section 1861(n) provides that wheelchairs included in the
definition of DME ``may include a power-operated vehicle that may be
appropriately used as a wheelchair, but only where the use of such a
vehicle is determined to be necessary on the basis of the individual's
medical and physical condition.'' The general Medicare payment rules
for DME are set forth in section 1834(a) of the Act and 42 CFR part
414, subpart D of our regulations. Section 1834(a)(1) of the Act and
Sec. 414.210(a) of our regulations establish that the Medicare payment
for a DME item is generally equal to 80 percent of either the lower of
the actual charge or the fee schedule amount for the item. The
beneficiary coinsurance is generally equal to 20 percent of either the
lower of the actual charge or the fee schedule amount for the item once
the deductible is met.
For Medicare payment purposes, power wheelchairs or power-driven
wheelchairs are classified under various codes in the Healthcare Common
Procedure Coding System (HCPCS) based on the level of performance and
functional characteristics of each power wheelchair that accommodate
the specific needs of patients. Power wheelchairs classified under
performance Groups 1 through 3 are covered under Medicare for use in
the patient's home. Power wheelchair groups were established in 2006
with the release of the Power Mobility Device Coding Guidelines
published by the Durable Medical Equipment Regional Carriers (DMERCs)
currently called the Durable Medical Equipment Medicare Administrative
Contractors (DME MACs). The DMEPOS quality standards define certain
power wheelchairs falling as ``complex, rehabilitative'' power
wheelchairs, and these ``complex, rehabilitative'' power wheelchairs
are treated as a separate product category for the purpose of
implementing the DMEPOS Competitive Bidding Program (CBP) mandated by
section 1847(a) of the Act. In both the quality standards and the
DMEPOS competitive bidding program, complex, rehabilitative power
wheelchairs are defined or identified as power wheelchairs classified
as Group 2 power wheelchairs with power options that can accommodate
rehabilitative features (for example, tilt in space) or Group 3 power
wheelchairs.
With the exception of power wheelchairs furnished during calendar
year 1990, power wheelchairs have been paid under the capped rental
category of DME since January 1, 1989. The payment rules for capped
rental DME are provided at section 1834(a)(7) of the Act and Sec.
414.229 of our regulations. Payment for these items is generally on a
monthly rental basis, with rental payments capped at 13 months. After a
13-month period of continuous use during which rental payments are
made, the statute and regulations require that the supplier transfer
title to the wheelchair to the beneficiary. In addition, effective for
power wheelchairs furnished on or after January 1, 1***, section
1834(a)(7) of the Act, as amended by section 4152(c)(2) (D) of the
Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508), mandates
that the supplier of the power wheelchair offer the patient the option
to purchase rather than rent the item. Since 1991, over 95 percent of
Medicare beneficiaries have exercised this lump-sum purchase option for
power wheelchairs.
Consistent with payment for other DMEPOS items, Sec. 414.210(f)(1)
permits payment for replacement of capped rental DME if the item has
been in continuous use for the equipment's reasonable useful lifetime
or is lost, stolen, or irreparably damaged. Section 414.210(f)(1)
states the reasonable useful lifetime for equipment is determined
through program instructions. In the absence of CMS program
instructions, the carrier may determine the reasonable useful lifetime
for equipment, but in no case can it be less than 5 years. Computation
is based on when the equipment is delivered to the beneficiary, not the
age of the equipment. If the beneficiary elects to obtain a new capped
rental item after the reasonable useful lifetime, a new 13-month rental
payment period would begin for the new equipment in accordance with the
requirements of Sec. 414.229.
Section 1834(a)(7)(A) of the Act, Sec. 414.229(b) and (c) set
forth the current fee schedule amounts for capped rental items.
Pursuant to section 1834(a)(7)(A)(i)(II) of the Act and Sec.
414.229(b), the current rental fee schedule amounts for months 1 thru 3
of the 13-month capped rental period are calculated to pay 10 percent
of the average of allowed purchase price for the item. The rental fee
schedule amounts for months 4 thru 13 of the 13-month capped rental
period are calculated to pay 7.5 percent of the average of allowed
purchase price for the item. The purchase price is determined
consistent with section 1834(a)(8) of the Act and Sec. 414.229(c) and
Sec. 414.220(e) and (f) and is updated by the covered item update, as
required by section 1834(a)(14) of the Act and Sec. 414.229(d). The
current purchase price amount for power wheelchairs acquired on a lump
sum purchase basis is 100 percent of the purchase price calculated for
the item when rented, as discussed above.
2. Revision of Payment Amounts for Power Wheelchairs
Section 3136(a) of the ACA made several changes to section
1834(a)(7)(A) of the Act. Section 3136(a)(1) of the ACA amends section
1834(a)(7)(A) of the Act by adding a new subclause (III) to section
1834(a)(7)(A)(i) of the Act. Subclause (III) revises the capped rental
fee schedule amounts for all power wheelchairs, modifying the current
payment structure of 10 percent of the purchase price for months 1 thru
3 and 7.5 percent of that purchase price for months 4 through 13 that
was discussed above. The rental fee schedule amount for months 1 thru 3
of the 13-month

[[Page 40122]]

capped rental period for power wheelchairs is revised to 15 percent of
the purchase price for the item. The rental fee schedule amounts for
months 4 thru 13 of the 13-month capped rental period for power
wheelchairs is revised to 6 percent of the purchase price for the item.
The statutory provision does not change the methodologies used to
calculate and subsequently update of the purchase price of power
wheelchairs. Therefore, the methodology described above for determining
the purchase price amounts will continue to apply.
Pursuant to section 3136(c) of the ACA, the changes made by section
3136(a) of the ACA apply to power-driven wheelchairs furnished on or
after January 1, 2011.
Furthermore, as discussed above, section 3136(c)(2) of the ACA
states that the changes made by section 3136(a), including the new
payment structure for power wheelchairs, do not apply to payment made
for items and services furnished pursuant to contracts entered into
under section 1847 of the Act for the DMEPOS CBP prior to January 1,
2011 which applies to the implementation of the first round of the
DMEPOS CBP. As a result, contract suppliers furnishing power
wheelchairs in competitive bidding areas (CBA) pursuant to contracts
entered into prior to January 1, 2011 as part of Round 1 of the DMEPOS
CBP will continue to be paid based under the current regulations using
10 percent of the purchase price for months 1 through 3 and 7.5 percent
for each of the remaining months. As a result, we are proposing to make
changes to Sec. Sec. 414.202, 414.229 and 414.408 to reflect these
statutory requirements.
3. Elimination of Lump Sum Payment for Standard Power Wheelchairs
Section 3136(a)(2) of the ACA further amends section
1834(a)(7)(A)(iii) by inserting the term ``complex rehabilitative''
before the term ``power-driven wheelchairs.'' As a result, section
1834(a)(7)(A)(iii) of the Act now extends the lump sum purchase option
only to complex rehabilitative power wheelchairs. As discussed above,
``complex rehabilitative power wheelchairs are power wheelchairs that
are classified as: (1) Group 2 power wheelchairs with power options
that can accommodate rehabilitative features (for example, tilt in
space), or (2) Group 3 power wheelchairs. We consider all other power
wheelchairs to be standard power wheelchairs. Therefore, we propose to
interpret the language ``complex rehabilitative'' in section
1834(a)(7)(A) of the Act consistent with this longstanding
classification. As a result, the changes made by section 3136 to
section 1834(a)(7)(A)(iii) eliminate the lump sum purchase option for
standard power wheelchairs.
Pursuant to section 3136(c) of the ACA, the changes made to section
1834(a)(7)(A)(iii) of the Act apply to power-driven wheelchairs
furnished on or after January 1, 2011. The lump sum purchase payment
option will no longer extend to standard power driven wheelchairs
furnished on or after January 1, 2011.
Furthermore, section 3136(c)(2) of the ACA states that the changes
made by section 3136(a), including the limitation of the lump sum
purchase payment option to complex, rehabilitative power wheelchairs,
do not apply to payment made for items and services furnished pursuant
to contracts entered into under section 1847 of the Act for the DMEPOS
CBP prior to January 1, 2011 pursuant to the implementation of the
first round of the DMEPOS CBP. As a result, contract suppliers
furnishing power wheelchairs in CBAs pursuant to contracts entered into
prior to January 1, 2011 as part of Round 1 of the DMEPOS CBP must
continue to offer beneficiaries the lump sum purchase option for all
power wheelchairs.
We are proposing changes to Sec. Sec. 414.229 and 414.408 to
reflect our interpretation of these statutory requirements.

O. Section 3139: Payment for Biosimilar Biological Products

Section 3139 of the ACA amends section 1847A of the Act to provide
for Medicare payment of biosimilar biological products using the
average sale price (ASP) methodology.
Section 1847A of the Act, as amended by the ACA, defines a
biosimilar biological product as a biological product approved under an
abbreviated application for a license of a biological product that
relies in part on data or information in an application for another
biological product licensed under section 351 of the Public Health
Service Act (PHSA). The reference biological product for a biosimilar
biological product is defined by the statute as the biological product
licensed under such section 351 of the PHSA that is referred to in the
application of the biosimilar biological product.
The ACAct also amends section 1847A of the Act to specify that the
payment amount for a biosimilar biological product will be the sum of
the following two amounts: the ASP of all NDCs assigned to the
biosimilar biological drug product determined using the methodology in
section 1847A(b)(6) of the Act, and 6 percent of the payment amount
determined using the methodology in section 1847A(b)(4) of the Act for
the corresponding reference biological product. Sections 7001 to 7003
of the ACA also established a licensing pathway for biosimilar
biological products, and in accordance with the statute, the effective
date for Medicare ASP statutory provisions is July 1, 2010. We are
proposing conforming regulation text changes at Sec. 414.902 and Sec.
414.904 and we welcome comments on these conforming changes.
We anticipate that as biosimilar biological drug products are
approved, we will receive ASP sales data through the ASP data
submission process and publish national payment amounts in a manner
that is consistent with our current approach to other drugs and
biologicals that are paid under section 1847A of the Act and set forth
in 42 CFR part 414 subpart J. Until we have collected sufficient sales
data, as reported by manufacturers, payment limits will be determined
in accordance with the provisions in section 1847A(c)(4) of the Act. If
no manufacturer data is collected, prices will be determined by local
contractors using any available pricing information, including provider
invoices. More information about the ASP payment methodology and the
data submission process may be found on the CMS Web site at http://www.cms.gov/McrPartBDrugAvgSalesPrice/01_overview.asp and in this
rule, in the section VI.A.1. of this proposed rule, ``Carry Over'' ASP.

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

1. ESRD Market Basket Discussion
Section 3401(h) of the ACA amended section 1881(b)(14)(F) of the
Act and directs the Secretary to annually increase payment amounts
established under the ESRD market basket. Please see section VI.E. of
this proposed rule for a detailed description of these provisions.
2. Productivity Adjustment Regarding Ambulatory Surgical Center,
Ambulance, Clinical Laboratory and DMEPOS Fee Schedules
Section 3401 of the ACA requires that the update factor under
certain payment systems be annually adjusted by changes in economy-wide
productivity.

[[Page 40123]]

The year that the productivity adjustment is effective varies by
payment system. Specifically, section 3401 of the ACA requires that in
CY 2011 (and in subsequent years) update factors under the ambulatory
surgical center (ASC) payment system, the ambulance fee schedule (AFS),
and the clinical laboratory fee schedule (CLFS) be adjusted by changes
in economy-wide productivity. Section 3401(a) amends section
1886(b)(3)(B) of the Act to add clause (xi)(II) which sets forth the
definition of this productivity adjustment. The statute defines the
productivity adjustment to be equal to the 10-year moving average of
changes in annual economy-wide private nonfarm business multifactor
productivity (MFP) (as projected by the Secretary for the 10-year
period ending with the applicable fiscal year, year, cost reporting
period, or other annual period) (the ``MFP adjustment''). Please see
http://www.bls.gov/mfp for more information on MFP. This is the link to
the Bureau of Labor Statistics (BLS) historical published data on the
measure of MFP.
The projection of MFP will be produced by an economic forecasting
firm, currently HIS Global Insight (IGI). In order to generate a
forecast of MFP, IGI would replicate the MFP measure calculated by the
BLS using a series of proxy variables derived from the IGI US Macro-
economic models. These models take into account a very broad range of
factors that influence the total US economy. IGI forecasts the
underlying proxy components such as Gross Domestic Product (GDP),
capital, and labor inputs required to estimate MFP, and will combine
those projections according to the BLS methodology. For more
information on the BLS measure of MFP, including technical notes,
visit: http://www.bls.gov/mfp/. Table 34 lists the MFP component series
employed by the BLS and the corresponding concepts estimated by IGI.

Table 34--Multifactor Productivity Component Series Employed by the
Bureau of Labor Statistics and HIS Global Insight
------------------------------------------------------------------------
BLS Series IGI Series
------------------------------------------------------------------------
Real value-added output, constant 2000 Real gross non-farm value added
dollars. output, chained 2005 dollar
billions.
Private non-farm business sector labor Hours of all persons-private
input; 2000=100.00. nonfarm business sector;
1992=1.0.
Aggregate capital inputs; 2000=100.00.. Real effective capital stock
used for full employment GDP,
chained 2005 dollar billions.
------------------------------------------------------------------------

To identify the appropriate proxy variables, IGI compared the
historical growth rates of the BLS and IGI components listed above and
found they were consistent across all series and therefore suitable
proxies for calculating MFP. IGI would use the growth rates of the
forecasted IGI concepts to project BLS' components of MFP, and derive
the MFP adjustment that would be used under section 3401 to adjust the
updates for the ASC payment system, the AFS, and the CLFS.
As discussed below, for each of these payment systems, the update
factor is the percentage increase (or percentage decrease for the CLFS)
in the consumer price index for all urban consumers (CPI-U) (referred
to as the ``CPI-U update factor'').
The statute for all three payment systems generally states that the
Secretary shall reduce the CPI-U adjustment by the MFP adjustment. In
order to calculate the MFP-adjusted updates to these payment systems,
the MFP percentage adjustment would be subtracted from the CPI-U update
factor (for the most recent 12-month period beginning with July 1 of
the previous year and ending with June 30 of the current year). For
example, if the update factor (CPI-U) is 4.0 percent, and the projected
MFP is 1.3 percent, the MFP-Adjusted update factor (or MFP-Adjusted
CPI-U for these payment systems) would be a 2.7 percent increase.
The period on which the CPI-U is calculated is for the most recent
12-month period beginning with July 1 of the previous year and ending
with June 30 of the current year, and we propose that the end of the
10-year moving average of changes in the MFP should coincide with the
end of this CPI-U timeframe. Since the CPI-U update factor is reduced
by the MFP adjustment to determine the annual update for these payment
systems, we believe it is appropriate for the numbers associated with
both parts of the calculation to be projected as of the same end date
(in this case, the end date of the time frame for both estimates would
be June 30th of the year preceding the update year itself). In this
way, changes in market conditions are aligned. We will round the final
annual adjustment to the one-tenth of one percentage point level up or
down as applicable according to conventional rounding rules (that is,
if the number we are rounding is followed by 5, 6, 7, 8, or 9, we will
round the number up; if the number we are rounding is followed by 0, 1,
2, 3, or 4, we will round the number down).
Below, we provide more information on the statutory requirements
and proposals for each of the three payment systems. The statutory
requirements for the ASC payment system will also be addressed in the
CY 2011 OPPS/ASC proposed rule. We note that, in this proposed rule, we
are describing the legislative provision and outlining the methodology
we propose to use to calculate and apply the MFP adjustment to
determine the annual updates for ASCs, the AFS, and the CLFS for CY
2011 and each subsequent year. We will set forth the final MFP
adjustment for CY 2011 in the CY 2011 PFS final rule. Once we finalize
the methodology for determining and applying the MFP adjustment to the
CPI-U update factors for these payment systems, for subsequent calendar
years, as we have done in the past, we intend to notify the general
public of the annual update to the AFS and CLFS via CMS instruction and
on the CMS Web site. These notifications would set forth both the CPI-U
percentage increase or decrease and the MFP adjustment for the
applicable year. For ASCs, for subsequent calendar years, as we have
done in the past, we would continue to notify the general public of the
annual update to the ASC payment amount via OPPS/ASC rulemaking.
We welcome comments on these proposals.
a. Ambulatory Surgical Centers (ASCs)
Section 1833(i)(2)(C) of the Act requires that, if the Secretary
has not updated the ASC payment amounts in a calendar year, the payment
amounts shall be increased by the percentage increase in the CPI-U as
estimated by the Secretary for the 12-month period ending with the
midpoint of the year involved. Because the Secretary does update the
ASC payment amounts annually, we adopted a policy, which we codified at
Sec. 416.171(a)(2)(ii), to update the ASC conversion factor using the
CPI-U for CY 2010 and subsequent calendar years. Therefore, the annual

[[Page 40124]]

update to the ASC payment system is the CPI-U (referred to as the CPI-U
update factor). Section 3401(k) of the ACA amends section 1833(i)(2)(D)
of the Act by adding a new clause (v) which requires that ``any annual
update under [the ASC payment] system for the year * * * shall be
reduced by the productivity adjustment described in section
1886(b)(3)(B)(xi)(II)'' (which we refer to as the MFP adjustment)
effective with the calendar year beginning January 1, 2011. Section
3401(k) of the ACA states that application of the MFP adjustment to the
ASC payment system may result in the update to the ASC payment system
being less than zero for a year and may result in payment rates under
the ASC payment system for a year being less than such payment rates
for the preceding year.
In accordance with section 1833(i)(2)(C)(i) of the Act, before
applying the MFP adjustment, the Secretary first determines the
``percentage increase'' in the CPI-U, which we interpret cannot be a
negative number. Thus, in the instance where the percentage change in
the CPI-U for a year is negative, we propose to hold the CPI-U update
factor for the ASC payment system to zero. Section 1833(i)(2)(D)(v) of
the Act, as added by section 3401(k) of the ACA, then requires that the
Secretary reduce the CPI-U update factor (which would be held to zero
if the CPI-U percentage change is negative) by the MFP adjustment, and
states that application of the MFP adjustment may reduce this
percentage change below zero. If the application of the MFP adjustment
to the CPI-U percentage increase would result in a MFP-adjusted CPI-U
update factor that is less than zero, then the annual update to the ASC
payment rates would be negative and payments would decrease relative to
the prior year.
Table 35 provides illustrative examples of how the MFP would be
applied to the ASC payment system. These examples show the implication
of a positive CPI-U update factor with a smaller MFP, a positive CPI-U
update factor with a large MFP, and a CPI-U update factor of 0. We
discuss the application of the MFP to the CPI-U update factor for the
ASC payment system under the OPPS/ASC CY 2001 proposed rule (1504-P),
which will be published around the same time as this proposed rule.
Comments on the specific mathematical calculation of the MFP should be
made to this PFS proposed rule. Comments on the application of the MFP
to the CPI-U update factor under the ASC payment system should be made
to the OPPS/ASC CY 2011 proposed rule (1504-P).

Table 35--Multifactor Productivity Adjusted Payment Update: Illustrative
Example
------------------------------------------------------------------------
MFP-Adjusted CPI-U
CPI-U (percent) MFP (percent) update factor
(percent)
------------------------------------------------------------------------
4.0 1.3 2.7
4.0 4.7 -0.7
0.0 0.2 -0.2
------------------------------------------------------------------------

b. Ambulance Fee Schedule (AFS)
In accordance with section 1834(l)(3)(B) of the Act, the AFS is
required to be increased each year by the percentage increase in the
CPI-U (U.S. city average) for the 12-month period ending with June of
the previous year. We refer to this update as the Ambulance Inflation
Factor (AIF). Section 3401(j) of the ACA amends section 1834(l)(3) of
the Act to add a new subparagraph (C) which states that, for CY 2011
and each subsequent year, after determining the percentage increase
under section 1834(l)(3)(B) (that is, the CPI-U percentage increase, or
AIF), the Secretary shall reduce such percentage increase by the MFP
adjustment described in section 1886(b)(3)(B)(xi)(II) (as discussed
above). Section 3401(j) further amends section 1834(l)(3) to state that
the application of subparagraph (C) (that is, the reduction of the CPI-
U percentage increase by the MFP adjustment) may result in that
percentage increase being less than zero for a year, and may result in
payment rates for a year being less than such payment rates for the
preceding year.
In accordance with section 1834(l)(3) of the Act as amended by
section 3401(j) of the ACA, before applying the MFP adjustment, the
Secretary first determines the ``percentage increase'' in the CPI-U,
which we interpret cannot be a negative number. Thus, in the instance
where the percentage change in the CPI-U for a year is negative, we
propose to hold the AIF to zero. The statute then requires that the
Secretary reduce the CPI-U percentage increase (which would be held to
zero if the CPI-U percentage change is negative) by the MFP adjustment,
and states that application of the MFP adjustment may reduce this
percentage increase below zero. If the application of the MFP
adjustment to the CPI-U percentage increase would result in an MFP-
adjusted AIF that is less than zero, then the annual update to the AFS
would be negative and payments would decrease relative to the prior
year.
Table 36 provides illustrative examples of how the MFP would be
applied to the AFS. Finally, we propose to revise Sec. 414.610(f) to
require that the AIF be reduced by the MFP adjustment as required by
the statute in determining the annual update under the ambulance fee
schedule for CY 2011 and each subsequent year, and to revise Sec.
414.620 to state that changes in payment rates resulting from the
incorporation of the AIF and the MFP adjustment will be announced by
CMS by instruction and on the CMS Web site, as we discussed above.

Table 36--Examples of the Application of the Multifactor Productivity
Adjustment to the Ambulance Fee Schedule
------------------------------------------------------------------------
A B C D
CPI-UA AIF MFP Final update
rounded
------------------------------------------------------------------------
2.0% 2.0% 1.3% 0.7%
0.0% 0.0% 1.3% -1.3%
-2.0% 0.0% 1.3% -1.3%
1.0% 1.0% 1.3% -0.3%
------------------------------------------------------------------------

c. Clinical Laboratory Fee Schedule
Section 1833(h)(2)(A)(i) of the Act, as amended by section 3401(l)
of the ACA, requires the Secretary to annually adjust the CLFS ``by a
percentage increase or decrease equal to the percentage increase or
decrease in the Consumer Price Index for All Urban Consumers (United
States city average minus, for each of the years 2009 through 2010, 0.5
percentage points.'' Therefore, the

[[Page 40125]]

adjustment to the fee schedule can be an increase or a decrease.
Section 3401(l) of the ACA also adds new clause (iv) that applies
in CY 2011 and each subsequent year. This clause requires the Secretary
to reduce the adjustment in clause (i): (1) By the MFP adjustment
described in section 1886(b)(3)(B)(xi)(II) for 2011 and each subsequent
year and (2) by 1.75 percentage points for each of 2011 through 2015
(the ``percentage adjustment''). However, section 3401(l) of the ACA
states that the MFP adjustment will not apply in a year where the
adjustment to the fee schedule determined under clause (i) is zero or a
percentage decrease for a year. Further, the application of the MFP
adjustment may not result in an adjustment to the fee schedule under
clause (i) of less than zero for a year.
Therefore, we are proposing to apply the MFP adjustment as follows:
If the CPI-U update factor is positive, it would be
reduced by the MFP. However, if application of the MFP would result in
a negative update, the update would be held to zero.
If the CPI-U update factor is zero or negative, the MFP
adjustment would not be applied.
Section 3401(l) of the ACA also states that the application of the
percentage adjustment may result in an adjustment to the fee schedule
under clause (i) being less than zero for a year and may result in
payment rates for a year being less than such payment rates for the
preceding year. Therefore, we are proposing to apply the percentage
reduction of 1.75 percentage points to any adjustment to the fee
schedule under the CLFS as directed by Section 3401(l) of the ACA.
Table 37 provides illustrative examples of how these adjustments
would be applied to fees under the CLFS.

Table 37--Examples of the Application of the Multifactor Productivity Adjustment to the Clinical Lab Fee
Schedule
----------------------------------------------------------------------------------------------------------------
Productivity adjusted Resultant change to
update CLFS
CPI-U MFP ----------------------- (-1.75%) Percentage ---------------------
Greater of 0.0% or point reduction
(Col.A)-(Col.B) Col.C-Col.D
A B C D E
----------------------------------------------------------------------------------------------------------------
2.0% 1.3% 0.7% -1.75% -1.05%
0.0% N/A 0.0% -1.75% -1.75%
-2.0% N/A 0.0% -1.75% -1.75%
----------------------------------------------------------------------------------------------------------------

d. DMEPOS Fee Schedule
Sections 1834(a)(14), 1834(h)(4), and 1842(s)(1) of the Act mandate
annual updates to the fee schedule amounts established in accordance
with these respective sections for covered items of durable medical
equipment defined in section 1834(a)(13) of the Act, prosthetic
devices, orthotics, and prosthetics defined in section 1834(h)(4)(B)
and (C) of the Act, and parenteral and enteral nutrients, equipment,
and supplies described in section 1842(s)(2)(D) of the Act. The annual
updates for 2011 for these sections are based on the percentage
increase in the CPI-U for the 12-month period ending with June 2010.
The annual updates for years subsequent to 2011 are based on the
percentage increase in the CPI-U for the 12-month period ending with
June of the previous year (that is, June 2011 for 2012, June 2011 for
2013, etc.). Since 1990 for durable medical equipment, prosthetic
devices, orthotics, and prosthetics and 2003 for parenteral and enteral
nutrients, equipment, and supplies, these annual fee schedule updates
have been implemented on an annual basis through program instructions.
Section 3401(m) of the ACA amends section 1834(a)(14) of the Act to
add a new subparagraph (L) which provides that, for CY 2011 and each
subsequent year, the fee schedule update factor based on the CPI-U for
the 12-month period ending with June of the previous year is to be
reduced by the MFP adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act (as discussed above). Section 3401(m)
of the ACA further amends section 1834(a)(14) of the Act to state that
the application of subparagraph (L) (that is, the reduction of the CPI-
U percentage increase by the MFP adjustment) may result in that
percentage increase being less than zero for a year, and may result in
payment rates for a year being less than such payment rates for the
preceding year.
Section 3401(n) of ACA amends section 1834(h)(4)(A) of the Act to
add a new clause (xi) which provides that, for CY 2011 and each
subsequent year, the fee schedule update factor based on the CPI-U for
the 12-month period ending with June of the previous year is to be
reduced by the MFP adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act (as discussed above). Section 3401(n)
of the ACA further amends section 1834(h)(4) of the Act to state that
the application of subparagraph (A)(xi) (that is, the reduction of the
CPI-U percentage increase by the MFP adjustment) may result in that
percentage increase being less than zero for a year, and may result in
payment rates for a year being less than such payment rates for the
preceding year.
Section 3401(o) of ACA amends section 1842(s)(1) of the Act to add
a new subparagraph (B) and clause (ii) which provides that, for CY 2011
and each subsequent year, the fee schedule update factor based on the
CPI-U for the 12-month period ending with June of the previous year is
to be reduced by the MFP adjustment described in section
1886(b)(3)(B)(xi)(II) (as discussed above). Section 3401(o) further
amends section 1842(s)(1) to state that the application of subparagraph
(B)(ii) (that is, the reduction of the CPI-U percentage increase by the
MFP adjustment) may result in that percentage increase being less than
zero for a year, and may result in payment rates for a year being less
than such payment rates for the preceding year.
The MFP adjustments to the CPI-U percentage increases used in
calculating the fee schedule adjustment factors for these DMEPOS items
and services as mandated by sections 3401(m), (n), and (o) of ACA are
simple mathematical calculations and are ministerial in nature.
Therefore, we plan to implement these adjustments for 2011 and
subsequent years as part of the annual program instructions related to
the DMEPOS fees schedule updates.

[[Page 40126]]

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

1. Background
a. Medicare Coverage of Preventive Physical Examinations and Routine
Checkups
Section 1862(a)(7) of the Act explicitly prohibits Medicare payment
for routine physical checkups with certain exceptions. One exception is
for the Initial Preventive Physical Exam (also referred to as the
``Welcome to Medicare'' exam) established for new beneficiaries
effective for services furnished on or after January 1, 2005. Section
4103 of the ACA has provided another exception to section 1862(a)(7).
Congress has expanded Medicare coverage under part B to include an
Annual Wellness Visit Providing Personalized Prevention Plan Services
(hereinafter referred to as the annual wellness visit) in sections
1861(s)(2)(FF) and 1861(hhh) of the Act. This expanded benefit will be
effective on January 1, 2011. Preventive care has become an increasing
focus of the Medicare program. For instance, section 101 of the MIPPA
expanded Medicare's authority to establish coverage for preventive
services that meet specified criteria. Among other things, the annual
wellness visit will encourage beneficiaries to obtain the preventive
services already covered by Medicare, and that are appropriate for each
individual beneficiary.
b. Requirements for Coverage of an Annual Wellness Visit
Section 4103 of the ACA provides for coverage of an annual wellness
visit, which includes and/or takes into account a health risk
assessment (HRA), and creates a personalized prevention plan for
beneficiaries, subject to certain eligibility and other limitations.
Section 4103 of the ACA also requires the identification of elements
that must be provided to a beneficiary as part of the first visit for
personalized prevention plan services and requires the establishment of
a yearly schedule for appropriate provision of such elements
thereafter.
The Affordable Care Act specifies elements that may be included in
a personalized prevention plan, including establishment of, or update
to, the individual's medical and family history, a list of the
individual's current providers and suppliers and medications prescribed
for the individual; measurement of height, weight, body-mass index
(BMI) or waist circumference, and blood pressure; detection of any
cognitive impairment; establishment or update of an appropriate
screening schedule for the next 5 to 10 years; establishment or update
of a list of risk factors and conditions (including any mental health
conditions) for which interventions are recommended or underway; and
furnishing of personalized health advice and referral, as appropriate,
to health education or preventive counseling services or programs. The
Affordable Care Act also permits the Secretary to add other elements to
the annual wellness visit determined to be appropriate.
2. Proposed Revisions
a. Proposed Revisions to Sec. 411.15, Particular Services Excluded
From Coverage
To conform the regulations to the statutory requirements of the
ACA, we are proposing to revise Sec. 411.15 by specifying an exception
to the routine physical checkups exclusion from coverage in Sec.
411.15(a)(1) and modifying Sec. 411.15(k)(15). We would add a
provision to permit coverage of annual wellness visits that meet the
eligibility limitation and the conditions for coverage we are
specifying in Sec. 410.15 (Annual Wellness Visit Providing
Personalized Prevention Plan Services). Coverage of the annual wellness
visit is furnished under Medicare Part B only. As provided in the
statute, this new coverage allows payment for an annual wellness visit
if provided after January 1, 2011 for an individual who is no longer
within 12 months after the effective date of his or her first Medicare
Part B coverage period, and has not received either an IPPE or an
annual wellness visit within the past 12 months.
b. Proposed Revisions to Part 410, Subpart B--Medical and Other Health
Services
We propose to add Sec. 410.15(a), Condition for Coverage of Annual
Wellness Visits Providing Personalized Prevention Plan Services, and
Sec. 410.15(b), Limitation on Coverage of Annual Wellness Visits
Providing Personalized Prevention Plan Services, to codify the coverage
of the annual wellness visit providing personalized prevention plan
services.
We are proposing to define several terms in Sec. 410.15. These
include the following terms: (1) Detection of any cognitive impairment;
(2) Review of the individual's functional ability and level of safety;
(3) Health professional; (4) Establishment of, or update to the
individual's medical and family history; (5) Eligible beneficiary; (6)
First annual wellness visit providing personalized prevention plan
services; and (7) Subsequent annual wellness visit providing
personalized prevention plan services.
Further, the ACA allows the addition of any other element
determined appropriate by the Secretary for inclusion in an annual
wellness visit. We reviewed the relevant medical literature, current
clinical practice guidelines, and the recommendations of the United
States Preventive Services Task Force (USPSTF). Pursuant to that
review, we propose to add depression screening and functional status
screening as elements of the first annual wellness visit only. In their
December 2009 Recommendation Statement, the U.S. Preventive Services
Task Force (USPSTF) recommends screening adults for depression when
staff-assisted depression care supports are in place to assure accurate
diagnosis, effective treatment and follow-up (Grade: B recommendation).
That is, the USPSTF recommends the service; and there is high certainty
that the net benefit is moderate or there is moderate certainty that
the net benefit is moderate to substantial.
The USPSTF is currently updating its 1996 recommendation regarding
screening for hearing impairment in older adults as well as its
recommendation on falls in the elderly. Until those recommendations can
be published, functional status screening (including assessment of
hearing impairment, ability to successfully perform activities of daily
living, fall risk and home safety) appears supportable by evidence only
for the first annual wellness visit.
We also are proposing that the definition of the term
``Establishment of, or an update to the individual's medical and family
history'' include more than a list of all of an individual's prescribed
medications as provided in the statute, but also supplements such as
vitamins and calcium that an individual may use or be exposed to.
Supplements such as these are commonly used by many beneficiaries and
the medical literature supports that their use be closely monitored by
health professionals because they can interact with prescribed
medications and may result in unintended medical problems in individual
cases. The statute expressly permits the Secretary to add other
elements such as this to the annual wellness visits.
(1) Definitions
We are proposing to add the following definitions to Sec. 410.15:

[[Page 40127]]

Detection of any cognitive impairment, for purposes of
this section, means assessment of an individual's cognitive function by
direct observation, with due consideration of information obtained by
way of patient report, concerns raised by family members, friends,
caretakers, or others.
Review of the individual's functional ability and level of
safety, for purposes of this section includes, at a minimum, assessment
of the following topics:

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

Health professional, for purposes of this section means:
++ A physician who is a doctor of medicine or osteopathy (as defined in
section 1861(r)(1) of the Act); or
++ A practitioner as described in clause (i) of section 1842(b)(18)(C)
of the Act, that is, a physician assistant, nurse practitioner, or
clinical nurse specialist (as defined in section 1861(aa)(5) of the
Social Security Act); or
++ A medical professional (including a health educator, registered
dietitian, or nutritionist) or a team of medical professionals, who are
working under the supervision of a physician as defined in this
definition.

Establishment of, or an update to the individual's medical
and family history, for purposes of this section, means at a minimum
the collection and documentation of the following:

++ Past medical and surgical history, including experiences with
illnesses, hospital stays, operations, allergies, injuries, and
treatments.
++ Use or exposure to medications and supplements, including calcium
and vitamins.
++ Medical events experienced by the beneficiary's parents and any
siblings and children, including diseases that may be hereditary or
place the individual at increased risk.

Eligible beneficiary, for purposes of this section, means
an individual who is no longer within 12 months after the effective
date of his or her first Medicare Part B coverage period, and has not
received either an initial preventive physical examination or an annual
wellness visit providing a personalized prevention plan within the past
12 months.
(2) Requirements of the First Visit for Personalized Prevention Plan
Services
We are proposing that the first annual wellness visit for purposes
of this benefit include the following:
Establishment of the individual's medical and family
history;
Establishment of a list of current providers and suppliers
that are regularly involved in providing medical care to the
individual;
Measurement of the individual's height, weight, body mass
index (or waist circumference, if appropriate), blood pressure, and
other routine measurements as deemed appropriate, based on the
individual's medical and family history;
Detection of any cognitive impairment that the individual
may have;
Review of the individual's potential (risk factors) for
depression, including current or past experiences with depression or
other mood disorders, based on the use of an appropriate screening
instrument for persons without a current diagnosis of depression, which
the health professional as defined in this section may select from
various available screening questions or standardized questionnaires
designed for this purpose and recognized by national professional
medical organizations;
Review of the individual's functional ability and level of
safety, based on direct observation or the use of appropriate screening
questions or a screening questionnaire, which the health professional
as defined in this section may select from various available screening
questions or standardized questionnaires designed for this purpose and
recognized by national professional medical organizations;
Establishment of the following:

++ A written screening schedule, such as a checklist, for the next 5 to
10 years as appropriate, based on recommendations of the USPSTF and the
Advisory Committee on Immunization Practices, and the individual's
health status, screening history, and age-appropriate preventive
services covered by Medicare; and
++ A list of risk factors and conditions for which primary, secondary
or tertiary interventions are recommended or are underway, including
any mental health conditions or any such risk factors or conditions
that have been identified through an initial preventive physical
examination (as described under Sec. 410.16), and a list of treatment
options and their associated risks and benefits;

Furnishing of personalized health advice and a referral,
as appropriate, to health education or preventive counseling services
or programs aimed at reducing identified risk factors and improving
self management, or community-based lifestyle interventions to reduce
health risks and promote self-management and wellness, including weight
loss, physical activity, smoking cessation, fall prevention, and
nutrition; and
Any other element determined appropriate by the Secretary
through the National Coverage Determination process.
(3) Requirements of Subsequent Visits for Personalized Prevention Plan
Services
We are proposing that subsequent annual wellness visits providing
personalized prevention plan services for purposes of this benefit
include the following:
An update of the individual's medical and family history;
An update of the list of current providers and suppliers
that are regularly involved in providing medical care to the
individual, as that list was developed for the first annual wellness
visit providing personalized prevention plan services;
Measurement of an individual's weight, blood pressure, and
other routine measurements as deemed appropriate, based on the
individual's medical and family history;
Detection of any cognitive impairment, as that term is
defined in this section, that the individual may have;
An update to the following:

++ The written screening schedule for the individual as that schedule
was developed at the first annual wellness visit providing personalized
prevention plan services; and
++ The list of risk factors and conditions for which primary, secondary
or tertiary interventions are recommended or are underway for the
individual as that list was developed at the first annual wellness
visit providing personalized prevention plan services;

Furnishing of personalized health advice to the individual
and a referral, as appropriate, to health education or preventive
counseling services or programs as that advice and related services are
defined in paragraph (a) of this section;
Any other element determined appropriate by the Secretary
through the National Coverage Determination process. Body-mass index
(BMI) should be calculated at the first annual wellness visit and may
be recalculated at subsequent visits, if indicated. Given

[[Page 40128]]

the general stability of adult height, we would not expect the BMI to
meaningfully change in the absence of significant weight change. We
have not in the definition of the subsequent annual visit required
measurement of the individual's height.
We are proposing to add two distinct elements to the definition of
the first annual wellness visit only: depression screening and
functional status assessment. Our review of the medical literature and
the USPSTF recommendations indicates that the optimum frequency for
those services is unknown. Thus we believe it would be premature and
beyond the current evidence to require that they be included in the
definition of subsequent visits, but they may be performed at these
visits, if indicated.
In addition, to facilitate future consideration of coverage of
additional elements in the definitions of the first and subsequent
annual wellness visits in Sec. 410.15(a), we are proposing that the
determination of other required elements for those purposes will be
made through the National Coverage Determination (NCD) process. The NCD
process is evidence based, transparent and furnishes the opportunity
for public comment, and is described in sections 1862(l) of the Act.
While section 4103 of the ACA ultimately requires that an HRA be
included in the new annual wellness visit benefit beginning January 1,
2011, the HRA guidelines (with standards for interactive telephonic and
web-based HRAs) and the model HRA tool also required by section 4103
are not yet available. As a result, we have not included requirements
related to the HRA in this proposed rule. When HRA guidelines and
standards have been established, and a model HRA instrument is
available and determined by the Secretary to be appropriate for the
Medicare population, we will revise these regulations to include the
HRA as an element in the definition of the annual wellness visit.
We are requesting public comments on the components of both the
first and subsequent annual wellness visits, as well as the definitions
of related terms in the document. We ask that commenters making
specific recommendations on this or any related issue provide
documentation from the medical literature, current clinical practice
guidelines, or the USPSTF or Advisory Committee on Immunization
Practices recommendations.
3. Payment for the Annual Wellness Visit Providing Personalized
Prevention Plan Services (PPPS)
Section 4103 of the ACA created a new benefit for the ``annual
wellness visit'' with personalized prevention plan services. The
Affordable Care Act amends section 1861(s)(2) of the Act by adding a
new subsection (FF) to provide for coverage of the annual wellness
visit beginning January 1, 2011. Section 4103 also adds new subsection
(hhh) to section 1861 of the Act to define ``personalized prevention
plan services'' and to specify who may furnish these services. Finally,
section 4103 amends section 1848(j)(3) of the Act to provide for
payment of annual wellness visits under the PFS, and specifically
excludes the annual wellness visit from the hospital outpatient
prospective payment system (OPPS). Therefore, a single payment under
the PFS will be made when an annual wellness visit is furnished by a
physician, physician assistant, nurse practitioner, or clinical nurse
specialist, or by a medical professional or team of medical
professionals, as determined appropriate by the Secretary, under the
supervision of a physician.
To allow for Medicare reporting and payment of the annual wellness
visit, we are proposing to create two new HCPCS G-codes for reporting
the first wellness visit and creation of the PPPS and the subsequent
visits available to the beneficiary every 12 months. Specifically, we
are proposing to establish the following two new HCPCS codes for CY
2011: GXXXA (Annual wellness visit; includes a personalized prevention
plan of service (PPPS), first visit) and GXXXB (Annual wellness visit;
includes a personalized prevention plan of service (PPPS), subsequent
visit). A beneficiary's first annual wellness visit to a practitioner
would be reported to Medicare under HCPCS code GXXXA, even if the
beneficiary had previously received an initial preventive physical
examination (IPPE) that was covered by Medicare. Beneficiaries, in
their first 12 months of Part B coverage, will continue to be eligible
only for an IPPE. After the first 12 months of Part B coverage, on and
after January 1, 2011, beneficiaries will be eligible for an annual
wellness visit described by HCPCS code GXXXA or GXXXB, provided that
the beneficiary has not received an IPPE or annual wellness visit
within the preceding 12-month period.
A beneficiary would be eligible for one initial annual wellness
visit covered by Medicare that must include all of the required
elements that we are proposing for the first visit as described in the
preceding section. All other annual wellness visits that would include
the required elements for those visits would be reported as subsequent
visits, even if a different practitioner furnished the subsequent
annual wellness visit. We would expect there to be continuity and
communication among the practitioners caring for beneficiaries over
time with respect to the PPPS, and that would include the case where a
different practitioner furnishing a subsequent annual wellness visit
would update the information in the patient's medical record based on
the patient's interval history since the previous annual wellness
visit.
The first wellness visit described by HCPCS code GXXXA is similar
to the IPPE that is currently reported with HCPCS code G0402 (Initial
preventive physical examination; face-to-face visit, services limited
to new beneficiary during the first 12 months of Medicare enrollment).
We believe that the physician work and nonfacility PE of the IPPE and
the first annual wellness visit are very similar, given that both
represent an initial beneficiary visit focused on prevention. In the CY
2010 PFS final rule with comment period discussion of payment for the
IPPE (74 FR 61767), we noted that in the context of physician work and
intensity, HCPCS code G0402 was most equivalent to CPT code 99204
(Level 4 new patient office or other outpatient visit). Therefore, for
CY 2011, we are proposing to crosswalk the same physician work RVUs of
2.43 from CPT code 99204 to HCPCS codes G0402 and GXXXA. Similarly, we
believe the direct PE inputs for all of these services are similar and,
therefore, we are proposing to assign the same direct PE inputs to
HCPCS codes G0402 and GXXXA as are included for CPT code 99204. We note
that currently, the direct PE inputs for HCPCS code G0402 also include
preventive assessment forms, and we are proposing to add this supply to
the PE for HCPCS code GXXXA as well because we believe it would be used
in the first wellness visit. The proposed CY 2011 PE and malpractice
RVUs for HCPCS code GXXXA are displayed in Addendum B to this proposed
rule. We also note that we are proposing no facility PE RVUs for HCPCS
code GXXXA because only a single payment will be made under the PFS
when this service is furnished. There is no separate facility payment
for GXXXA when a practitioner furnishes this service in the facility
setting.
Moreover, we believe that a subsequent annual wellness visit
described by HCPCS code GXXXB is most similar, from the perspectives of

[[Page 40129]]

physician work and PE, to CPT code 99214 (Level 4 established patient
office or other outpatient visit). The subsequent annual wellness visit
is a patient visit for PPPS that includes certain required elements,
such as updating information regarding the patient's history, risk
factors, and regular medical care providers and suppliers since the
prior annual visit, and obtaining routine measurements. We believe the
physician work and direct PE of a subsequent annual wellness visit are
similar, in terms of evaluation and management (E/M) visit level, to
the first wellness visit, which we are proposing to value like a level
4 new patient office or other outpatient visit, as we have previously
valued the IPPE. However, the subsequent annual wellness visit would
typically be for an established patient and, as described earlier in
this section, we are proposing that certain wellness visit elements
only must be furnished in the first wellness visit. As a result, we
believe it would be most appropriate to value the subsequent annual
wellness visit based upon an E/M visit for an established patient.
Therefore, for CY 2011 we are proposing to crosswalk the same physician
work RVUs of 1.50 from CPT code 99214 to HCPCS code GXXXB. Furthermore,
we believe the direct PE inputs for these two services are also similar
and, therefore, we are proposing to assign the same direct PE inputs to
HCPCS code GXXXB as are assigned to CPT code 99214. We note that we are
also proposing to add the same preventive assessment forms to the PE
for HCPCS code GXXXB as we are proposing to add for HCPCS code GXXXA
because we believe this supply would be used in both the first and
subsequent annual wellness visits. The proposed CY 2011 PE and
malpractice RVUs for HCPCS code GXXXB are displayed in Addendum B to
this proposed rule. Similar to our treatment of HCPCS code GXXXA for
the first wellness visit, we are proposing no facility PE RVUs for
HCPCS code GXXXB as only a single payment will be made under the PFS
when this service is furnished. There is no separate facility payment
for GXXXB when a practitioner furnishes this service in the facility
setting.
While we believe there could be overlap in the direct PE,
malpractice expense, and physician work in both history taking and
examination of the patient in the context of the initial or subsequent
wellness visit and another E/M service, we are not proposing to limit
the level of a medically necessary E/M visit when furnished and billed
with a wellness visit. As we stated in the CY 2005 PFS final rule with
comment period with respect to the IPPE (69 FR 66289 through 66290), we
do not want to prohibit the reporting of an appropriate level of
service when it is necessary to evaluate and treat the beneficiary for
acute and chronic conditions. However, at the same time, we believe the
practitioner is better able to discuss health promotion, disease
prevention, and the educational opportunities available with
beneficiaries when their health status has been stabilized and the
beneficiary is physically receptive. Therefore, depending on the
clinical circumstances, a CPT code for a medically necessary E/M visit
may be reported and appended with CPT modifier -25 (significant,
separately identifiable evaluation and management service by the same
physician on the same day of the procedure or other service) to
designate the E/M visit as a separately identifiable service from the
initial or subsequent wellness visit. However, we believe this scenario
would be uncommon, and we expect that no components of an encounter
attributable to the annual wellness visit would be used in determining
the level of a separate E/M visit that would also be reported.
With respect to beneficiary cost-sharing, section 4103(c) of the
ACA amends section 1833(a)(1) of the Act by adding subparagraph (X),
referring to the PPPS to state that the amount paid shall be 100
percent of the lesser of the actual charge for the services or the
amount determined under the payment basis determined under section 1848
of the Act, thereby eliminating coinsurance for the annual wellness
visit. Finally, section 4103(b)(4) of the ACA amends section 1833(b) of
the Act to specify that the Part B deductible does not apply to the
annual wellness visit. We expect that practitioners will work to ensure
that this valuable new Medicare benefit is furnished to the
beneficiaries that they care for in their practices, effective January
1, 2011.

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

1. Definition of ``Preventive Services''
Section 4104 of the ACA revises section 1861(ddd) of the Act to add
paragraph (3), which defines the term ``preventive services'' as
follows:
The specific services currently listed in section
1861(ww)(2) of the Act with the explicit exclusion of
electrocardiograms (as specified in section 1861(ww)(2)(M) of the Act);
The initial preventive physical examination (IPPE)
established by section 611 of the MMA and defined in section
1861(ww)(1) of the Act; and
The annual wellness visit, as specified by section
1861(hhh) of the Act as added by section 4103 of the ACA. We refer
readers to section V.Q. of this proposed rule for the proposed
provisions related to the coverage of and payment for the annual
wellness visit. The regulations regarding coverage of the IPPE are
specified in Sec. 410.16 and remain unchanged by the ACA.
The specific preventive services included in the definition of
``preventive services'' in section 1861(ddd)(3)(A) of the Act as cross-
referenced to section 1861(ww)(2) of the Act, excluding
electrocardiograms, include the following:
Pneumococcal, influenza, and hepatitis B vaccine and
administration.
Screening mammography.
Screening pap smear and screening pelvic exam.
Prostate cancer screening tests.
Colorectal cancer screening tests.
Outpatient diabetes self-management training (DSMT).
Bone mass measurement.
Screening for glaucoma.
Medical nutrition therapy (MNT) services.
Cardiovascular screening blood tests.
Diabetes screening tests.
Ultrasound screening for abdominal aortic aneurysm (AAA).
Additional preventive services identified for coverage
through the national coverage determination (NCD) process.
We note that currently the only additional preventive service
identified for coverage through the NCD process is HIV testing. A
proposed NCD for smoking cessation services for asymptomatic patients
was released in May 2010 on the CMS Web site at: http://www.cms.gov/mcd/index_list.asp?list_type=nca. We will address the applicability
of section 1861(ddd)(3)(A) of the Act (as added by section 4104 of the
ACA) to these services if an NCD establishing them as additional
preventive services is finalized.
We are proposing to add the definition of ``preventive services''
in Sec. 410.2 to implement the provisions of section 1861(ddd)(3) of
the Act (as amended by section 4104 of the ACA).
2. Deductible and Coinsurance for Preventive Services
Section 4104(b)(4) of the ACA amends section 1833(a)(1) of the Act
by requiring 100 percent Medicare

[[Page 40130]]

payment for the IPPE and for those preventive services recommended by
the United States Preventive Services Task Force (USPSTF) with a grade
of A or B for any indication or population and that are appropriate for
the individual. This provision waives any coinsurance that would
otherwise be applicable under section 1833(a)(1) of the Act for those
items and services listed in section 1861(ww)(2) of the Act (excluding
electrocardiograms) to which the USPSTF has given a grade of A or B. In
addition, section 4103(c)(1) of the ACA amends section 1833(c)(1) of
the Act to waive the coinsurance for the annual wellness visit. The
coinsurance represents the beneficiary's share of the payment to the
provider or supplier for furnished services. Coinsurance generally
refers to a percentage (for example, 20 percent) of the Medicare
payment rate for which the beneficiary is liable and is applicable
under the PFS, while copayment generally refers to an established
amount that the beneficiary must pay that is not necessarily related to
a particular percentage of the Medicare payment, and is applicable
under the hospital Outpatient Prospective Payment System (OPPS). We
refer readers to the CY 2011 OPPS/ASC proposed rule for proposed
provisions related to payment for preventive services, including waiver
of the deductible and copayment, under the OPPS.
Section 4104(c) of the ACA amends section 1833(b)(1) of the Act to
waive the Part B deductible for preventive services described in
subparagraph (A) of section 1861(ddd)(3) of the Act that have a grade
of A or B from the USPSTF. In addition, section 1833(b)(1) of the Act
(as amended by section 4103(c)(4) of the ACA) waives the Part B
deductible for the annual wellness visit. These provisions are
effective for services furnished on and after January 1, 2011. Section
101(b)(2) of the MIPPA amended section 1833(b) of the Act to waive the
deductible for the IPPE effective January 1, 2009.
Not all preventive services described in subparagraph (A) of
section 1861(ddd)(3) are recommended by the USPSTF with a grade of A or
B and, therefore, some of the preventive services do not meet the
criteria in sections 1833(a)(1) and (b)(1) of the Act for the waiver of
the deductible and coinsurance. However, with certain exceptions noted
below, the changes made by section 4104 of the ACA do not affect most
of the preexisting specific provisions in sections 1833(a) and 1833(b)
of the Act (that are codified in regulations in Sec. 410.160(b) and
Sec. 410.152) that waive the deductible and coinsurance for specific
services. For example, section 1833(a)(1)(D) of the Act already waives
the coinsurance and section 1833(b)(3) of the Act waives the deductible
for clinical laboratory tests (including tests furnished for screening
purposes). Section 4104 of the ACA does not change this provision and,
therefore, the waiver of both the deductible and coinsurance remains in
place for all laboratory tests, regardless of whether the particular
clinical laboratory test meets the USPSTF grading criteria specified in
sections 1833(a)(1) and 1833(b)(1) of the Act (as amended by section
4104 of the ACA) for waiver of the deductible and coinsurance as a
preventive service.
The following preventive services listed in section 1833(ddd)(3)(A)
of the Act are not recommended by the USPSTF with a grade of A or B for
any indication or population: digital rectal examination furnished as a
prostate cancer screening service; glaucoma screening; DSMT services;
and barium enema furnished as a colorectal cancer screening service.
Specifically, HCPCS code G0102 (Prostate cancer screening; digital
rectal exam), which does not have a grade of A or B from the USPSTF for
any indication or population, will continue to be subject to the
deductible and coinsurance as there is no statutory provision to the
contrary. However, the deductible and coinsurance for HCPCS code G0103
(Prostate cancer screening; prostate specific antigen test (PSA)) will
continue to be waived in accordance with section 1833(a)(1)(D) of the
Act, even though this service also does not have a grade of A or B from
the USPSTF.
Glaucoma screening services, described by HCPCS codes G0117
(Glaucoma screening for high risk patients furnished by an optometrist
or ophthalmologist) and G0118 (Glaucoma screening for high risk patient
furnished under the direct supervision of an optometrist or
ophthalmologist), will continue to be subject to the deductible and
coinsurance because these services are not recommended with a grade of
A or B by the USPSTF for any indication or population and there is no
other statutory provision to except them. Similarly, DSMT services are
currently not rated by the USPSTF, and there is no other statutory
provision to except them from applicability of the deductible and
coinsurance. Therefore the deductible and coinsurance requirements will
continue to apply.
Barium enemas furnished as colorectal cancer screening tests,
described by HCPCS codes G0106 (Colorectal cancer screening;
alternative to G0104, screening sigmoidoscopy, barium enema) and G0120
(Colorectal cancer screening; alternative to G0105, screening
colonoscopy, barium enema), do not have a grade of A or B from the
USPSTF for any indication or population. However, the deductible does
not apply to barium enemas furnished as colorectal cancer screening
tests, because colorectal cancer screening tests are explicitly
excluded from the deductible in section 1833(b)(8) of the Act. However,
there is no specific exclusion of barium enemas from the coinsurance
requirement in section 1833(b)(1) of the Act and, therefore, this
requirement, as applicable, continues to apply to barium enemas. We
note that the USPSTF has given a grade of A to screening colonoscopy,
screening flexible sigmoidoscopy, and fecal occult blood screening
tests, and that, as a result, these colorectal cancer screening tests
are subject to the statutory waiver of both the deductible and
coinsurance.
We note also that the USPSTF ceased to make recommendations with
regard to vaccines and vaccine administration after CY 1996, so as not
to conflict with the recommendations of the Centers for Disease Control
and Prevention's Advisory Committee on Immunization Practices. However,
the USPSTF's most recent vaccine recommendations gave a grade of B to
influenza and pneumococcal vaccines and their administration and a
grade of A to hepatitis B vaccine and its administration. While
sections 1833(a)(1) and 1833(b)(1) of the Act require that the
preventive services receive a grade of A or B from the USPSTF for the
coinsurance and deductible to be waived, the statute does not specify
that the recommended grade must be furnished by the USPSTF within any
given timeframe. The USPSTF grades for these preventive services are
the most current USPSTF grade and have never been withdrawn. Therefore,
we believe that these preventive services meet the requirements of the
statute for the waiver of the deductible and coinsurance. We also note
that the Centers for Disease Control and Prevention's Advisory
Committee on Immunization Practices currently recommends influenza,
pneumococcal, and hepatitis B vaccines.
We are proposing to update Sec. 410.160(b), which lists the
services for which expenses incurred are not subject to the Part B
annual deductible and do not count toward meeting that deductible.
Specifically, we are proposing to revise Sec. 410.160(b)(2) to include
influenza and hepatitis B

[[Page 40131]]

vaccines and their administration, in addition to pneumococcal vaccine
and its administration. In addition, in Sec. 410.160(b), we are also
proposing to add exceptions for bone mass measurement, MNT services,
and the annual wellness visit.
In Sec. 410.152, we are proposing to revise paragraph (l) to
establish the amount of payment under the applicable payment system for
providers and suppliers of the services listed in the paragraph and
displayed in Table 38. Table 38 displays the HCPCS codes that we are
proposing as ``preventive services'' under section 1861(ddd)(3)(A) of
the Act and identifies the HCPCS codes for the IPPE and the annual
wellness visit. Table 38 also indicates the most recent USPSTF grade,
if any, that is the basis for our proposed policy with regard to waiver
of the deductible and coinsurance, as applicable, and the Medicare
payment system under which the HCPCS code would be paid when furnished
outside of the facility setting. We note that the changes made by
section 4104 of the ACA with respect to the deductible and coinsurance
apply in all settings in which the services are furnished.
In developing recommendations regarding preventive services, we
recognize that the USPSTF may make recommendations that are specific to
an indication or population, at times including characteristics such as
gender and age in its recommendations. While we are proposing to waive
the deductible and coinsurance for any Medicare covered preventive
service recommended with a grade of A or B for any indication or
population, with no limits on the indication or population as long as
the USPSTF has recommended the preventive service for at least one
indication and/or population with a grade of A or B, we note that all
existing Medicare coverage policies for such services, including any
limitations based on indication or population, continue to apply. In
some cases, national coverage policies may currently limit Medicare
coverage based on the indication or population, consistent with the
USPSTF recommendations with a grade of A or B for the indication or
population. In other cases where Medicare does not explicitly noncover
preventive services for a specific population or indication, we would
expect that, particularly in those cases where the USPSTF
recommendation grade is a D (that is, the USPSTF recommends against the
service because there is moderate or high certainty that the service
has no net benefit or that the harms outweigh the benefits),
practitioners would only order those preventive services that are
clinically appropriate for the beneficiary. If we have concerns in the
future about the appropriateness of preventive services for an
indication or population in light of the USPSTF's recommendations, we
may consider using our authority under section 1834(n)(1) of the Act
(as added by section 4105 of the ACA) to modify Medicare coverage of
any preventive service to be consistent with the recommendations of the
USPSTF.
Section 10501(i)(2) of the ACA amended the definition of Federally
Qualified Health Center (FQHC) services as defined in section
1861(aa)(3)(A) of the Act by replacing the specific references to
services provided under section 1861(qq) and (vv) of the Act (diabetes
outpatient self-management training services and medical nutrition
therapy services, respectively) with preventive services as defined in
section 1861(ddd)(3) of the Act, as established by section 4014(a)(3)
of the ACA. These changes are effective for services provided on or
after January 1, 2011. Accordingly, we are proposing to conform the
regulations to the new statutory requirement by adding a new section
Sec. 405.2449 which would add the new preventive services definition
to the definition of FQHC services effective for services provided on
or after January 1, 2011.
Section 1861(ddd)(3) of the Act defines ``preventive services'' as
consisting of the following three components:
Screening and preventive services described in section
1861(ww)(2) of the Act (other than electrocardiograms described in
subparagraph (M) of that same subsection).
An initial preventive physical examination, as defined in
section 1861(ww) of the Act.
Personalized prevention plan services as defined in
section 1861(hhh)(1) of the Act.
We are proposing to add each of these three components into the new
Medicare FQHC preventive services definition in a new Sec. 405.2449.
Section 4104(b)(1) of the ACA, as amended by section 10406 of the
same Act, waives coinsurance for preventive services by adding section
1833(a)(1)(Y) to the Act to require, essentially, waiver of coinsurance
for preventive services that are recommended with a grade of A or B by
the USPSTF for any indication or population. This provision is
specifically designed to remove barriers to affording and obtaining
such preventive services under Medicare.
In addition, section 10501(i)(3)(B)(ii) of the ACA added section
1833(a)(1)(Z) to the Act to require a 20-percent copay on all FQHC
services after implementation of the FQHC prospective payment system.
We believe we can give both section 1833(a)(1)(Y) and (Z) of the Act,
and the definition of FQHC services (revised to include the broader
scope of preventive services) their best effect by permitting a 100
percent reimbursement rate for preventive services as defined at
section 1861 (ddd)(3) of Act, effective January 1, 2011.
Section 1833(b)(4) of the Act stipulates that the Medicare Part B
deductible shall not apply to Federally qualified health center
services. The ACA makes no change to this provision, therefore Medicare
shall continue to waive the Part B deductible for all federally
qualified health center services, including preventive services added
by the ACA.

Table 38--Proposed CY 2011 Deductible and Coinsurance for Preventive Services Under Section 1861(ddd(3)(A) of the Act (Includes the IPPE and the Annual
Wellness Visit)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CPT/
Preventive service HCPCS Long descriptor USPSTF rating Payment method CY 2010 coins./ CY 2011 coins./
Code \1\ deductible deductible
--------------------------------------------------------------------------------------------------------------------------------------------------------
Initial Preventive Physical G0402 Initial preventive physical * Not Rated..... PFS............. Coins. applies and WAIVED.
Examination, IPPE. examination; face to face ded. is waived.
visits, services limited to new
beneficiary during the first 12
months of Medicare enrollment.
G0403 Electrocardiogram, routine ECG ................ PFS............. Not Waived........ Not Waived.
with 12 leads; performed as a
screening for the initial
preventive physical examination
with interpretation and report.

[[Page 40132]]

G0404 Electrocardiogram, routine ECG ................ PFS............. Not Waived........ Not Waived.
with 12 leads; tracing only,
without interpretation and
report, performed as a screening
for the initial preventive
physical examination.
G0405 Electrocardiogram, routine ECG ................ PFS............. Not Waived........ Not Waived.
with 12 leads; interpretation
and report only, performed as a
screening for the initial
preventive physical examination.
Ultrasound Screening for G0389 Ultrasound, B-scan and/or real B............... PFS............. Coins. applies and WAIVED.
Abdominal Aortic Aneurysm time with image documentation; ded. is waived.
(AAA). for abdominal aortic aneurysm
(AAA) ultrasound screening.
Cardiovascular Disease 80061 Lipid panel...................... A............... CLFS............ WAIVED............ WAIVED.
Screening.
82465 Cholesterol, serum or whole ................ CLFS............ WAIVED............ WAIVED.
blood, total.
83718 Lipoprotein, direct measurement; ................ CLFS............ WAIVED............ WAIVED.
high density cholesterol (hdl
cholesterol).
84478 Triglycerides.................... ................ CLFS............ WAIVED............ WAIVED.
Diabetes Screening Tests....... 82947 Glucose; quantitative, blood B............... CLFS............ WAIVED............ WAIVED.
(except reagent strip).
82950 Glucose; post glucose dose ................ CLFS............ WAIVED............ WAIVED.
(includes glucose).
82951 Glucose; tolerance test (gtt), * Not Rated..... CLFS............ WAIVED............ WAIVED.
three specimens (includes
glucose).
Diabetes Self-Management G0108 Diabetes outpatient self- * Not Rated..... PFS............. Not Waived........ Not Waived.
Training Services. management training services,
(DSMT)......................... individual, per 30 minutes.
G0109 Diabetes outpatient self- ................ PFS............. Not Waived........ Not Waived.
management training services,
group session (2 or more), per
30 minutes.
Medical Nutrition Therapy (MNT) 97802 Medical nutrition therapy; B............... PFS............. Not Waived........ WAIVED.
Services. initial assessment and
intervention, individual, face-
to-face with the patient, each
15 minutes.
97803 Medical nutrition therapy; re- ................ PFS............. Not Waived........ WAIVED.
assessment and intervention,
individual, face-to-face with
the patient, each 15 minutes.
97804 Medical nutrition therapy; group ................ PFS............. Not Waived........ WAIVED.
(2 or more individual(s)), each
30 minutes.
G0270 Medical nutrition therapy; B............... PFS............. Not Waived........ WAIVED.
reassessment and subsequent
intervention(s) following second
referral in same year for change
in diagnosis, medical condition
or treatment regimen (including
additional hours needed for
renal disease), individual, face
to face with the patient, each
15 minutes.
G0271 Medical nutrition therapy, ................ PFS............. Not Waived........ WAIVED.
reassessment and subsequent
intervention(s) following second
referral in same year for change
in diagnosis, medical condition,
or treatment regimen (including
additional hours needed for
renal disease), group (2 or more
individuals), each 30 minutes.

[[Page 40133]]

Screening Pap Test............. G0123 Screening cytopathology, cervical A............... CLFS............ WAIVED............ WAIVED.
or vaginal (any reporting
system), collected in
preservative fluid, automated
thin layer preparation,
screening by cytotechnologist
under physician supervision.
G0124 Screening cytopathology, cervical ................ PFS............. Coins. applies and WAIVED.
or vaginal (any reporting ded. is waived.
system), collected in
preservative fluid, automated
thin layer preparation,
requiring interpretation by
physician.
G0141 Screening cytopathology smears, A............... PFS............. Coins. applies and WAIVED.
cervical or vaginal, performed ded. is waived.
by automated system, with manual
rescreening, requiring
interpretation by physician.
G0143 Screening cytopathology, cervical A............... CLFS............ WAIVED............ WAIVED.
or vaginal (any reporting
system), collected in
preservative fluid, automated
thin layer preparation, with
manual screening and rescreening
by cytotechnologist under
physician supervision.
G0144 Screening cytopathology, cervical A............... CLFS............ WAIVED............ WAIVED.
or vaginal (any reporting
system), collected in
preservative fluid, automated
thin layer preparation, with
screening by automated system,
under physician supervision.
G0145 Screening cytopathology, cervical A............... CLFS............ WAIVED............ WAIVED.
or vaginal (any reporting
system), collected in
preservative fluid, automated
thin layer preparation, with
screening by automated system
and manual rescreening under
physician supervision.
G0147 Screening cytopathology smears, A............... CLFS............ WAIVED............ WAIVED.
cervical or vaginal, performed
by automated system under
physician supervision.
G0148 Screening cytopathology smears, A............... CLFS............ WAIVED............ WAIVED.
cervical or vaginal, performed
by automated system with manual
rescreening.
P3000 Screening papanicolaou smear, ................ CLFS............ WAIVED............ WAIVED.
cervical or vaginal, up to three
smears, by technician under
physician supervision.
P3001 Screening papanicolaou smear, ................ PFS............. Coins. applies & WAIVED.
cervical or vaginal, up to three ded. is waived.
smears, requiring interpretation
by physician.
Q0091 Screening papanicolaou smear; ................ PFS............. Coins. applies & WAIVED.
obtaining, preparing and ded. is waived.
conveyance of cervical or
vaginal smear to laboratory.
Screening Pelvic Exam.......... G0101 Cervical or vaginal cancer A............... PFS............. Coins. applies and WAIVED.
screening; pelvic and clinical ded. is waived.
breast examination.
Screening Mammography.......... 77052 Computer-aided detection B............... PFS............. Coins. applies and WAIVED.
(computer algorithm analysis of ded. is waived.
digital image data for lesion
detection) with further
physician review for
interpretation, with or without
digitization of film
radiographic images; screening
mammography (list separately in
addition to code for primary
procedure).
77057 Screening mammography, bilateral B............... PFS............. Coins. applies and WAIVED.
(2-view film study of each ded. is waived.
breast).
G0202 Screening mammography, producing ................ PFS............. Coins. applies & WAIVED.
direct digital image, bilateral, ded. is waived.
all views.
Bone Mass Measurement.......... G0130 Single energy x-ray B............... PFS............. Not Waived........ WAIVED.
absorptiometry (sexa) bone
density study, one or more
sites; appendicular skeleton
(peripheral) (e.g., radius,
wrist, heel).

[[Page 40134]]

77078 Computed tomography, bone mineral ................ PFS............. Not Waived........ WAIVED.
density study, 1 or more sites;
axial skeleton (e.g., hips,
pelvis, spine).
77079 Computed tomography, bone mineral ................ PFS............. Not Waived........ WAIVED.
density study, 1 or more sites;
appendicular skeleton
(peripheral) (e.g., radius,
wrist, heel).
77080 Dual-energy x-ray absorptiometry ................ PFS............. Not Waived........ WAIVED.
(dxa), bone density study, 1 or
more sites; axial skeleton
(e.g., hips, pelvis, spine).
77081 Dual-energy x-ray absorptiometry ................ PFS............. Not Waived........ WAIVED.
(dxa), bone density study, 1 or
more sites; appendicular
skeleton (peripheral) (e.g.,
radius, wrist, heel).
77083 Radiographic absorptiometry ................ PFS............. Not Waived........ WAIVED.
(e.g., photodensitometry,
radiogrammetry), 1 or more sites.
76977 Ultrasound bone density B............... PFS............. Not Waived........ WAIVED.
measurement and interpretation,
peripheral site(s), any method.
Colorectal Cancer Screening.... G0104 Colorectal cancer screening; A............... PFS............. Coins. applies and WAIVED.
flexible sigmoidoscopy. ded. is waived.
G0105 Colorectal cancer screening; ................ PFS............. Coins. applies WAIVED.
colonoscopy on individual at and; ded. is
high risk. waived.
G0106 Colorectal cancer screening; * Not Rated..... PFS............. Coins. applies and Coins. applies
alternative to G0104, screening ded. is waived. and ded. is
sigmoidoscopy, barium enema. waived.
G0120 Colorectal cancer screening; ................ PFS............. Coins. applies and Coins. applies
alternative to G0105, screening ded. is waived. and ded. is
colonoscopy, barium enema.. waived.
G0121 Colorectal cancer screening; A............... PFS............. Coins. applies and WAIVED.
colonoscopy on individual not ded. is waived.
meeting criteria for high risk.
82270 Blood, occult, by peroxidase ................ CLFS............ WAIVED............ WAIVED.
activity (e.g., guaiac),
qualitative; feces, consecutive.
G0328 Colorectal cancer screening; ................ CLFS............ Coins. applies and WAIVED.
fecal occult blood test, ded. is waived.
immunoassay, 1-3 simultaneous.
Prostate Cancer Screening...... G0102 Prostate cancer screening; D............... PFS............. Not Waived........ Not Waived.
digital rectal examination.
G0103 Prostate cancer screening; ................ CLFS............ WAIVED............ WAIVED.
prostate specific antigen test
(PSA).
Glaucoma Screening............. G0117 Glaucoma screening for high risk I............... PFS............. Not Waived........ Not Waived.
patients furnished by an
optometrist or ophthalmologist.
G0118 Glaucoma screening for high risk ................ PFS............. Not Waived........ Not Waived.
patient furnished under the
direct supervision of an
optometrist or ophthalmologist.
Influenza Virus Vaccine........ 90655 Influenza virus vaccine, split B............... Drug Pricing WAIVED............ WAIVED.
virus, preservative free, when File.
administered to children 6-35
months of age, for intramuscular
use.
90656 Influenza virus vaccine, split ................ Drug Pricing WAIVED............ WAIVED.
virus, preservative free, when File.
administered to individuals 3
years and older, for
intramuscular use.
90657 Influenza virus vaccine, split ................ Drug Pricing WAIVED............ WAIVED.
virus, when administered to File.
children 6-35 months of age, for
intramuscular use.
90658 Influenza virus vaccine, split ................ Drug Pricing WAIVED............ WAIVED.
virus, when administered to File.
individuals 3 years of age and
older, for intramuscular use.
90660 Influenza virus vaccine, live, ................ Drug Pricing WAIVED............ WAIVED.
for intranasal use. File.

[[Page 40135]]

90662 Influenza virus vaccine, split ................ Drug Pricing WAIVED............ WAIVED.
virus, preservative free, File.
enhanced immunogenicity via
increased antigen content, for
intramuscular use.
G0008 Administration of influenza virus ................ PFS............. WAIVED............ WAIVED.
vaccine.
G9141 Influenza A (H1N1) immunization ................ PFS............. WAIVED............ WAIVED.
administration (includes the
physician counseling the patient/
family).
G9142 Influenza A (H1N1) vaccine, any ................ Drug Pricing WAIVED............ WAIVED.
route of administration. File (if not
supplied at no
cost).
Pneumococcal Vaccine........... 90669 Pneumococcal conjugate vaccine, B............... Drug Pricing WAIVED............ WAIVED.
polyvalent, when administered to File.
children younger than 5 years,
for intramuscular use.
90670 Pneumococcal conjugate vaccine, ................ Drug Pricing WAIVED............ WAIVED.
13 valent, for intramuscular File.
use..
90732 Pneumococcal polysaccharide ................ Drug Pricing WAIVED............ WAIVED.
vaccine, 23-valent, adult or File.
immunosuppressed patient dosage,
when administered to individuals
2 years or older, for
subcutaneous or intramuscular
use.
G0009 Administration of pneumococcal ................ PFS............. WAIVED............ WAIVED.
vaccine.
Hepatitis B Vaccine............ 90740 Hepatitis B vaccine, dialysis or A............... Drug Pricing Not Waived........ WAIVED.
immunosuppressed patient dosage File.
(3 dose schedule), for
intramuscular use.
90743 Hepatitis B vaccine, adolescent ................ Drug Pricing Not Waived........ WAIVED.
(2 dose schedule), for File.
intramuscular use.
90744 Hepatitis B vaccine, pediatric/ ................ Drug Pricing Not Waived........ WAIVED.
adolescent dosage (3 dose File.
schedule), for intramuscular use.
90746 Hepatitis B vaccine, adult ................ Drug Pricing Not Waived........ WAIVED.
dosage, for intramuscular use. File.
90747 Hepatitis B vaccine, dialysis or ................ Drug Pricing Not Waived........ WAIVED.
immunosuppressed patient dosage File.
(4 dose schedule), for
intramuscular use.
G0010 Administration of hepatitis B A............... PFS............. Not Waived........ WAIVED.
vaccine.
HIV Screening.................. 86689 HTLV or HIV antibody, A............... CLFS............ WAIVED............ WAIVED.
confirmatory test (e.g., Western
Blot).
G0432 Infectious agent antigen ................ CLFS............ WAIVED............ WAIVED.
detection by enzyme immunoassay
(EIA) technique, qualitative or
semi-qualitative, multiple-step
method, HIV-1 or HIV-2,
screening.
G0433 Infectious agent antigen ................ CLFS............ WAIVED............ WAIVED.
detection by enzyme-linked
immunosorbent assay (ELISA)
technique, antibody, HIV-1 or
HIV-2, screening.
G0435 Infectious agent antigen ................ CLFS............ WAIVED............ WAIVED.
detection by rapid antibody test
of oral mucosa transudate, HIV-1
or HIV-2, screening.
Annual Wellness Visit.......... GXXXA Annual wellness visit, including * Not Rated..... PFS............. N/A............... WAIVED.
PPPS, first visit.
GXXXB Annual wellness visit, including ................ PFS............. N/A............... WAIVED.
PPPS, subsequent visit.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ U.S. Preventive Services Task Force Recommendations.
A--The USPSTF strongly recommends that clinicians routinely provide [the service] to eligible patients. (The USPSTF found good evidence that [the
service] improves important health outcomes and concludes that benefits substantially outweigh harms.)
B--The USPSTF recommends that clinicians routinely provide [the service] to eligible patients. (The USPSTF found at least fair evidence that [the
service] improves important health outcomes and concludes that benefits outweigh harms.)
C--The USPSTF makes no recommendation for or against routine provision of [the service]. (The USPSTF found at least fair evidence that [the service] can
improve health outcomes but concludes that the balance of benefits and harms is too close to justify a general recommendation.)
D--The USPSTF recommends against routinely providing [the service] to asymptomatic patients. (The USPSTF found at least fair evidence that [the service]
is ineffective or that harms outweigh benefits.)

[[Page 40136]]

I--The USPSTF concludes that the evidence is insufficient to recommend for or against routinely providing [the service]. (Evidence that [the service] is
effective is lacking, of poor quality, or conflicting and the balance of benefits and harms cannot be determined.)

4. Extension of Waiver of Deductible to Services Furnished in
Connection With or in Relation to a Colorectal Cancer Screening Test
That Becomes Diagnostic or Therapeutic
Section 4104(c) of the ACA amends section 1833(b) of the Act to
waive the Part B deductible for colorectal cancer screening tests that
become diagnostic. Specifically, section 1833(b)(1) of the Act (as
amended by section 4104(c)(2) of the ACA) waives the deductible with
respect to a colorectal cancer screening test regardless of the code
that is billed for the establishment of a diagnosis as a result of the
test, or for the removal of tissue or other matter or other procedure
that is furnished in connection with, as a result of, and in the same
clinical encounter as a screening test. We are proposing that all
surgical services furnished on the same date as a planned screening
colonoscopy, planned flexible sigmoidoscopy, or barium enema be
considered to be furnished in connection with, as a result of, and in
the same clinical encounter as the screening test. In the event of a
legislative change to this policy (for example, a statutory change that
would waive the coinsurance for these related services in addition to
the deductible), we would reassess the appropriateness of this proposed
definition of services that are furnished in connection with, as a
result of, and in the same clinical encounter as the colorectal cancer
screening test that becomes diagnostic. We also note that the
beneficiary's annual deductible would likely be met when any surgical
procedure (related or not) is furnished on the same day as the
scheduled screening test.
We are proposing to implement this provision by creating a HCPCS
modifier that providers and practitioners would append to the
diagnostic procedure code that is reported instead of the screening
colonoscopy or screening flexible sigmoidoscopy HCPCS code or as a
result of the barium enema when the screening test becomes a diagnostic
service. The claims processing system would respond to the modifier by
waiving the deductible for all surgical services on the same date as
the diagnostic test. Coinsurance would continue to apply to the
diagnostic test and to other services furnished in connection with, as
a result of, and in the same clinical encounter as the screening test.

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

1. Section 5501(a): Incentive Payment Program for Primary Care Services
a. Background
Section 5501(a) of the ACA revises section 1833 of the Act by
adding a new paragraph (x), ``Incentive Payments for Primary Care
Services.'' Section 1833(x) of the Act states that in the case of
primary care services furnished on or after January 1, 2011 and before
January 1, 2016 by a primary care practitioner, there shall also be
paid on a monthly or quarterly basis an amount equal to 10 percent of
the payment amount for such services under Part B.
Section 1833(x)(2)(A) of the Act (as added by section 5501(a) of
the ACA) defines a primary care practitioner as: (1) A physician, as
described in section 1861(r)(1) of the Act, who has a primary specialty
designation of family medicine, internal medicine, geriatric medicine,
or pediatric medicine; or (2) a nurse practitioner, clinical nurse
specialist, or physician assistant as defined in section 1861(aa)(5) of
the Act, and in all cases, for whom primary care services accounted for
at least 60 percent of the allowed charges under Part B for the
practitioner in a prior period as determined appropriate by the
Secretary.
Section 1833(x)(2)(B) (as added by section 5501(a)(2)(B) of the
ACA) defines primary care services as those services identified by the
following HCPCS codes as of January 1, 2009 (and as subsequently
modified by the Secretary, as applicable):
99201 through 99215 for new and established patient office
or other outpatient evaluation and management (E/M) visits;
99304 through 99340 for initial, subsequent, discharge,
and other nursing facility E/M services; new and established patient
domiciliary, rest home (e.g., boarding home), or custodial care E/M
services; and domiciliary, rest home (e.g., assisted living facility),
or home care plan oversight services; and
99341 through 99350 for new and established patient home
E/M visits.
These codes are displayed in Table 39. All of these codes remain
active in CY 2010 and there are no other codes used to describe these
services.

Table 39--Primary Care Services Eligible for Primary Care Incentive
Payments in CY 2011
------------------------------------------------------------------------
CPT codes Description
------------------------------------------------------------------------
99201.................... Level 1 new patient office or other
outpatient visit.
99202.................... Level 2 new patient office or other
outpatient visit.
99203.................... Level 3 new patient office or other
outpatient visit.
99204.................... Level 4 new patient office or other
outpatient visit.
99205.................... Level 5 new patient office or other
outpatient visit.
99211.................... Level 1 established patient office or other
outpatient visit.
99212.................... Level 2 established patient office or other
outpatient visit.
99214.................... Level 4 established patient office or other
outpatient visit.
99215.................... Level 5 established patient office or other
outpatient visit.
99304.................... Level 1 initial nursing facility care.
99305.................... Level 2 initial nursing facility care.
99306.................... Level 3 initial nursing facility care.
99307.................... Level 1 subsequent nursing facility care.
99308.................... Level 2 subsequent nursing facility care.
99309.................... Level 3 subsequent nursing facility care.
99310.................... Level 4 subsequent nursing facility care.
99315.................... Nursing facility discharge day management;.
30 minutes.
99316.................... Nursing facility discharge day management;
more than 30 minutes.
99318.................... Other nursing facility services; evaluation
and management of a patient involving an
annual nursing facility assessment.
99324.................... Level 1 new patient domiciliary, rest home,
or custodial care visit.

[[Page 40137]]

99325.................... Level 2 new patient domiciliary, rest home,
or custodial care visit.
99326.................... Level 3 new patient domiciliary, rest home,
or custodial care visit.
99327.................... Level 4 new patient domiciliary, rest home,
or custodial care visit.
99328.................... Level 5 new patient domiciliary, rest home,
or custodial care visit.
99334.................... Level 1 established patient domiciliary, rest
home, or custodial care visit.
99335.................... Level 2 established patient domiciliary, rest
home, or custodial care visit.
99336.................... Level 3 established patient domiciliary, rest
home, or custodial care visit.
99337.................... Level 4 established patient domiciliary, rest
home, or custodial care visit.
99339.................... Individual physician supervision of a patient
in home, domiciliary or rest home recurring
complex and multidisciplinary care
modalities; 30 minutes.
99340.................... Individual physician supervision of a patient
in home, domiciliary or rest home recurring
complex and multidisciplinary care
modalities; 30 minutes or more.
99341.................... Level 1 new patient home visit.
99342.................... Level 2 new patient home visit.
99343.................... Level 3 new patient home visit.
99344.................... Level 4 new patient home visit.
99345.................... Level 5 new patient home visit.
99347.................... Level 1 established patient home visit.
99348.................... Level 2 established patient home visit.
99349.................... Level 3 established patient home visit.
99350.................... Level 4 established patient home visit.
------------------------------------------------------------------------

b. Proposed Primary Care Incentive Payment Program (PCIP)
For primary care services furnished on or after January 1, 2011 and
before January 1, 2016, we are proposing to provide a 10 percent
incentive payment to primary care practitioners, identified as the
following: (1) In the case of physicians, enrolled in Medicare with a
primary specialty designation of 08--family practice, 11--internal
medicine, 37--pediatrics, or 38--geriatrics; or (2) in the case of
nonphysician practitioners (NPPs), enrolled in Medicare with a primary
care specialty designation of 50--nurse practitioner, 89--certified
clinical nurse specialist, or 97--physician assistant; and (3) for whom
the primary care services displayed in Table 39 accounted for at least
60 percent of the allowed charges under Part B for such practitioner
during the time period that is specified by the Secretary, and proposed
in this section.
We are proposing to use the most current full year of claims data
to identify primary care practitioners eligible for the PCIP for a CY
based on the practitioner's primary specialty (as identified on claims)
and the practitioner's percentage of all allowed charges for the
primary care services displayed in Table 39. We commonly use the most
recent full year of claims data for purposes of establishing annual
payment amounts under a number of Medicare's fee-for-service programs.
A practitioner with a primary care specialty designation would be
eligible for the PCIP in a CY if the percentage of his or her allowed
charges for primary care services (identified in Table 39) on claims
where the practitioner is identified as one of the primary care
specialties described above meets or exceeds the 60 percent threshold.
We note that the practitioner's specialty is applied to the claim by
the claims processing system and reflects the physician's primary
specialty designation for purposes of Medicare enrollment on the date
the claim is processed, which would usually be close to the date on
which the service was actually furnished to the beneficiary. We would
identify primary care practitioners eligible for the PCIP for a year by
the individual physician/practitioner national provider identifier
(NPI) number using the most current full year of claims data available.
Therefore, for determining PCIP practitioner eligibility for CY
2011, we would use CY 2009 PFS claims data, processed through June 30,
2010. This would ensure analysis of about 99 percent of CY 2009 claims
to determine practitioner eligibility for PCIP payment beginning
January 2011. We note that the MMA changed the requirements for
critical access hospital (CAH) billing for practitioners' professional
services and, therefore, modifications were made to the Medicare claims
processing system to require CAHs to identify the practitioner
furnishing a service on the CAH claim for that professional service.
However, because the rendering practitioner has only been identified on
CAH claims since July 1, 2009, for the first year of the PCIP we are
proposing to identify eligible practitioners using only 6 months of CAH
data for those CAHs paid under the optional method. Thereafter, we
would update the list of practitioners eligible for the PCIP annually
based on the most recent available full year of PFS and CAH claims
data.
To the extent practitioners were paid under the PFS during the
historical claims data year for some primary services and, for other
services, CAHs were paid under the optional method for those same
practitioners' professional services, we would aggregate the historical
claims data from all settings by the practitioner's NPI in order to
determine whether the practitioner is eligible for PCIP payments. We
note that for all practitioners (both practitioners paid under the PFS
and practitioners for whose professional services CAHs are paid under
the optional method), the period of claims data used for the annual
determination of the primary care service percentage of allowed charges
with a practitioner specialty of primary care would lag the PCIP
payment year by 2 years (for example, CY 2010 claims data would be used
for the CY 2012 PCIP). This 2-year lag is consistent with other areas
of the Medicare program where we rely on information from claims data
to inform payment in a future year, such as the use of CY 2009 PFS
utilization data in the establishment of certain aspects of CY 2011 PFS
payment rates.
Under the proposed PCIP eligibility determination method, it would
be necessary to revise the list of eligible practitioners based on
updated claims data regarding primary specialty designation and the
percentage of a practitioner's allowed charges for primary care
services each year. The

[[Page 40138]]

revised list of practitioners developed prior to the beginning of the
next CY would establish a practitioner's eligibility for PCIP payments
for the full next CY. That is, once eligible for the PCIP for a given
CY, the practitioner would receive PCIP payments for primary care
services furnished throughout that full CY until we reassess the
practitioner's PCIP eligibility for the next year's payments. As a
result, a practitioner newly enrolling in Medicare during a CY would
not be eligible for the PCIP until Medicare claims data reflecting the
practitioner's primary care specialty and a percentage of allowed
charges for primary care services that equals or exceeds the 60 percent
threshold were available to establish the practitioner's eligibility
for the next PCIP year. Similarly, an enrolled practitioner's change in
primary specialty designation (either to or from a primary care
specialty) would not affect that practitioner's eligibility for the
PCIP until the practitioner's claims reflecting the change were
available for analysis in preparation for the next applicable CY PCIP.
Given the statutory requirement that a practitioner's primary care
services account for at least 60 percent of the allowed charges under
Part B for the practitioner in a prior period as determined by the
Secretary, we see no clear alternative methodologies that would allow
PCIP payments to be made to those practitioners newly enrolling in
Medicare without the 2-year lag in eligibility determination that was
described previously. However, given our general interest in supporting
primary care practitioners and entry into primary care practice by new
physicians and NPPs in order to ensure that Medicare beneficiaries have
access to these important services, we are seeking public comments on
alternative approaches for establishing PCIP eligibility for newly
enrolled practitioners that would be consistent with the statutory
requirement.
We plan to monitor changes in the primary specialties of enrolled
practitioners over time and would expect not to see significant changes
in the specialties of currently enrolled practitioners as a result of
the PCIP payments. We would expect that physicians changing their
primary specialty to one of the primary care specialties of family
medicine, internal medicine, geriatric medicine, or pediatric medicine
and who would be newly eligible for the PCIP would be furnishing
primary care services to the patients in their practices. Consistent
with our past policies, we would expect that physicians changing their
primary specialty designation under Medicare would make such changes
only so that their primary specialty designation is fully consistent
with the specific or unique type of medicine they practice. If we find
that physicians are changing their specialty designations (for example,
cardiologists who designate their primary specialty as internal
medicine, although they practice cardiology) in order to take advantage
of the PCIP payments, we would considering making future revisions to
eliminate such an outcome.
Consistent with the established Medicare HPSA physician bonus
program (Medicare Claims Processing Manual, Pub. 100-04, Chapter 12,
Section 90.4.4) and the proposed Health Professional Shortage Area
Surgical Incentive Payment Program (HSIP) described in section III.S.2.
of this proposed rule, we are proposing that PCIP payments would be
calculated by the Medicare contractors and made quarterly on behalf of
the eligible primary care practitioner for the primary care services
furnished by the practitioner in that quarter. The primary care
practitioners' professional services may be paid under the PFS based on
a claim for professional services or, where the practitioner has
reassigned his or her benefits to a CAH paid under the optional method,
to the CAH based on an institutional claim.
As discussed above, eligible primary care practitioners would be
identified on a claim based on the NPI of the rendering practitioner.
If the claim is submitted by a practitioner's group practice or a CAH,
the rendering practitioner's NPI must be included on the line-item for
the primary care service (identified in Table 39 above) in order for a
determination to be made regarding whether or not the service is
eligible for payment of the PCIP. We note that, in order to be eligible
for the PCIP, physician assistants, clinical nurse specialists, and
nurse practitioners must be billing for their services under their own
NPI and not furnishing services incident to physicians' services.
Regardless of the specialty area in which they may be practicing, these
specific NPPs would be eligible for the PCIP based on their specialty
if their historical percentage of allowed charges for primary care
services equals or exceeds the 60 percent threshold.
We note that section 1833(x)(4) of the Act (as added by section
5501(a) of the ACA) specifies ``there shall be no administrative or
judicial review under section 1869, 1878, or otherwise, respecting the
identification of primary care practitioners.'' We believe that the
inclusion of this language is intended to provide a means for the
practical implementation of this provision. That is, because we must
develop a process and identify primary care practitioners before we can
make payment under the PCIP to the eligible primary care practitioners,
the statute gives CMS the authority to make final determinations of
eligible primary care practitioners that are not subject to appeal
through the various channels normally available to practitioners, in
order for the timely payments under the PCIP to occur. In contrast, if
the determinations that CMS must make under this provision were subject
to appeal, the timely implementation of this provision could be
jeopardized and payments under the PCIP could be significantly delayed.
However, we do not believe that the ``no administrative or judicial
review'' clause precludes CMS from correcting errors resulting from
clerical or mathematical mistakes. Therefore, we note that
practitioners would have the opportunity to notify CMS of clerical or
mathematical errors that may have occurred during the process of
identifying eligible primary care practitioners for PCIP payment, and
which could result in a mistaken eligibility determination for the
PCIP.
In summary, under the PCIP beginning in CY 2011, we are proposing
to identify primary care practitioners based on their primary specialty
and percentage of allowed charges for primary care services that equals
or exceeds the 60 percent threshold based upon the most current full
year of Medicare claims data, which would be the claims data for 2
years prior to the incentive payment year (for example, CY 2009 claims
data processed through June 2010 would be used to identify primary care
practitioners for the CY 2011 PCIP). Practitioners identified as
eligible for the PCIP immediately prior to the PCIP payment year would
then receive quarterly incentive payments during the PCIP year equal to
10 percent of the payment amount for their primary care services under
Part B, in addition to the amount the primary care practitioner would
otherwise be paid for their professional services under Part B for
furnishing the primary care services. For example, primary care
practitioners identified in late CY 2010 for the CY 2011 PCIP would
receive quarterly PCIP payments in CY 2011 that equal 10 percent of the
Part B payment for the primary care services those practitioners
furnish during CY 2011.
We further note that section 1833(x)(3) of the Act (as added by
section 5501(a) of the ACA) authorizes

[[Page 40139]]

payment under the PCIP as an additional payment amount for specified
primary care services without regard to any additional payment for the
service under section 1833(m) of the Act. Therefore, an eligible
primary care physician furnishing a primary care service in a HPSA may
receive both a HPSA physician bonus payment under the established
program and a PCIP payment under the new program beginning in CY 2011,
but the PCIP payment is made without regarding to the HPSA physician
bonus payment amount. In addition, payments for outpatient CAH services
under section 1834(g)(2)(B) of the Act (as amended by section 5501(a)
of the ACA) are not affected by the PCIP payment amounts made to the
CAH on behalf of the primary care practitioner.
Accordingly, for CY 2011, we are proposing to add a new Sec.
414.80 to our regulations to specify the requirements of the PCIP.
Proposed Sec. 414.80(a) would define primary care practitioners and
primary care services. Proposed Sec. 414.80(b) would provide eligible
primary care practitioners a 10 percent incentive payment with respect
to primary care services, in addition to the amount that would
otherwise be paid for their professional services under Part B.
Quarterly PCIP payments would be made to eligible practitioners or to
CAHs paid under the optional method that are billing on behalf of
practitioners for their professional services for identified primary
care services.
2. Section 5501(b): Incentive Payment Program for Major Surgical
Procedures Furnished in Health Professional Shortage Areas
a. Background
Section 1833(m) of the Act provides for an additional 10 percent
incentive payment for physicians' services furnished 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. Section 5501(b) of the ACA revises
section 1833 of the Act by adding the new subparagraph (y), ``Incentive
Payments for Major Surgical Procedures Furnished in Health Professional
Shortage Areas.''
In the case of major surgical procedures furnished by a general
surgeon on or after January 1, 2011 and before January 1, 2016, in an
area designated under section 332(a)(1)(A) of the Public Health Service
Act as a geographic HPSA, there shall be paid on a monthly or quarterly
basis, an amount equal to 10 percent of the payment amount for eligible
services under Part B. Section 1833(y)(2)(A) of the Act (as added by
section 5501(b) of the ACA) defines a general surgeon as a physician
who is described in section 1861(r)(1) of the Act and who has
designated a CMS specialty code of 02--General Surgery as his or her
primary specialty code in the physician enrollment under section
1866(j) of the Act.
Section 1833(y)(2)(B) of the Act (as added by section 5501(b) of
the ACA) defines major surgical procedures as surgical procedures for
which a 10-day or 90-day global period is used for payment under the
PFS in section 1848(b) of the Act. In Addendum B to the CY 2010 PFS
final rule with comment period (74 FR 62017 through 62143), as
corrected in the correction notice (74 FR 65455 through 65457), we
identified 489 10-day global procedure codes and 3,796 90-day global
procedure codes for a total of 4,285 surgical procedure codes that
would have met the surgical procedure criteria for the incentive
payment if it were applicable in CY 2010.
b. Proposed HPSA Surgical Incentive Payment Program (HSIP)
For services furnished on or after January 1, 2011 and before
January 1, 2016, we are proposing to provide a 10 percent incentive
payment to general surgeons, identified by their enrollment in Medicare
with a primary specialty code of 02--general surgery, in addition to
the amount they would otherwise be paid for their professional services
under Part B, when they furnish a major surgical procedure in a
location that was defined by the Secretary as of December 31 of the
prior year as a geographic HPSA. As with the PCIP described above, we
do not believe that surgeons will change their Medicare specialty
designation in order to take advantage of the HSIP payments. However,
we will monitor the specialty designations of enrolled physicians, and
if we find that surgeons are changing their primary specialty
designation to general surgery in order to take advantage of the HSIP
payments, we would consider making future revisions to eliminate such
an outcome.
Consistent with the established Medicare HPSA physician bonus
program, we are proposing that these HSIP payments would be calculated
by the Medicare contractors based on the criteria for payment that we
have established as discussed earlier in this section, and payments
would be made quarterly on behalf of the qualifying general surgeon for
the qualifying major surgical procedures. The surgeons' professional
services may be paid under the PFS based on a claim for professional
services or, where the physician has reassigned his or her benefits to
a critical access hospital (CAH) paid under the optional method, to the
CAH based on an institutional claim.
Qualifying general surgeons would be identified on a claim for a
major surgical procedure based on the primary specialty of the
rendering physician, identified by his or her NPI, of 02--general
surgery. If the claim is submitted by a physician's group practice or a
CAH, the rendering physician's NPI must be included on the line-item
for the major surgical procedure in order for a determination to be
made regarding whether or not the procedure is eligible for payment
under the HSIP.
For HSIP payment to be applicable, the major surgical procedure
must be furnished in an area designated by the Secretary as of December
31 of the prior year as a geographic HPSA. We would provide HSIP
payments for major surgical procedures furnished by general surgeons in
the same HPSAs as we currently recognize for purposes of payment of all
physicians under the established Medicare HPSA physician bonus program
under section 1833(m) of the Act.
Each year, we publish a list of zip codes eligible for automatic
payment of the HPSA physician bonus payment at: http://www.cms.gov/hpsapsaphysicianbonuses/01_overview.asp. We are proposing to use the
same list of zip codes for automatic payment of the bonus for eligible
services furnished by general surgeons. We are also proposing to create
a new HCPCS code modifier to identify circumstances when general
surgeons furnish services in areas that are designated as HPSAs as of
December 31 of the prior year, but that are not on the list of zip
codes eligible for automatic payment. The new modifier would be
appended to the major surgical procedure on claims submitted for
payment, similar to the current process for payment of the Medicare
HPSA physician bonus when the geographic HPSA is not a HPSA identified
for automatic payment.
Consistent with the statutory requirement, we are proposing to
define major surgical procedures as those for which a 10-day or 90-day
global period is used for payment under the PFS. For CY 2011,
approximately 4,300 10-day and 90-day global surgical procedures codes
are identified in Addendum B to this proposed rule under the far right
column labeled ``Global'' and designated with ``010'' or ``090,''
respectively.

[[Page 40140]]

We further note that section 1833(y)(3) of the Act (as added by
section 5501(b)(1) of the ACA) authorizes payment under the HSIP as an
additional payment amount for specified surgical services without
regard to any additional payment for the service under section 1833(m)
of the Act. Therefore, a general surgeon may receive both a HPSA
physician bonus payment under the established Medicare HPSA physician
bonus program and an HSIP payment under the new program beginning in CY
2011, but the HSIP payment is made without regarding to the HPSA
physician bonus payment amount. In addition, payments for outpatient
CAH services under section 1834(g)(2)(B) of the Act (as amended by
section 5501(b) of the ACA) are not affected by the HSIP payment
amounts made to the CAH on behalf of the general surgeon.
Accordingly, for CY 2011, we are proposing to amend Sec. 414.2 by
adding the definitions of ``HPSA'' and ``major surgical procedure.'' We
are also proposing to revise Sec. 414.67 to move the existing
provisions to paragraph (a) to be grouped as the ``Health Professional
Shortage Area (HPSA) physician bonus program'' and adding a new
paragraph (b) for the ``HPSA surgical incentive payment program''
provisions. Proposed Sec. 414.67(b) would state that general surgeons
who furnish identified 10-day and 90-day global period surgical
procedures in an area designated by the Secretary as of December 31 of
the prior year as a geographic HPSA that is recognized by Medicare for
the HPSA physician bonus program as specified under renumbered Sec.
414.67(a)(1) would receive a 10 percent incentive payment in addition
to the amount that would otherwise be paid for their professional
services under Part B. Physicians furnishing services in areas that are
designated as geographic HPSAs prior to the beginning of the year but
not included on the published list of zip codes for which automated
HPSA surgical bonus payments are made should report a specified HCPCS
code modifier to receive the HSIP payment. Quarterly incentive payments
would be made to physicians or to CAHs paid under the optional method
that are billing on behalf of physicians for their professional
services.
3. Sections 5501(a) and (b) of the ACA and Payment for Critical Access
Hospital Professional Services Under the Optional Method
Section 1834(g) of the Act establishes the payment rules for
outpatient services furnished by a CAH. In 1999, section 403(d) of the
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113) (BBRA) amended
section 1834(g) of the Act to provide for two methods of payment for
outpatient services furnished by a CAH. Specifically, section
1834(g)(1) of the Act, as amended by the BBRA, specifies that the
amount of payment for outpatient services furnished by a CAH is equal
to the reasonable costs of the CAH in furnishing such services. (The
physician or other practitioner furnishing the professional service
receives payment under the PFS.) In the alternative, the CAH may make
an election, under section 1834(g)(2) of the Act, to receive amounts
that are equal to ``the reasonable costs'' of the CAH for facility
services plus, with respect to the professional services, the amount
otherwise paid for professional services under Medicare, less the
applicable Medicare deductible and coinsurance amount. The election
made under section 1834(g)(2) of the Act is sometimes referred to as
``method II'' or ``the optional method.'' Throughout this section of
this preamble, we refer to this election as ``the optional method.''
In 2000, section 202 of the Medicare, Medicaid and SCHIP Benefits
Improvement and Protection Act of 2000) (Pub. L. 106-554) (BIPA)
amended section 1834(g)(2)(B) of the Act to increase the payment for
professional services under the optional method to 115 percent of the
amount otherwise paid for professional services under Medicare. In
addition, in 2003 section 405(a)(1) of the MMA amended section
1834(g)(l) of the Act by inserting the phrase ``equal to 101 percent
of'' before the phrase ``the reasonable costs.'' However, section 405
of the MMA did not make a corresponding change to section 1834(g)(2)(A)
of the Act regarding the amount of payment for facility services under
the optional method. In 2010, Section 3128 of the ACA amended section
1834(g)(2)(A) of the Act by inserting the phrase ``101 percent of''
before ``the reasonable costs.''
Section 5501(a) of the ACA amends section 1833 of the Act by adding
a new paragraph (x), ``Incentive Payments for Primary Care Services,''
that authorizes additional Part B payments to primary care
practitioners for primary care services. Section 5501(b) of the ACA
further amends section 1833 of the Act by adding new paragraph (y),
``Incentive Payments for Major Surgical Procedures Furnished in Health
Professional Shortage Areas,'' that authorizes additional Part B
payments for major surgical procedures furnished by general surgeons in
HPSAs. Sections 5501(a)(3) and 5501(b)(3) of the ACA make conforming
amendments to section 1834(g)(2)(B) of the Act, which refers to payment
to the CAH for professional services under the optional method, by
adding at the end of section 1834(g)(2)(B) the following phrase,
``Subsections (x) and (y) of 1833 shall not be taken into account in
determining the amounts that would otherwise be paid pursuant to the
preceding sentence.'' As such, section 1834(g)(2)(B) of the Act (as
amended by sections 5501(a)(2) and 5501(b)(2) of the ACA) requires that
under the optional method, the 115 percent adjustment payment to the
CAH for professional services is calculated without considering the
incentive payments for primary care services furnished by primary care
practitioners and major surgical procedures furnished by general
surgeons in HPSAs as these terms are defined under sections 1833(x) and
(y) of the Act.
The regulations implementing section 1834(g)(2)(B) of the Act,
payment to the CAH for professional services under the optional method,
are in Sec. 413.70(b)(3)(ii)(B). In order to implement the amendments
to section 1834(g)(2)(B) of the Act as specified by sections 5501(a)(2)
and 5501(b)(2) of the ACA, we are proposing to amend the regulations in
Sec. 413.70(b)(3)(ii)(B) to state that, effective for primary care
services furnished by primary care practitioners and major surgical
procedures furnished by general surgeons in HPSAs on or after January
1, 2011 and before January 1, 2016, the additional incentive payment
amounts as specified in Sec. 414.67 and Sec. 414.80 are not included
in the determination of the payment for professional services made to
the CAH under the optional method. Accordingly, we are proposing that
payment for professional services to the CAH at 115 percent of the PFS
amount under the optional method would not take into account the
additional Part B incentive payments for primary services furnished by
primary care practitioners and major surgical procedures furnished by
general surgeons in HPSAs as provided in Sec. 414.67 and Sec. 414.80.

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

1. Background
Section 1877 of the Act also known as the physician self-referral
law: (1) Prohibits a physician from making referrals for certain
``designated health services'' (DHS) payable by Medicare to an entity
with which he or she (or an immediate family member) has a

[[Page 40141]]

financial relationship (ownership 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
DHS rendered as a result of a prohibited referral. The statute
establishes a number of specific exceptions and grants the Secretary
the authority to create regulatory exceptions that pose no risk of
program or patient abuse.
Section 1877(b)(2) of the Act, entitled ``In-office Ancillary
Services'' sets forth the exception that permits a physician in a solo
or group practice to order and provide designated health services
(DHS), other than most durable medical equipment and pretrial and
enteral nutrients, in the office of the physician or group practice,
provided that certain specific criteria are met. Under this exception,
the statute limits who can furnish the service, designates where the
service must be performed, and limits who can bill for the service. As
explained at the end of the statutory exception, the service may also
be subject to ``such other requirements as the Secretary may impose by
regulation as needed to protect against program or patient abuse.'' The
in-office ancillary services exception is interpreted at Sec.
411.355(b).
Section 6003 of the ACA amends section 1877(b)(2) of the Act by
creating a new disclosure requirement for the in-office ancillary
services exception to the prohibition on physician self-referral.
Specifically, section 6003 provides that, with respect to referrals for
magnetic resonance imaging (MRI), computed topography (CT), positron
emission topography (PET), and any other DHS specified under section
1877(h)(6)(D) that the Secretary determines appropriate, we must
promulgate a requirement that the referring physician inform a patient
in writing at the time of the referral that the patient may obtain the
service from a person other than the referring physician or someone in
the physician's group practice and provide the patient with a list of
suppliers who furnish the service in the area in which the patient
resides.
2. Proposed Disclosure Requirement
We are proposing to implement section 6003 of the ACA by amending
Sec. 411.355(b) to add new paragraph (b)(7). We describe below our
proposal for the new disclosure requirement.
a. Services That Trigger the Disclosure Requirement
Section 6003(a) of the ACA requires that the new disclosure
requirement apply to MRI, CT, and PET services as well as such other
radiology or imaging services included in the DHS category specified in
section 1877(h)(6)(D) of the Act that the Secretary determines
appropriate. We are considering whether to expand this disclosure
requirement to other radiology and imaging services. We are not
inclined to expand the disclosure requirement but we solicit comments
regarding whether other radiology or imaging services that fall under
section 1877(h)(6)(D) of the Act should be included in this
requirement, and if so, which services, and the purpose served by
extending the disclosure requirement to additional radiology or imaging
services.
b. General Disclosure Requirements
In Sec. 411.355(b)(7), we are proposing that the disclosure notice
should be written in a manner sufficient to be reasonably understood by
all patients and must, as the ACA requires, be given to the patient at
the time of the referral. This notice must indicate to the patient that
the services may be obtained from a person other than the referring
physician or his or her group practice and include a list of other
suppliers who provide the service being referred (MRI, CT, or PET).
We believe one purpose of the disclosure requirement is to inform a
patient's decision-making regarding his or her own care. The list of
suppliers provided to the patient by the physician is meant to serve as
a resource for the patient. Nothing on the disclosure notice or list of
suppliers may indicate to the patient that he or she must receive
imaging from a supplier on the list if not receiving the service from
the referring physician. The patient may receive the imaging service
from the referring physician, from a supplier identified on the notice,
or from another supplier of the patient's choice. The patient is free
to choose the supplier of the service.
c. List of Alternate Suppliers
Section 6003(a) of the ACA specifies that the referring physician
must provide a written list of ``suppliers (as defined in section
1861(d)).'' Section 1861(d) of the Act defines supplier as ``a
physician or other practitioner, a facility, or other entity (other
than a provider of services) that furnishes items or services under
this title.'' We are proposing that only suppliers be included on the
written list. We are not proposing to permit or require the list to
include ``providers of services'', which is defined in section 1861(u)
of the Act to include hospitals and critical access hospitals, among
other facilities. We are soliciting comments regarding whether
inclusion of providers of services on the written notice would benefit
patients in choosing an alternate entity for an imaging service by
providing more, and varied, options.
Section 6003(a) of the ACA also requires that the alternate
suppliers specified in the notice provided to the patient must furnish
the relevant services ``in the area in which [the patient] resides.''
We are aware that a patient may travel outside the area in which he or
she resides in order to receive medical care. We believe that requiring
an original written notice for each patient based upon a certain
distance from the patient's residence could place a significant
administrative burden on physicians practicing in a solo or group
practice. It would be impractical for a physician to prepare a separate
list for every area in which his or her patients reside. Additionally,
we believe that if a patient has traveled to see the referring
physician, the physician is located in an area convenient to the
patient and therefore, a referral within a certain distance of this
location would also be convenient for the patient.
In order to ease the administrative burden of creating multiple
lists while still implementing the requirements of the statute, we are
proposing that the suppliers included in this notice should be located
within a 25-mile radius of the physician's office location at the time
of the referral. We believe that a 25-mile radius is large enough in
most areas to generate a list of suppliers that will be useful to
patients. We note that we have used a 25-mile radius in other physician
self-referral exceptions, including the intra-family rural referrals
exception (Sec. 411.355(j)) and the physician recruitment exception
(Sec. 411.357(e)). Even if a patient resides more than 25 miles away,
we are proposing that it will be sufficient to provide a list of
suppliers located within a 25-mile radius of the physician's office
location at the time the referral is made. As discussed above, we
believe that measuring the distance from the physician's office
location will better serve patients who have perhaps traveled from long
distances to receive specialized treatment.
We are soliciting comments regarding the proposed 25-mile radius
requirement. In attempting to minimize confusion and burden related to
implementing this provision, we have proposed the same standard for
both urban and rural areas. We realize that in some areas 25 miles may
be too small to generate a sufficient list of other suppliers. We are
interested in hearing whether an alternative distance may be

[[Page 40142]]

more effective for urban or rural areas as well as what other criteria
should be considered in finalizing regulations for physicians in both
urban and rural areas.
In order to help a patient make an informed decision regarding
other options for the recommended imaging services, we propose that the
written notice include no fewer than 10 other suppliers. We considered
proposing that the list include the 10 closest suppliers, but we want
to allow physicians some flexibility in drafting the list of suppliers.
On the other hand, we are concerned that physicians located in large
metropolitan areas will draft a list that includes suppliers located
mostly at the edges of the 25-mile radius, thereby increasing the
chances that the patient will choose to receive imaging services from
the referring physician's practice. We are soliciting comments
regarding whether providing a list of 10 suppliers is sufficient or too
burdensome or susceptible to abuse and whether there are alternate
criteria we should use that would result in an adequate list of
convenient suppliers that does not impose an undue burden on physician
practices or a risk of abuse.
We recognize that there may be fewer than 10 other suppliers within
a 25-mile radius of the referring physician's office location. We
propose that, under these circumstances, the physician shall list all
of the other suppliers of the particular imaging service that are
present within a 25-mile radius of the referring physician's office
location, including up to 10 suppliers as required by these
regulations. If no other suppliers of the imaging services ordered
exist within the 25-mile radius of the physician's office location, the
physician need not provide a list of alternative suppliers, but must
still disclose to his or her patients that the patients may receive the
imaging services from another supplier. In this last situation, simply
providing this disclosure statement will satisfy the disclosure
requirement of this provision even though alternative suppliers are not
listed. The physician must maintain documentation of the disclosure.
We are proposing that the written notice be required to include
certain information about the listed suppliers in order to satisfy this
disclosure requirement. The list must include the name, address, phone
number, and distance from the physician's office location at the time
of the referral. We propose to require inclusion of the distance from
the physician's location to the other suppliers in order to emphasize
to the patient the relative convenience of the listed suppliers.
We are not proposing an exception to the disclosure requirement for
MRI, CT, or PET services furnished on an emergency or time-sensitive
basis. We are soliciting comments related to whether there are other
procedures or circumstances in which it may be difficult or impractical
to provide the written disclosure prior to provision of the imaging
services.
This proposal sets forth criteria that apply to the disclosure
requirement and list of alternative suppliers. These criteria are
intended to provide clear guidance as to how physicians may comply with
the new requirement of the in-office ancillary services exception. We
understand that there may be alternative ways to implement these
statutory requirements. One possible alternative is to only require a
``reasonable'' list of other suppliers with general requirements for
the disclosure to patients, while providing that if the physician meets
the more specific requirements set forth in this proposal, he or she
will be deemed to have a ``reasonable'' disclosure. We seek comments on
this specific alternative and any other alternative methods of
compliance that still satisfy the statutory requirements.
d. Documentation of Disclosure
In order to document that this disclosure requirement has been
satisfied, we propose that a record of the patient's signature on the
disclosure notification must be maintained as an element of the
patient's medical record. We are soliciting comments regarding the
burden of this recordkeeping requirement. We are also interested in
comments that suggest alternative means of recording that the
disclosure was made to the patient at the time of referral.
e. Effective Date
As discussed above, section 6003(a) of the ACA amends section
1877(b)(2) of the Act by instructing that the new disclosure
requirement be added as one of the additional requirements of the in-
office ancillary services exception. The last sentence of the statutory
exception preceding this amendment authorizes the Secretary to impose
``such other requirements * * * by regulation as needed to protect
against program or patient abuse'' (emphasis added). The amendment
specifies that ``[s]uch requirements shall * * * include a [disclosure]
requirement * * *'' In reading the last sentence of section 1877(b)(2)
together with the amendment, we do not believe that the amendment is
self-effectuating. Instead, the new disclosure requirement of section
6003 must be promulgated by regulation. Therefore, we believe that a
correct reading of section 6003(a) is that this amendment shall not be
effective until the Secretary promulgates a final regulation
implementing this new requirement and the regulation becomes effective.
We considered whether, pursuant to section 6003 of the ACA, the
final rule setting forth the disclosure requirement should apply
retroactively to all services furnished on or after January 1, 2010.
Given the structure of the amended in-office ancillary services
exception and the statute as a whole, however, we believe that
retroactive rulemaking is not required. Therefore, we are proposing
that the new disclosure requirement shall apply only to services
furnished on or after the effective date of the final regulation
implementing section 6003 of the ACA. We are proposing an effective
date of January 1, 2011 for the regulation implementing this provision.

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

1. Background
Sections 1814(a)(1), 1835(a), and 1842(b)(3)(B) of the Act
establish time limits for filing Medicare Part A and B claims. Prior to
the enactment of the ACA, under sections 1814(a)(1) and 1835(a) of the
Act, providers could file for Part A and Part B claims, respectively,
``* * * no later than the close of the period of 3 calendar years
following the year in which such services are furnished (deeming any
services furnished in the last 3 calendar months of any calendar year
to have been furnished in the succeeding calendar year) except that,
where the Secretary deems that efficient administration so requires,
such period may be reduced to not less than 1 calendar year * * *''.
Prior to the enactment of the ACA, CMS was authorized to establish a
minimum time limit for provider-submitted Part A and Part B claims of
at least 1 calendar year from the date of service, and a maximum time
limit not to exceed 4 years and 3 months after the date of service.
Additionally, prior to the enactment of the ACA, under section
1842(b)(3)(B) of the Act, Part B claims for physician and other
supplier services could be filed with Medicare ``* * * no later than
the close of the calendar year following the year in which such service
is furnished (deeming any service furnished in the last 3 months of any
calendar year to have been furnished in

[[Page 40143]]

the succeeding calendar year) * * *''. Therefore, prior to the
enactment of the ACA, CMS was authorized to establish a minimum time
limit for filing Part B claims of 15 months and a potential maximum of
27 months after the service was furnished, depending on what month of
the year the service was furnished.
Section 424.44 implements sections 1814(a)(1), 1835(a), and
1842(b)(3)(B) of the Act. In order to effectively administer the
Medicare Program, CMS, through regulations, modified the potential
minimum and maximum time periods for filing Part A claims so that Part
A claims would have the same time limits as Part B claims. At Sec.
424.44(a), CMS adopted the minimum time limit of 15 months and
potential maximum of 27 months after the service was furnished that was
permitted under section 1842(b)(3)(B) of the Act for Part B claims and
uniformly applied that 15 to 27 month time limit to both Part A and B
claims. Also, under Sec. 424.44(b), CMS allowed providers and
suppliers the opportunity to file claims after the 15 to 27 month
deadline for filing claims expired when the failure to file ``* * * was
caused by error or misrepresentation of an employee, intermediary,
carrier, or agent of the Department that was performing Medicare
functions and acting within the scope of its authority.''
2. Provisions of the ACA
Section 6404 of the ACA amended sections 1814(a)(1), 1835(a), and
1842(b)(3)(B) of the Act regarding Medicare fee-for-service (FFS)
claims for services furnished on or after January 1, 2010. Under
section 6404(b)(1) of the ACA, all claims for services furnished on or
after January 1, 2010 must be filed within 1 calendar year after the
date of service. The provisions of the ACA did not amend these sections
of the Act for services furnished before January 1, 2010. However,
section 6404(b)(2) of the ACA created a new requirement that claims for
services furnished before January 1, 2010 must be filed on or before
December 31, 2010. Thus, the statutory provisions prior to the
enactment of the ACA remain in effect for pre-2010 services, subject to
this new requirement. The practical effect of this change is that any
claims for services furnished before October 1, 2009 will follow the
current existing regulations. But for any services furnished during the
last three months of 2009, those claims must be filed no later than
December 31, 2010. For services furnished between October 1, 2009 and
December 31, 2009, providers and suppliers will only have 12-15 months
to file a claim, whereas before the ACA amendments, they would have had
an additional year to file their claims, or 24 to 27 months. Therefore,
in order to effectuate the changes made by the ACA, we are proposing to
amend Sec. 424.44 so that it is consistent with the amended statutory
provisions.
We are proposing to amend Sec. 424.44(a) by replacing the current
text with the requirement that claims for services provided on or after
January 1, 2010 must be submitted no later than the close of the period
ending 1 calendar year after the date of service. As noted above, any
services furnished before January 1, 2010 will still be subject to the
pre-existing statutory provisions. Therefore, we are proposing that for
pre-2010 services, the pre-existing regulatory structure will continue
to apply. For those services furnished before January 1, 2010, claims
must be filed on or before December 31 of the following year for
services that were furnished during the first 9 months of a calendar
year, and on or before December 31st of the second following year for
services that were furnished during the last 3 months of the calendar
year. However, for those services provided in the last three months of
2009, we propose that all claims for those services must be filed no
later than December 31, 2010.
Section 6404 of the ACA also gives the Secretary authority to
create exceptions to the 1 year timely filing period. In addition to
the existing exception to the timely filing requirement due to error or
misrepresentation by CMS, our contractors or agents, we propose to
create two new exceptions. First, we are proposing to create an
exception for those situations where a beneficiary becomes
retroactively entitled to Medicare benefits, but was not entitled at
the time the services were furnished. Second, we are proposing to
permit providers and suppliers to file claims after the time limit for
filing claims has expired in limited dual eligible Medicare/Medicaid
beneficiary situations.
The first new proposed exception at Sec. 424.44(b)(2) will permit
providers and suppliers to file claims after the time limit for filing
claims expires when CMS or our contractors determines that the
following conditions have been met:
At the time the service was furnished the beneficiary was
not entitled to Medicare; and
The beneficiary subsequently received notification of
Medicare entitlement effective retroactively to or before the date of
the furnished service.
In these situations, if CMS or one of our contractors determines
that both of the conditions in Sec. 424.44(b)(2) are met, then the
time to file a claim will be extended through the last day of the 6th
calendar month following the month in which the beneficiary received
notification of Medicare entitlement effective retroactively to or
before the date of the furnished service. Therefore, instead of the
beneficiary having to pay out of his or her own pocket for the service
or instead of the beneficiary's other insurance or some other payer
that is secondary to Medicare having to pay primary for the service,
Medicare may pay primary (or secondary or tertiary) for the service
since the beneficiary was entitled to Medicare (although retroactively)
at the time the service was furnished. All of Medicare's payment rules
including Medicare's Secondary Payer rules still apply in these
retroactive entitlement situations.
The second proposed new exception at Sec. 424.44(b)(3) will permit
providers and suppliers to file claims for dually-eligible
beneficiaries after the time limit for filing claims expires when CMS
or our contractors determine that all of the following conditions have
been met:
At the time the service was furnished the beneficiary was
not entitled to Medicare;
The beneficiary subsequently received notification of
Medicare entitlement effective retroactively to or before the date of
the furnished service; and
A State Medicaid agency recovered the Medicaid payment for
the furnished service from the provider or supplier 11 months or more
after the date of service.
This proposed exception applies to situations where a provider or
supplier bills (and receives payment from) Medicaid for the services
that a dual eligible Medicare/Medicaid beneficiary receives from the
provider or supplier. However, at the time the services were furnished,
the patient was not a dual eligible Medicare/Medicaid beneficiary yet
because Medicare entitlement was granted to the individual
retroactively after the service was actually furnished to the
individual. In addition, after the State Medicaid Program discovers
that the individual was granted Medicare entitlement retroactively, the
State Medicaid Program recovers its payments from the provider or
supplier for that individual's services instructing the provider or
supplier that Medicare should be billed for the services (not
Medicaid). If all three of the conditions outlined above occur within
11 months of the date the service was furnished, then the provider or
supplier will have enough time to bill Medicare for the

[[Page 40144]]

service. However, if Medicaid recovers their incorrect payment 11
months or more after the date the service was furnished, then the
provider or supplier will not have enough time to file a claim with
Medicare for the covered services because the time limit for filing
claims expires 1 calendar year after the date of service. In these
situations, if CMS or one of our contractors determines that all of the
conditions at Sec. 424.44(b)(3) are met, then the time to file a claim
will be extended through the last day of the 6th calendar month
following the month in which the State Medicaid agency recovered the
Medicaid payment for the furnished service from the provider or
supplier. Therefore, we are proposing that this exception along with
the aforementioned retroactive entitlement exception be added to Sec.
424.44.
We are proposing that for the one existing exception due to error
or misrepresentation by CMS, our contractors or agents (see Sec.
424.44(b)(1)) that no extension of time will be granted beyond 4 years
from the date of service. Limiting the exception for this timely filing
extension is consistent with current CMS policy. Moreover, we believe
that limiting this exception to 4 years after the date of service
strikes an appropriate balance between fairness and equity for
providers, suppliers, and beneficiaries and administrative finality for
the Medicare program. We recognize that limiting the exceptions process
could have potential impacts on those that wish to avail themselves of
this exception. Therefore, we are soliciting comments on how this
proposed four year limitation on the exception at Sec. 424.44(b)(1)
will impact providers, suppliers and beneficiaries and the frequency of
such occurrences. In addition, we are soliciting comments on whether
the proposed four year limitation for this particular exception is
appropriate, or what changes, if any, should be made to the limitation
on the exceptions process, including a rationale or justification for
an alternative time limitation.
CMS is not proposing a definition of the term ``date of service''
in this regulation. Yet we recognize that the definition of this term
is very important to providers, suppliers, and beneficiaries because
the ``date of service'' will ultimately determine when the claim has to
be filed in order to meet the new 1 calendar year requirement. In most
cases the ``date of service'' will be the date that the item or service
is actually furnished to the beneficiary; however, we recognize that
for many Part A and B services it is difficult to craft a uniform rule
that will apply a consistent date of service standard. It is our
intention to provide sub-regulatory guidance on what constitutes the
date of service for different Part A and B services. We are soliciting
comments regarding whether CMS should provide a regulatory definition
of ``date of service'' and, if so, how should it define this term.
We are also clarifying the exception that appears at Sec.
424.44(e). We are making clear that this regulation does not supersede
the restriction on retrospective billing that appears in Sec. Sec.
424.520 and 424.521. Under these provisions certain newly-enrolled
suppliers, such as physicians, non-physician practitioners, physician
or non-physician practitioner organizations and IDTFs, have only a
limited ability to submit claims for items or services furnished prior
to the effective date of their Medicare billing privileges even if
these claims would otherwise be considered timely. In addition, we want
to make clear that the one calendar year timely filing limit in section
424.44(a) does apply to any retrospective claims permitted by sections
424.520 and 424.521 and to claims for items or services furnished after
the effective date of the supplier's billing privileges.

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

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

[[Page 40145]]

purposes is set forth in section 1847(a)(1)(D)(ii)(II) of the Act which
states, ``[t]he Secretary may subdivide metropolitan statistical areas
with populations (based upon the most recent data from the Census
Bureau) of at least 8,000,000 into separate areas for competitive
acquisition purposes.'' We have identified three MSAs which, based on
the 2009 estimate from the Census Bureau data, could be subdivided
under section 1847(a)(1)(D)(ii)(II): (1) Chicago-Naperville-Joliet,
Illinois-Indiana-Wisconsin (IL-IN-WI) MSA with a population of
9,569,624; (2) Los Angeles-Long Beach-Santa Ana, California (CA) MSA
with a population of 12,872,808; and (2) New York-Northern New Jersey-
Long Island, New York-New Jersey-Pennsylvania (NY-NJ-PA) MSA with a
population of 19,006,798. We are proposing to divide these MSAs into
separate CBAs because we believe this approach would create more
manageable CBAs for contract suppliers to serve and allow more small
suppliers to be considered for participation in the program.
We considered certain factors when considering whether to propose
subdividing the MSAs with populations of at least 8,000,000. We
considered the geographic, social, and economic integration of each of
the MSAs. We apply all of these factors when grouping counties into
CBAs considered at a county level in each MSA and we believe it is also
appropriate to use these factors to determine: (1) Whether or not to
subdivide an MSA into separate CBAs, and (2) once the decision is made
to subdivide the MSA, how to subdivide the MSA. We considered the
following factors, generally in the order in which they are listed:
Geographic size of the MSA and the location of the
counties within each MSA compared to neighboring counties;
The driving distances from north to south and east to west
within each MSA and county;
The total population and the population of FFS Medicare
beneficiaries using DMEPOS items subject to competitive bidding;
The DMPOS allowed charges for items subject to competitive
bidding;
Comparably sized Round 1 and Round 2 MSAs based on
beneficiary counts and allowed charges for competitive bid items;
The interstate highway infrastructures of the MSAs; and
The current service patterns of suppliers in each county
of the MSA.
We used each of the factors to the extent practical to develop
initial proposals for reasonable and workable subdivisions of these
highly and densely populated MSAs. We believe consideration of these
factors will help us meet our goal of subdividing large and densely
populated MSAs and creating CBAs that are attractive to suppliers and
incentivize them to bid competitively for a contract. With this goal in
mind, we are trying to establish CBAs that provide for a good volume of
DMEPOS business for winning bidders, avoid obvious geographic
obstacles, mimic existing supplier service patterns, and, to the extent
possible, do not cross State lines. We believe the factors we have
selected will achieve those objectives.
We found that counties clearly delineate areas within a MSA, and as
we have done for Round 1 by identifying CBAs by counties and zip codes,
we are proposing to subdivide the MSAs at a county level. Since the
Office of Management and Budget (OMB) defines the MSAs by counties and
county-based subdivisions are stable, we use counties to subdivide
CBAs. When subdividing an MSA into counties, we consider counties that
share social, economic and geographic integration. The Chicago-
Naperville-Joliet IL-IN-WI MSA comprises 14 counties within 3 States:
Illinois, Indiana, and Wisconsin. This MSA has 207,106 beneficiaries
and $218,161,562 of DMEPOS allowed charges subject to the DMEPOS CBP.
Using the factors that we indentified, we would subdivide the Chicago-
Naperville-Joliet, IL-IN-WI MSA into four separate CBAs: Indiana-
Chicago Metro CBA; South-West-Chicago-Metro CBA; Central-Chicago Metro
CBA; and Northern-Chicago Metro CBA. The counties, DMEPOS allowed
charges, and the number of beneficiaries subject to competitive
bidding, and the general population that comprise each of these
proposed CBAs are shown in Table 40.

Table 40--Chicago-Naperville-Joliet, IL-IN-WI
----------------------------------------------------------------------------------------------------------------
DMEPOS
beneficiary count
CBA name/County DMEPOS allowed subject to General
Charles* competitive population **
bidding*
----------------------------------------------------------------------------------------------------------------
Indiana-Chicago Metro CBA:
Lake, IN........................................ $18,600,917 16,637 493,800
Jasper, IN...................................... 1,238,119 1,191 32,544
Newton, IN...................................... 580,842 393 13,933
Porter, IN...................................... 4,856,838 4,526 162,181
-----------------------------------------------------------
CBA TOTAL................................... 25,276,716 22,747 702,458
----------------------------------------------------------------------------------------------------------------
South-West-Chicago-Metro CBA:
Will, IL........................................ 13,523,185 12,522 681,097
Grundy, IL...................................... 1,417,511 1,405 47,958
Kendall, IL..................................... 978,215 1,052 103,460
DeKalb, IL...................................... 2,358,319 2,323 106,321
Kane, IL........................................ 9,273,504 9,082 507,579
-----------------------------------------------------------
CBA TOTAL................................... 27,550,734 26,384 1,446,415
----------------------------------------------------------------------------------------------------------------
Central-Chicago Metro CBA:
Cook, IL........................................ 124,854,279 116,360 5,294,664
DuPage, IL...................................... 16,945,135 18,492 930,528
-----------------------------------------------------------
CBA TOTAL................................... 141,799,414 134,852 6,225,192
----------------------------------------------------------------------------------------------------------------
Northern-Chicago Metro CBA:

[[Page 40146]]

Lake, IL........................................ 12,352,802 12,482 712,453
McHenry, IL..................................... 7,020,768 6,852 318,641
Kenosha, WI..................................... 4,161,128 3,789 164,465
-----------------------------------------------------------
CBA TOTAL................................... 23,534,698 23,123 1,195,559
-----------------------------------------------------------
MSA TOTAL................................... 218,161,562 207,106 9,569,624
----------------------------------------------------------------------------------------------------------------
* Source: Medicare claims from 10/1/08 to 9/30/09 for items subject to competitive bidding.
** Source: U.S. Census Bureau 2009 population estimates.

Figure 1 shows the boundaries of each proposed CBA.

BILLING CODE 4120-01-P

[[Page 40147]]

[GRAPHIC] [TIFF OMITTED] TP13JY10.452

BILLING CODE 4120-01-C

[[Page 40148]]

The Indiana-Chicago Metro CBA would include all four of the Indiana
counties that are part of the MSA. The other CBAs in the MSA would be
as follows:
The South-West-Chicago Metro CBA would include counties in
Illinois located to the south and west of the Central-Chicago Metro
CBA.
The Central-Chicago Metro CBA would include the city of
Chicago covering both Cook and DuPage counties.
The Northern-Chicago Metro CBA which is north of the
Central-Chicago Metro CBA subdivision that encompasses the city of
Chicago.
The Los Angeles-Long Beach-Santa Ana, CA MSA comprises two
counties: Los Angeles County and Orange County. The MSA has 173,631
fee-for-service beneficiaries receiving DMEPOS subject to competitive
bidding and $244,523,957 in DMEPOS allowed charges subject to the
DMEPOS CBP. We propose to subdivide the Los Angeles-Long Beach-Santa
Ana, CA MSA into two CBAs: Los Angeles County CBA and Orange County
CBA. The DMEPOS allowed amount and beneficiary count subject to
competitive bidding, and the general population that comprises these
two proposed CBAs are shown in Table 41.

Table 41--Los Angeles-Long Beach-Santa Ana, CA
----------------------------------------------------------------------------------------------------------------
DMEPOS
CBA name DMEPOS allowed beneficiary General
amount * count * population **
----------------------------------------------------------------------------------------------------------------
Los Angeles County CBA.................................... $201,244,121 137,408 9,862,049
-----------------------------------------------------
CBA Total............................................. 201,244,121 137,408 * 9,862,049
----------------------------------------------------------------------------------------------------------------
Orange County CBA......................................... 43,279,836 36,223 3,010,759
-----------------------------------------------------
CBA Total............................................. 43,279,836 36,223 3,010,759
-----------------------------------------------------
MSA Total......................................... 244,523,957 173,631 12,872,808
----------------------------------------------------------------------------------------------------------------
*Source: Medicare claims from 10/1/08 to 9/30/09 for items subject to competitive bidding.
**Source: U.S. Census Bureau 2009 population estimates.

Figure 2 shows the boundaries of each proposed CBA.

[[Page 40149]]

[GRAPHIC] [TIFF OMITTED] TP13JY10.002

As mentioned earlier, we propose to subdivide MSAs using counties,
and since the Los Angeles-Long Beach-Santa Ana, CA MSA only has two
counties, it offers only one subdivision along the county lines. Hence,
we have proposed to divide the MSA by the two counties creating two
CBAs.
We also propose to use the authority in section 1847(a)(3)(A) of
the Act to exclude certain areas within the Los Angeles-Long Beach-
Santa Ana, CA MSA. We believe these areas meet the requirement of
section 1847(a)(3)(A); they are rural areas with a low population
density within an urban area that are not competitive. In the final
rule CMS-1270 F Sec. 414.410(c) published in April 2007, we defined
the factors we consider when determining an area is considered a low
population density area or an area that would not be competitive. Based
on our review of the County Subdivision Population from the 2000 Census
from the U.S. Census Bureau, and using the factors set forth in the
April 2007 proposed rule, we propose to exclude the area of Los Angeles
County north of the San Gabriel mountains. This large geographic area
has a population of about 357,000, which is only 4 percent of the total
population of Los Angeles County, and is separated from the rest of the
county by the San Gabriel Mountains. The area north of the San Gabriel
Mountains has one major road and many terrains which make this area
remote. The majority of the population in LA County lives south of the
San Gabriel Mountains.
We believe that excluding this area will create a more manageable
CBA that still provides sufficient volume of DMEPOS items while
avoiding the geographic obstacle of the mountains. We believe including
this area in the DMEPOS CBP would result in fewer small suppliers being
considered for participation under the program, because we would not
expect small suppliers to have the resources to serve these more remote
areas. As a result, we expect that if this proposal is finalized it
will increase the number of bids submitted for the CBAs within the Los
Angeles-Long Beach-Santa Ana, CA MSA.
The Los Angeles County includes the two islands of Santa Catalina
and San Clemente off the west coast. We are proposing that the two
islands be included as a part of the Los Angeles County CBA in order to
ensure that

[[Page 40150]]

beneficiaries presently residing on these islands or who move to these
islands in the future are ensured access to competitively bid items by
contract suppliers. San Clemente Island is a military base with a
current population of zero, and therefore, the inclusion of this area
in the CBA would not result in an increase in the supplier service area
at this time.
We also propose to subdivide the New York-Northern New Jersey-Long
Island, NY-NJ-PA MSA into five CBAs. This MSA comprises 23 counties in
three States: New York, New Jersey and Pennsylvania. The MSA has
344,879 FFS beneficiaries receiving DMEPOS subject to the DMEPOS CBP
and $350,449,795 in allowed charges for DMEPOS items subject to
competitive bidding. The counties, DMEPOS allowed amount and
beneficiary count subject to competitive bidding and the general
populations that comprise each of these proposed CBAs are shown in
Table 42.

Table 42--New York-Northern New Jersey-Long Island, NY-NJ-PA
----------------------------------------------------------------------------------------------------------------
DMEPOS
CBA name/County DMEPOS allowed beneficiary count General
amount * * population **
----------------------------------------------------------------------------------------------------------------
Nassau-Brooklyn-Queens County Metro CBA:
Nassau, NY...................................... $30,888,889 29,857 1,351,625
Kings, NY....................................... 47,044,915 44,893 2,556,598
Queens, NY...................................... 33,406,236 32,798 2,293,007
-----------------------------------------------------------
CBA TOTAL................................... 111,340,040 107,548 6,201,230
----------------------------------------------------------------------------------------------------------------
Suffolk County CBA:
Suffolk, NY..................................... 31,950,806 31,476 1,512,224
-----------------------------------------------------------
CBA TOTAL................................... 31,950,806 31,476 1,512,224
----------------------------------------------------------------------------------------------------------------
Bronx-Manhattan NY CBA:
Bronx, NY....................................... 19,791,646 17,002 1,391,903
New York, NY.................................... 26,483,792 26,414 1,634,795
-----------------------------------------------------------
CBA TOTAL................................... 46,275,438 43,416 3,026,698
----------------------------------------------------------------------------------------------------------------
North-West NY Metro CBA:
Hudson, NJ...................................... 13,622,910 12,644 595,419
Bergen, NJ...................................... 19,948,837 20,278 894,840
Passaic, NJ..................................... 10,266,137 10,233 490,948
Putnam, NY...................................... 1,997,668 1,876 99,244
Rockland, NY.................................... 6,421,317 6,265 298,545
Essex, NJ....................................... 1,392,770 1,379 770,675
Morris, NJ...................................... 9,094,758 9,830 487,548
Sussex, NJ...................................... 2,905,240 2,819 150,909
Pike, PA........................................ 1,393,003 1,475 59,664
Westchester, NY................................. 16,971,210 17,220 953,943
-----------------------------------------------------------
CBA TOTAL................................... 84,013,850 84,019 4,801,735
----------------------------------------------------------------------------------------------------------------
Southern NY Metro CBA:
Hunterdon, NJ................................... 2,709,880 2,356 129,031
Richmond, NY.................................... 7,054,863 6,626 487,407
Union, NJ....................................... 10,466,838 10,654 523,249
Middlesex, NJ................................... 15,803,473 16,649 789,102
Monmouth. NJ.................................... 14,979,747 15,110 642,448
Ocean, NJ....................................... 20,913,022 21,600 569,111
Somerset, NJ.................................... 4,941,838 5,425 324,563
-----------------------------------------------------------
CBA TOTAL................................... 76,869,661 78,420 3,464,911
-----------------------------------------------------------
MSA TOTAL................................... 350,449,795 344,879 19,006,798
----------------------------------------------------------------------------------------------------------------
* Source: Medicare claims from 10/1/08 to 9/30/09 for items subject to competitive bidding.
** Source: U.S. Census Bureau 2009 population estimates.

Figure 3 shows the boundaries of each proposed CBA.

[[Page 40151]]

[GRAPHIC] [TIFF OMITTED] TP13JY10.003

The Nassau-Brooklyn-Queens CBA would be contiguous to Suffolk
County and would consist of the western part of Long Island and extend
to the eastern part of New York City. The Suffolk County CBA would
consist of the eastern part of Long Island and would encompass most of
Long Island. The Bronx-Manhattan NY CBA would include the entire area
of Manhattan and the Bronx. The North-West NY Metro CBA would be
situated north and west of New York City and would extend into New
Jersey and Pennsylvania. The Southern NY Metro CBA would include Staten
Island and would extend south to Ocean County, New Jersey.
At the March 17, 2010 meeting of the Program Advisory and Oversight
Committee (PAOC), we presented these proposals for subdividing these
three large MSAs. Various members of the PAOC had the following
suggestions for subdividing these MSAs:
Draw the boundaries of CBAs using the interstate highways
rather than the divisions by County;
Determine the current servicing areas of suppliers by MSA
and product category by using a scatter plot;
Use the Hudson River to divide the CBAs for the New York
MSA;
Carve out Pike and Putnam Counties from the New York MSA
due to their location and their low population density;
Include Manhattan as a separate CBA, due to its unique
nature as a self contained area;
Consider State licensure requirements when we divide the
MSAs into CBAs;
In the LA County CBA, exclude the area north of the San
Gabriel Mountains from the CBA; and
Consider traffic patterns when dividing the Los Angeles
MSAs into CBAs.
We are considering the PAOC's advice and recommendations and invite
further comments on the proposed subdivisions and PAOC's advice of
these three MSAs.
3. Exclusions of Certain Areas After Round 2 and Prior to 2015
The MIPPA amended the statute by requiring that competition under
Round 2 takes place in 2011 and by adding section 1847(a)(1)(D)(iii)
that requires CMS to exclude the following areas from the competitive
bid program for competitions after Round 2 of the program and before
2015:
Rural Areas;
Metropolitan Statistical Areas not selected under Round 1
or Round 2 with a population of less than 250,000; and
Areas with a low population density within a MSA that is
otherwise selected consistent with section 1847(a)(3)(A).
We propose to incorporate these requirements and timeframes in
proposed Sec. 414.410(c).
4. Expansion of Round 2
Section 6410(a) of the ACA expanded the areas to be included in
Round 2 of the program. As amended by section 6410(a) of the ACA,
section 1847(a)(1)(B)(i)(II) requires that the competition for Round 2
of the program occur in 91 of the largest MSAs in 2011. Prior to this
change, Round 2 was to include 70 MSAs. Section 1847(a)(1)(D)(ii)(II),
as added by section 6410(a), specifies that the additional 21 MSAs to
be included in Round 2 ``include the next 21 largest metropolitan
statistical areas by total population'' (after those already selected
Round 2). The 2009 annual population estimates from the U.S. Census
Bureau

[[Page 40152]]

are the most recent estimates of population that will be available
prior to the Round 2 competition mandated to take place in 2011. We
therefore propose to use these estimates to determine the additional 21
MSAs to be included in Round 2 of the program. Table 43 is a list of
the additional 21 MSAs added to Round 2.

Table 43--Additional 21 MSAs Added to Round 2
------------------------------------------------------------------------
2009 Total
21 Additional MSAs population
------------------------------------------------------------------------
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD............. 5,968,252
Washington-Arlington-Alexandria, DC-VA-MD-WV............ 5,476,241
Boston-Cambridge-Quincy, MA-NH.......................... 4,588,680
Phoenix-Mesa-Scottsdale, AZ............................. 4,364,094
Seattle-Tacoma-Bellevue, WA............................. 3,407,848
St. Louis, MO-IL........................................ 2,828,990
Baltimore-Towson, MD.................................... 2,690,886
Portland-Vancouver-Beaverton, OR-WA..................... 2,241,841
Providence-New Bedford-Fall River, RI-MA................ 1,600,642
Buffalo-Niagara Falls, NY............................... 1,123,804
Rochester, NY........................................... 1,035,566
Tucson, AZ.............................................. 1,020,200
Honolulu, HI............................................ 907,574
Albany-Schenectady-Troy, NY............................. 857,592
Worcester, MA........................................... 803,701
Oxnard-Thousand Oaks-Ventura, CA........................ 802,983
Springfield, MA......................................... 698,903
Bradenton-Sarasota-Venice, FL........................... 688,126
Poughkeepsie-Newburgh-Middletown, NY.................... 677,094
Stockton, CA............................................ 674,860
Boise City-Nampa, ID.................................... 606,376
------------------------------------------------------------------------

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

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

[[Page 40153]]

payment would continue in the current manner (utilizing revenue codes
and the interim per-visit payment rate methodology).
We further note that Medicare FQHCs would be required to adhere to
the information collection requirements in accordance with the content
and terms of their Medicare agreement as stipulated at Sec. 405.2434.
Failure to do so could result in the termination of the FQHC's Medicare
agreement in accordance with Sec. 405.2436 of the Medicare FQHC
regulations.
At this time, we do not foresee additional claims or other
information collection needs beyond collection of HCPCS codes.
Accordingly, we are not proposing additional information collection
requirements at this time. However, we invite public comment on any
additional information FQHCs believe may be necessary in order to
develop and implement a prospective payment system for Medicare FQHCs.

VI. Other Provisions of the Proposed Regulation

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

1. ``Carry Over'' ASP
The ASP payment methodology is authorized under section 303(c) of
the MMA which amends Title XVIII of the Act by adding section 1847A of
the Act. This section establishes the use of the ASP methodology for
payment for drugs and biologicals described in section 1842(o)(1)(C) of
the Act furnished on or after January 1, 2005. For purposes of this
part, the term ``drugs'' will hereafter refer to both drugs and
biologicals. The ASP methodology applies to most drugs furnished
incident to a physician's service, drugs furnished under the durable
medical equipment (DME) benefit, certain oral anti-cancer drugs, and
oral immunosuppressive drugs.
Sections 1847A and 1927(b) of the Act specify quarterly ASP data
reporting requirements for manufacturers. Specific ASP reporting
requirements are set forth in section 1927(b) of the Act. Although
delays in reporting have been uncommon, they create a risk that: (1)
Could result in the publication of payment limits which do not reflect
prices for drug products, and (2) could result in inaccurate payments,
the need for correction of files and unintentional ASP payment limit
variability.
As a result of these concerns, we are seeking to establish a
process for addressing situations where manufacturers fail to report
manufacturer ASP data in a timely fashion. This proposal is intended to
allow us to calculate and report ASP payment limits for a given quarter
within the existing timelines and does not affect the CMS or OIG's
authority to assess civil monetary penalties associated with untimely
or false ASP reporting. Manufacturers who misrepresent or fail to
report manufacturer ASP data will remain subject to civil monetary
penalties, as applicable and described in sections 1847A and 1927(b) of
the Act.
For the purposes of reporting under section 1847A of the Act, the
term manufacturer is defined in section 1927(k)(5) of the Act and means
any entity engaged in the following: production, preparation,
propagation, compounding, conversion or processing of prescription drug
product, either directly or indirectly by extraction from substances of
natural origin, or independently by means of chemical synthesis, or by
a combination of extraction and chemical synthesis; or packaging,
repackaging, labeling, relabeling, or distribution of prescription drug
products. The term manufacturer does not include a wholesale
distributor of drugs or a retail pharmacy licensed under State law.
However, manufacturers that also engage in certain wholesaler
activities are required to report ASP data for those drugs that they
manufacture. Note that the definition of manufacturers for the purposes
of ASP data reporting includes repackagers.
In accordance with section 1847A of the Act, manufacturers are
required to report data on the NDC level, which include the following
elements: the manufacturer ASP for drugs; the Wholesale Acquisition
Cost (WAC) in effect on the last day of the reporting period; the
number of ASP units sold; and the NDC. Currently, when manufacturer ASP
data or specific data elements are not available, we calculate an ASP
price for a billing code based on other applicable and available
pricing data from manufacturers for that drug. This includes WAC prices
from compendia if manufacturer data are not available for a billing
code. WAC prices tend to be higher than manufacturer ASP prices.
Although problems with reporting have been uncommon, we have
recently encountered situations where delays in manufacturer ASP
reporting could have led to significant ASP payment limit fluctuations
for highly utilized HCPCS codes. The greatest potential impact occurs
when data for high volume drug products within a HCPCS code that is
represented by a limited number of NDCs have not been reported and
cannot be included in the ASP volume weighted calculations described in
section 1847A(b) of the Act. For multisource drugs, such a situation is
likely to artificially increase or decrease Medicare ASP payment
limits, which in turn would affect beneficiary cost sharing amounts.
Such artificial fluctuations of the ASP payment limit could provide the
appearance of instability unrelated to market forces and could also
create access issues for providers and beneficiaries and confusion that
could ultimately affect product demand in the marketplace.
In order to minimize the possibility of ASP payment limit
fluctuations due to missing data, we are proposing a process,
consistent with our authority in section 1847A(c)(5)(B), to update
ASPs, based on the manufacturer's ASP calculated for the most recent
quarter for which data is available. Specifically, we are proposing to
carry over the previously reported manufacturer ASP for an NDC(s) when
missing manufacturer ASP and/or WAC data could cause significant
changes or fluctuations in ASP payment limits, and efforts by us to
obtain manufacturer reported ASP before Medicare ASP payment limits
publication deadlines have not been successful. For example, the most
recently reported manufacturer ASP prices for products on the market
would be carried over to the next quarter if an entire manufacturer's
submission was not received, manufacturer ASP price data for specific
NDCs has not been reported, or only WAC data has been reported;
however, NDCs that have zero sales or are no longer being manufactured
will not be subjected to this process. Also, we are proposing to apply
the carryover process only in cases where missing data results in a 10
percent or greater change in the ASP payment limit compared to the
previous quarter. Based on experience with ASP methodology since 2006,
we believe that this percentage threshold meets the definition of
significant. We are specifically seeking comments on our use of 10
percent as the threshold amount. In order to better represent actual
market trends, that is actual increases or decreases in manufacturer
reported ASP for the group of NDCs that represent the HCPCS code, we
are proposing that the manufacturer ASP payment amounts for the
individual NDCs that are carried over will be adjusted by the weighted
average of the change in the manufacturer ASP for the NDCs that were
reported during both the most recently available quarter and the
current quarter. We would appreciate comments about whether other
methods to account for

[[Page 40154]]

marketplace price trends to the carried over NDCs could be a better
substitute for applying the weighted average change. The previous
quarter's sales volumes will be carried over. An example of the
proposed process appears in Table 44.
We propose to apply this process to both single source drugs and
multiple source drugs. However, we are concerned that including single
source drugs in the carry over process could create an incentive for
non-reporting in situations where ASP prices for a single source drug
are falling and the manufacturer stops reporting ASP in an effort to
preserve a higher payment amount despite the risk of significant
statutory penalties for such an action. Therefore, we are specifically
requesting comments on this option and the effect of limiting this
proposal to multiple source drugs only. We will consider these comments
carefully before including both single source and multisource drugs in
this process.

Table 44--Proposed ASP Carryover Example for NDCs in a Specific HCPCS Code
--------------------------------------------------------------------------------------------------------------------------------------------------------
Previous Current
Qtr Previous Current Qtr Qtr Current Current Qtr Current Qtr Current Qtr
Previous quarter reported NDCs reported Qtr ASP reported reported Qtr ASP NDCs for volume for price for
volume price NDCs volume price calculation calculation calculation
--------------------------------------------------------------------------------------------------------------------------------------------------------
12345-6789-10..................................... 2000 $1.000 12345-6789-1 2500 $0.980 12345-6789-1 2500 $0.980
0 0
12345-6789-11..................................... 3000 1.000 12345-6789-1 1700 0.980 12345-6789-1 1700 0.980
1 1
12345-6789-12..................................... 5000 1.000 12345-6789-1 5500 0.980 12345-6789-1 5500 0.980
2 2
45678-1234-90..................................... 9000 1.100 (**) (**) (**) 45678-1234-9 9000 * 1.078
0
45678-1234-99..................................... 27000 1.100 (**) (**) (**) 45678-1234-9 27000 * 1.078
9
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This result is obtained by calculating the weighted average price change in NDCs available (that is, 12345-6789-10 thru 12345-6789-12) in both the
previous and current quarters, which is -2% [(0.98-1.00)*100], and applying that change to the previous quarter's manufacturer ASP for the missing
NDCs (that is, 45678-1234-90 and 45678-1234-99). The last two columns on the right would be used to calculate the weighted ASP and payment limits for
the 5 NDCs as a HCPCS code and accounts for missing prices for two high volume NDCs that represent most of the units sold within the HCPCS code and
therefore heavily influence the price calculation for the HCPCS code.
** Missing.

Our proposed approach is intended to establish a straightforward
and transparent solution that minimizes the effect of missing
manufacturer ASP data on Medicare ASP payment limits. We believe that
the availability of a mechanism to minimize non-market related price
fluctuations is desirable when efforts to obtain manufacturer's ASP
data by deadlines have not been successful. Our proposed mechanism is
not intended to alter or adjust reported prices and will not be used to
do so, but instead is intended to more accurately represent prices in
the marketplace if manufacturer ASP data for particular drug product(s)
is missing. Based on our experience with ASP reporting since 2004, we
do not believe that this process will be used frequently. However, as
we stated previously, recent concerns with delays in reporting of
manufacturer ASP data have led to this proposal.
We also remind manufacturers that significant civil monetary
penalties for not reporting or misrepresenting manufacturer ASP data
are authorized under sections 1847A(d)(4) and 1927(b)(3)(C) of the Act
and codified in regulations at Sec. 414.806. This proposal should not
be interpreted to mean that CMS and the OIG will refrain from
collecting such penalties for ASP reporting violations. Late or missing
reports will not be tolerated. This proposed policy would be
implemented regardless of any efforts by the OIG to enforce Civil
Monetary Penalties for non-reporting.
We would also like to remind manufacturers that additional specific
information about reporting ASP data to us is available. (See for
example.: 69 FR 17936, 69 FR 66299, 70 FR 70215, 71 FR 69665, 72 FR
66256, 73 FR 69751, and 74 FR 61904.) Also, Frequently Asked Questions
are posted in the Related Links Inside CMS Section of the ASP Overview
Web page at http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/01_overview.asp#TopOfPage, and the Downloads section of the same webpage
contains a link to the ASP Data Form (addendum A), which includes
examples of how ASP data must be reported and formatted for submission.
In particular, we would like to remind manufacturers to report sales
volume in quantities of NDC units sold (not vials or other units of
sale), and to use a zero (that is the character ``0'') instead of a
blank when reporting items that did not have any sales in a particular
quarter. In addition, manufacturers should report both the ASP and the
WAC for each NDC, the expiration date for the last lot sold, if
applicable, and the date of first sale for an NDC.
In summary, in situations where any current quarter's manufacturer
ASP data is unavailable, we are proposing, consistent with our
authority in section 1847A(c)(5)(B), to use the most recent data
available in the ASP payment limit calculation for single source and
multiple source drugs. We look forward to comments on this proposal and
the proposed changes to Sec. 414.904(i).
2. Partial Quarter ASP Data
Section 1847A(c)(4) of the Act states that ``In the case of a drug
or biological during an initial period (not to exceed a full calendar
quarter) in which data on the prices for sales for the drug or
biological is not sufficiently available from the manufacturer to
compute an average sales price for the drug or biological, the
Secretary may determine the amount payable under this section for the
drug or biological based on-- (A) the wholesale acquisition cost; or
(B) the methodologies in effect under this part on November 1, 2003, to
determine payment amounts for drugs or biological.''
When a new drug product enters the market, the first date of sale
rarely coincides with the beginning of a calendar quarter. Therefore,
the ASP data for many new drug products falls into partial quarter
status during the first quarter of sales. We are taking this
opportunity to describe our policy regarding how reported data is used
in the calculation of ASP payment limits during the first quarter of
sales for single source and multiple source drugs.
In accordance with section 1847A(c)(4)(A) of the Act, it has been
our policy to price new single source drugs at WAC for the first
quarter (unless the date of first sale is on the first day of the
quarter), and to add new

[[Page 40155]]

NDCs for multi source drugs and product line expansions of single
source drugs to the ASP calculation for a quarter as soon as these
products are reported.
We believe that the approaches for both single source and multi
source drugs are consistent with the statute, particularly section
1847A(c)(4) of the Act, and we intend to continue this policy.
3. Determining the Payment Amount for Drugs and Biological Which
Include Intentional Overfill
The methodology for developing Medicare drug payment allowances
based on the manufacturers' submitted ASP data is specified in 42 CFR
part 414, subpart K. We initially established this regulatory text in
the CY 2005 PFS final rule with comment period (69 FR 66424). We
further described the formula we use to calculate the payment amount
for each HCPCS billing code in the CY 2006 PFS proposed rule (70 FR
45844) and final rule with comment period (70 FR 70217). With the
enactment of the Medicare, Medicaid and SCHIP Extension Act (MMSEA)
(Pub. L. 110-173), the formula we use changed beginning April 1, 2008.
Section 112(a) of the MMSEA 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 drugs and biological. We addressed these
changes in the CY 2009 PFS proposed and final rules (73 FR 38520 and
69571, respectively). For each billing code, we calculate a volume-
weighted, ASP-based payment amount using the ASP data submitted by
manufacturers. Manufacturers submit ASP data to 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
20mg)/10mg = 8 billable units.
Beginning April 1, 2008, we use a two-step formula to calculate the
payment amount for each billing code. We sum the product of the
manufacturer's ASP and the number of units of the 11-digit NDC sold for
each NDC assigned to the billing and payment code, and then divide this
total by the sum of the product of the number of units of the 11-digit
NDC sold and the number of billing units in that NDC for each NDC
assigned to the billing and payment code.
The provisions in section 112 of the MMSEA were self-implementing
for services on and after April 1, 2008. Because of the limited time
between enactment and the implementation date, it was not practical to
undertake and complete rulemaking on this issue prior to implementing
the required changes. As a result of the legislation, we revised Sec.
414.904 to codify the changes to the determination of payment amounts
consistent with section 112 of the MMSEA.
Since that time, we have become aware of situations where
manufacturers, by design, include a small amount of ``intentional
overfill'' in containers of drugs. We understand that this
``intentional overfill'' is intended to compensate for loss of product
when a dose is prepared and administered properly. For instance, a
hypothetical drug is intended to be delivered at a 0.5 mg dose which
must be drawn into a syringe from a vial labeled for single use only.
The vial is labeled to contain 0.5 mg of product but actually contains
1.5 mg of product. The additional 1.0 mg of product is included, by
design, and is intended to be available to the provider so as to ensure
a full 0.5 mg dose is administered to the patient.
Our ASP payment calculations are based on data reported to us by
manufacturers. This data includes the ``volume per item.'' In our
``Appendix A--Average Sales Price Reporting Data Elements'' available
on our Web site at http://www.cms.gov/McrPartBDrugAvgSalesPrice/, we
define ``volume per item'' as ``The amount in one item. (ex., 10 ml in
one vial, or 500 tablets in one bottle) Enter ``1'' for certain forms
of drugs (for example, powders and sheets) when ``Strength of the
Product'' indicates the amount of the product per item.'' In order to
accurately calculate Medicare ASP payment limits under section 1847A,
we interpret ``the amount in one item'' to be the amount of product in
the vial or other container as indicated on the FDA-approved label.
It has been longstanding Medicare policy that in order to meet the
general requirements for coverage under the ``incident to'' provision,
services or supplies should represent an expense incurred by the
physician or entity billing for the services or supplies (See Medicare
Benefit Policy Manual (Publication 100-02), Chapter 15,
Sections 50.3, 60.1.A). Such physicians' services and supplies include
drugs and biological under section 1861(s)(2)(A). In accordance with
this policy, providers may only bill for the amount of drug product
actually purchased and that the cost of the product must represent an
expense to the physician.
We further understand that when a provider purchases a vial or
container of product, the provider is purchasing an amount of drug
defined by the product packaging or label. Any excess, free product
(that is, overfill) is provided without charge to the provider. In
accordance with our policy, providers may not bill Medicare for
overfill harvested from containers, including overfill amounts pooled
from more than one container, because that overfill does not represent
a cost to the provider. Claims for drugs and biological that do not
represent a cost to the provider are not reimbursable, and providers
who submit such claims may be subject to scrutiny and follow up action
by CMS, its contractors, and OIG.
Because such overfill is not included in the calculation of payment
limits under the methodology in section 1847A of the Act and does not
represent an incurred cost to a provider, we are proposing to update
our regulations at 42 CFR part 414 subpart J to clearly state that
Medicare ASP payment limits are based on the amount of product in the
vial or container as reflected on the FDA-approved label. We are also
proposing to update our regulations to clearly state that payment for
amounts of free product, or product in excess of the amount reflected
on the FDA-approved label, will not be made under Medicare.
4. WAMP/AMP
Section 1847A(d)(1) of the Act states that ``the Inspector General
of HHS shall conduct studies, which may include surveys to determine
the widely available market prices (WAMP) of drugs and biologicals to
which this section applies, as the Inspector General, in consultation
with the Secretary, determines to be appropriate.'' Section 1847A
(d)(2) of the Act states that, ``Based upon such studies and other data
for drugs and biologicals, the Inspector General shall compare the ASP
under this section for drugs and biologicals with--
The widely available market price (WAMP) for these drugs
and biologicals (if any); and
The average manufacturer price (AMP) (as determined under
section 1927(k)(1) of the Act) for such drugs and biologicals.''
Section 1847A(d)(3)(A) of the Act states that, ``The Secretary may
disregard the ASP for a drug or biological that exceeds the WAMP or the
AMP for such drug or biological by the applicable

[[Page 40156]]

threshold percentage (as defined in subparagraph (B)).'' Section
1847A(d)(3)(C) of the Act states that if the OIG finds that the ASP for
a drug or biological is found to have exceeded the WAMP or AMP by this
threshold percentage, the OIG ``shall inform the Secretary (at such
times as the Secretary may specify to carry out this subparagraph) and
the Secretary shall, effective as of the next quarter, substitute for
the amount of payment otherwise determined under this section for such
drug or biological, the lesser of--(i) the widely available market
price for the drug or biological (if any); or (ii) 103 percent of the
average manufacturer price * * *.''
The applicable threshold percentage is specified in section
1847A(d)(3)(B)(i) of the Act as 5 percent for CY 2005. For CY 2006 and
subsequent years, section 1847A(d)(3)(B)(ii) of the Act establishes
that the applicable threshold percentage is ``the percentage applied
under this subparagraph subject to such adjustment as the Secretary may
specify for the WAMP or the AMP, or both.'' In the CY 2006 (70 FR
70222), CY 2007 (71 FR 69680), CY 2008 (72 FR 66258), CY 2009 (73 FR
69752), and CY 2010 (74 FR 61904) PFS final rules with comment period,
we specified an applicable threshold percentage of 5 percent for both
the WAMP and AMP. We based this decision on the fact that data was too
limited to support an adjustment to the current applicable threshold
percentage.
For CY 2011, we are proposing to specify two separate adjustments
to the applicable threshold percentages. When making comparisons to the
WAMP, we propose the applicable threshold percentage to remain at 5
percent. The applicable threshold percentage for the AMP is addressed
below in this section of the preamble. Although the latest WAMP
comparison was published in 2008, the OIG is continuing to perform
studies comparing ASP to WAMP. Based on available OIG reports that have
been published comparing WAMP to ASP, we do not have sufficient
information to determine that the 5 percent threshold percentage is
inappropriate. As a result, we believe that continuing the 5 percent
applicable threshold percentage for the WAMP is appropriate for CY
2011. Therefore we are proposing to revise Sec. 414.904(d)(3) to
include the CY 2011 date.
As we noted in the CY 2010 PFS final rule with comment period (74
FR 61904), we understand that there are complicated operational issues
associated with this policy. We continue to proceed cautiously in this
area. We remain committed to providing stakeholders, including
providers and manufacturers of drugs impacted by potential price
substitutions with adequate notice of our intentions regarding such,
including the opportunity to provide input with regard to the processes
for substituting the WAMP for the ASP.
We welcome comments on our proposal to continue the applicable
threshold percentage at 5 percent for the WAMP for 2011.
5. AMP Threshold and Price Substitutions
a. AMP Threshold
As mentioned elsewhere in this proposal, when making comparisons of
ASP to AMP, the applicable threshold percentage for CY 2005 was
specified in statute as 5 percent. Section 1847A(d)(3) of the Act
allows the Secretary to specify adjustments to this threshold
percentage for years subsequent to 2005, and to specify the timing for
any price substitution. For CY 2006 (70 FR 70222), CY 2007 (71 FR
69680), CY 2008 (72 FR 66258), CY 2009 (73 FR 69752), and CY 2010 (74
FR 61904), the Secretary made no adjustments to the threshold
percentage; it remained at 5 percent.
For CY 2011, we are proposing with respect to AMP substitution to
apply the applicable percentage subject to certain adjustment such that
comparisons of ASP to AMP will only be made when the ASP exceeds the
AMP by 5 percent in two consecutive quarters immediately prior to the
current pricing quarter, or three of the previous four quarters
immediately prior to the current quarter.
In general, the ASP methodology reflects average market prices for
Part B drugs for a quarter. The ASP is based, in part, on the average
sales price to all purchasers for a calendar quarter; the AMP, in turn,
represents the average price paid by certain wholesalers. Accordingly,
while the ASP payment amount for a billing code may exceed its AMP for
that billing code for any given quarter, this may only reflect a
temporary fluctuation in market prices that would be otherwise
corrected in a subsequent quarter. We believe this fluctuation is
demonstrated by how few billing codes exceed the applicable threshold
percentage over multiple quarters. For example, in the Inspector
General's report ``Comparison of Average Sales Prices and Average
manufacturer Prices: An Overview of 2008'', only 33 of 482 examined
billing codes exceeded the applicable threshold percentage over
multiple quarters. This figure also included billing codes that
exceeded the threshold based on partial price comparisons (OEI-03-09-
00350). We are concerned that comparisons of a single quarter's ASP to
AMP will not adequately account for these temporary fluctuations and
underlying market trends. We believe that applying this threshold
percentage adjusted to reflect data from multiple quarters will account
for continuing differences between ASP and AMP, and allow us to better
identify those drugs that consistently trigger the substitution
threshold.
We further propose to apply the applicable AMP threshold percentage
only for those situations where AMP and ASP comparisons are based on
the same set of NDCs for a billing code (that is, ``complete'' AMP
data). Prior to 2008, the OIG calculated a volume-weighted AMP and made
ASP and AMP comparisons for only billing codes with such ``complete''
AMP data. In such comparisons, a volume-weighted AMP for a billing code
was calculated when NDC-level AMP data was available for the same NDCs
used by us to calculate the volume-weighted ASP. Beginning in the first
quarter of 2008, the OIG also began to make ASP and AMP comparisons
based on ``partial'' AMP data (that is, AMP data for some, but not all
NDCs in a billing code). For these comparisons, the volume-weighted AMP
for a billing code is calculated even when only such limited AMP data
is available. That is, the volume-weighted AMP calculated by the
Inspector General is based on fewer NDCs than the volume-weighted ASP
calculated by CMS. Moreover, volume-weighted ASPs are not adjusted by
the Inspector General to reflect the fewer number of NDCs in the
volume-weighted AMP.
Because the OIG's partial AMP data comparison does not reflect all
the NDCs used in our volume-weighted ASP calculations, we have some
concerns using the volume-weighted AMP. We believe that such AMP data
may not adequately account for market-related drug price changes and
may lead to the substitution of incomplete and inaccurate volume-
weighted prices. Such substitutions may impact physician and
beneficiary access to drugs. Therefore, in accordance with our
authority as set forth in section 1847A(d)(1) and (3) of the Act, we
are proposing the substitution of 103 percent of AMP for 106 percent of
ASP should be limited to only those drugs with ASP and AMP comparisons
based on the same set of NDCs. We are proposing to revise Sec.
414.904(d)(3) to reflect corresponding regulatory text changes, and we
welcome comments on all aspects of this proposal.

[[Page 40157]]

b. AMP Price Substitution
(1) Inspector General Studies
Section 1847A(d) of the Act requires the Inspector General to
conduct studies of the widely available market price for drugs and
biological to which section 1847A of the Act applies. However, it does
not specify the frequency of when such studies should be conducted. The
Inspector General has conducted studies comparing AMP to ASP for
essentially each quarter since the ASP system has been implemented.
Since 2005, the OIG has published 18 reports pertaining to the price
substitution issue (see Table 45), of which 16 have identified billing
codes with volume-weighted ASPs that have exceeded their volume-
weighted AMPs by the applicable threshold percentage.

Table 45--Published OIG Reports on Price Substitutions
------------------------------------------------------------------------
Date Report title
------------------------------------------------------------------------
7/2008................... A Comparison of Average Sales Price to Widely
Available Market Prices for Inhalation Drugs
(OEI-03-07-00190).
6/2006................... A Comparison of Average Sales Price to Widely
Available Market Prices: Fourth Quarter 2005
(OEI-03-05-00430).
4/2010................... Comparison of Third-Quarter 2009 Average
Sales Price and Average Manufacturer Prices:
Impact on Medicare Reimbursement for First
Quarter 2010 (OEI-03-10-00150).
2/2010................... Comparison of Average Sales Prices and
Average Manufacturer Prices: An Overview of
2008 (OEI-03-09-00350).
1/2010................... Comparison of Second-Quarter 2009 Average
Sales Price and Average Manufacturer Prices:
Impact on Medicare Reimbursement for Fourth
Quarter 2009 (OEI-03-09-00640).
8/2009................... Comparison of First-Quarter 2009 Average
Sales Price and Average Manufacturer Prices:
Impact on Medicare Reimbursement for Third
Quarter 2009 (OEI-03-09-00490).
8/2009................... Comparison of Fourth-Quarter 2008 Average
Sales Price and Average Manufacturer Prices:
Impact on Medicare Reimbursement for Second
Quarter 2009 (OEI-03-09-00340).
4/2009................... Comparison of Third-Quarter 2008 Average
Sales Prices and Average Manufacturer
Prices: Impact on Medicare Reimbursement for
First Quarter 2009 (OEI-03-09-00150).
2/2009................... Comparison of Second-Quarter 2008 Average
Sales Prices and Average Manufacturer
Prices: Impact on Medicare Reimbursement for
Fourth Quarter 2008 (OEI-03-09-00050).
12/2008.................. Comparison of First-Quarter 2008 Average
Sales Price and Average Manufacturer Prices:
Impact on Medicare Reimbursement for Third
Quarter 2008 (OEI-03-08-00530).
12/2008.................. Comparison of Average Sales Prices and
Average Manufacturer Prices: An Overview of
2007 (OEI-03-08-00450).
8/2008................... Comparison of Fourth-Quarter 2007 Average
Sales Price and Average Manufacturer Prices:
Impact on Medicare Reimbursement for Second
Quarter 2008 (OEI-03-08-00340).
5/2008................... Comparison of Third-Quarter 2007 Average
Sales Price and Average Manufacturer Prices:
Impact on Medicare Reimbursement for First
Quarter 2008 (OEI-03-08-00130).
12/2007.................. Comparison of Second-Quarter 2007 Average
Sales Price and Average Manufacturer Prices:
Impact on Medicare Reimbursement for Fourth
Quarter 2007 (OEI-03-08-00010).
9/2007................... Comparison of First-Quarter 2007 Average
Sales Price and Average Manufacturer Prices:
Impact on Medicare Reimbursement for Third
Quarter 2007 (OEI-03-07-00530).
7/2007................... Comparison of Third-Quarter 2006 Average
Sales Price and Average Manufacturer Prices:
Impact on Medicare Reimbursement for First
Quarter 2007 (OEI-03-07-00140).
7/2006................... Comparison of Fourth-Quarter 2005 Average
Sales Price and Average Manufacturer Prices:
Impact on Medicare Reimbursement for Second
Quarter 2006 (OEI-03-06-00370).
4/2006................... Monitoring Medicare Part B Drug Prices: A
Comparison of Average Sales Price to Average
Manufacturer Prices (OEI-03-04-00430).
------------------------------------------------------------------------

For example, in their latest report comparing AMP to ASP entitled
``Comparison of Third-Quarter 2009 Average Sales Price and Average
Manufacturer Prices: Impact on Medicare Reimbursement for First Quarter
2010'' (OEI-03-10-00150), the Inspector General found that of 356
billing codes with complete AMP data in the third quarter of 2009, 16
met the 5 percent threshold, that is, ASP exceeded AMP by at least 5
percent. Eight of these 16 billing codes were also eligible for price
adjustments in one or more of the previous four quarters, with three
drugs meeting the 5-percent threshold in all five quarters under
review. This Inspector General report further indicates that, ``If
reimbursement amounts for all 16 drugs had been based on 103 percent of
the AMPs, we estimate that Medicare expenditures would have been
reduced by over half a million dollars in the first quarter of 2010.''
These drugs and the savings found by the Inspector General constitute
potential savings for the Medicare program and beneficiaries.
(2) Regulatory, Judicial, and Legislative Changes
Since 2005, regulatory and legislative changes, as well as
litigation, have had a direct impact on this price substitution issue.
In 2007, we published a final rule that, in accordance with section
6001(c) of the Deficit Reduction Act, was designed to clarify the
definition of AMP (72 FR 39142). On December 19, 2007, the United
States District Court for the District of Columbia issued a preliminary
injunction in National Association of Chain Drug Stores et al. v.
Health and Human Services, Civil Action No. 1:07-cv-02017(RCL) that
enjoins CMS, in part, from posting any AMP data on a public Web site or
otherwise disclosing any AMP data to certain individuals or entities,
including, but not limited to, States or their representatives. (For
additional information on this injunction, please see our Web site at
http://www.cms.hhs.gov/DeficitReductionAct/Downloads/AMPPIOrder.pdf).
In 2010, section 2503 of ACA amended the definition of AMP, in
part, to reflect the average price paid for covered outpatient drugs:
(1) By wholesalers for drugs distributed to retail community
pharmacies; and (2) by retail community pharmacies that purchase drugs
directly from the manufacturer. The statute defines retail community
pharmacies, in part, as independent, chain, and supermarket pharmacies.
(3) Proposal
Overall, we are cognizant that any policy must reflect market-
related pricing changes. Additionally, we continue to recognize the
need, in light of the statute, to implement a price substitution
policy.

[[Page 40158]]

As discussed previously, section 1847A(d)(3) of the Act provides
authority for us to determine the applicable percentage subject to
``such adjustment as the Secretary may specify for the widely available
market price or the average manufacturer price, or both.'' We also have
authority to specify the timing of any ASP substitution. Consistent
with this authority, we are proposing a policy to substitute 103
percent of AMP for 106 percent of ASP where the applicable percentage
has been satisfied for a number of calendar quarters, as discussed
elsewhere in this rule. This policy would apply to both single source
and multiple source drugs and biologicals as defined respectively at
section 1847A(c)(6)(C) and (D) of the Act.
We acknowledge the limitation of the preliminary injunction on our
ability to publicly disclose AMP data and until that injunction is
modified, we will not implement this price substitution policy.
Because of the lack of data regarding WAMP to ASP comparisons, we
are explicitly excluding WAMP from this price substitution proposal
though we are proposing to maintain the WAMP threshold at 5 percent for
CY 2011 in a separate section of this rule. Overall, we are interested
in implementing a price substitution policy that reflects market-
related pricing changes and which focuses on those drugs that
consistently exceed the price substitution threshold over multiple
quarters. Unlike the OIG's AMP studies, the published WAMP studies have
recommended price substitutions based on specific timeframes that do
not illustrate whether such pricing discrepancies are singular or
consistent across multiple quarters. We will reconsider proposing a
policy for the substitution of WAMP at a later date.
(4) Timeframe for and Duration of Price Substitutions
As stated in Sec. 414.804(a)(5), a manufacturer's average sales
price must be submitted to CMS within 30 days of the close of the
quarter. We then calculate an ASP for each billing code as per the
process outlined at Sec. 414.904. Then, as per our CY 2005 PFS final
rule (69 FR 66300), we implement these new prices through program
instructions or otherwise at the first opportunity after we receive the
data, which is the calendar quarter after receipt.
Section 1847A(d)(3)(C) of the Act indicates that a price
substitution would be implemented ``effective as of the next quarter''
after the OIG has informed us that the ASP for a drug or biological
exceeds its AMP by the applicable percentage threshold. The OIG does
not receive new ASP prices for a given quarter until after we have
finalized them. Also, the results of their pricing comparisons are not
available until after the ASP prices for a given quarter have gone into
effect. Therefore, we anticipate that there will be a three quarter lag
for substituted prices from the quarter in which manufacturer sales
occurred, though this will depend in great part upon the timeframe in
which we obtain comparison data from the OIG. Table 46 provides an
example of this timeframe.

Table 46--Example Price Substitution Timeframe
----------------------------------------------------------------------------------------------------------------
Q2-10 Q3-10 Q4-10 Q1-11
----------------------------------------------------------------------------------------------------------------
ASP Process.................. Manufacturer Manufacturer submits CMS publishes Q4-10
sells drug. Q2-10 pricing data. payment limits.
CMS calculates ASP
payment limits for
Q4-10.
CMS calculates ASP
payment limits for
Q1-11. Compares
calculated payment
limits to OIG
substitute prices.
Publishes Q1-11
prices that may
include OIG
substitute prices
OIG Process.................. ............... .................... OIG receives Q4-10
pricing from CMS
and compares it to
Q2-10 volume-
weighted AMP data.
Notifies CMS of
eligible HCPCS for
substitution.
----------------------------------------------------------------------------------------------------------------

Given this lag in time, the ASP price for a billing code may have
decreased since the OIG's comparison. Therefore, consistent with our
authorities in section 1847A(d)(3) of the Act and our desire to provide
accurate payments consistent with these provisions, we believe that the
timing of any substitution policy should permit a final comparison
between the OIG's volume-weighted 103 percent AMP for a billing code
(calculated from the prior quarter's data) and the billing code's
volume-weighted 106 percent ASP, as calculated by CMS, for the current
quarter. This final comparison would assure the Secretary that the 106
percent ASP payment limit continues to exceed 103 percent of the OIG's
calculated AMP in order to avoid a situation in which the Secretary
would inadvertently raise the Medicare payment limit through this price
substitution policy. We specifically request comments on this proposal.
ASP payment limits are calculated on a quarterly basis as per
section 1847A(c)(5)(A) of the Act, and we are particularly mindful that
the ASP-based payment allowance for a billing code may change from
quarter to quarter. As such, we propose that any price substitution
would last for one quarter.
Overall, we believe that our proposal as outlined above to
substitute 103 percent of AMP for 106 percent of ASP provides us with a
viable mechanism for generating savings for the Medicare program and
its beneficiaries since it will allow Medicare to pay based off lower
market prices for those drugs and biologicals that consistently exceed
the applicable threshold percentage. Moreover, it will enable us to
address a programmatic vulnerability identified by the OIG. We welcome
comments on all aspects of our proposal.
We are also seeking comment on other issues related to the
comparison between ASP and AMP, such as--
Any effect of definitional differences between AMP and
ASP, particularly in light of the revised definition of AMP per ACA;
The impact of any differences in AMP and ASP reporting by
manufacturers on price substitution comparisons; and
Whether and/or how general differences and similarities
between AMP and manufacturer's ASP would affect comparisons between
these two.

[[Page 40159]]

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

Under the ambulance fee schedule, the Medicare program pays for
transportation services for Medicare beneficiaries when other means of
transportation are contraindicated and all other applicable medical
necessity requirements are met. Ambulance services are classified into
different levels of ground (including water) and air ambulance services
based on the medically necessary treatment provided during transport.
These services include the following levels of service:
For Ground--
++ Basic Life Support (BLS) (emergency and nonemergency).
++ Advanced Life Support, Level 1 (ALS1) (emergency and
nonemergency).
++ Advanced Life Support, Level 2 (ALS2).
++ Specialty Care Transport (SCT).
++ Paramedic ALS Intercept (PI).
For Air--
++ Fixed Wing Air Ambulance (FW).
++ Rotary Wing Air Ambulance (RW).
1. History of Medicare Ambulance Services
a. Statutory Coverage of Ambulance Services
Under sections 1834(l) and 1861(s)(7) of the Act, Medicare Part B
(Supplementary Medical Insurance) covers and pays for ambulance
services, to the extent prescribed in regulations, when the use of
other methods of transportation would be contraindicated by the
beneficiary's medical condition. The House Ways and Means Committee and
Senate Finance Committee Reports that accompanied the 1965 Social
Security Amendments suggest that the Congress intended that--
The ambulance benefit cover transportation services only
if other means of transportation are contraindicated by the
beneficiary's medical condition; and
Only ambulance service to local facilities be covered
unless necessary services are not available locally, in which case,
transportation to the nearest facility furnishing those services is
covered (H.R. Rep. No. 213, 89th Cong., 1st Sess. 37 and Rep. No. 404,
89th Cong., 1st Sess. Pt 1, 43 (1965)).
The reports indicate that transportation may also be provided from
one hospital to another, to the beneficiary's home, or to an extended
care facility.
b. Medicare Regulations for Ambulance Services
Our regulations relating to ambulance services are set forth at 42
CFR part 410, subpart B, and 42 CFR part 414, subpart H. Section
410.10(i) lists ambulance services as one of the covered medical and
other health services under Medicare Part B. Therefore, ambulance
services are subject to basic conditions and limitations set forth at
Sec. 410.12 and to specific conditions and limitations as specified in
Sec. 410.40 and Sec. 410.41. Part 414, subpart H, describes how
payment is made for ambulance services covered by Medicare.
2. Mileage Reporting
a. Background and Current Process for Reporting Ambulance Mileage
Historically, the Medicare fee-for-service (FFS) claims processing
system lacked the capability to accept and process fractional unit
amounts reported in any claim format. Therefore, the standard for
reporting units for ambulance mileage was to bill in whole number
increments. Thus, if the total units of service for ambulance mileage
included a fractional amount, providers and suppliers of ambulance
services (hereafter referred to collectively as ``providers and
suppliers'') were instructed to round the fraction up to the next whole
number. Claims billed with fractional units of service were, at that
time, returned as unprocessable as CMS' claims processing systems could
not accept nor adjudicate fractional unit amounts properly.
Consequently, in Change Request (CR) 1281 (Transmittal AB-00-88,
issued on September 18, 2000), we instituted an operational procedure
requiring whole-unit reporting of mileage on ambulance claims.
Specifically, we instructed providers and suppliers that ``If mileage
is billed, the miles must be whole numbers. If a trip has a fraction of
a mile, round up to the nearest whole number.'' Our instructions also
stated that ``1'' should be reported for trips totaling less than a
single mile. This was an operational instruction based on Medicare's
FFS system limitations and capabilities at the time, as our claims
processing systems were not capable of accepting and processing claims
submitted with fractional units of service. Since then, our claims
processing system functionality has evolved to the point where this
rounding process is no longer necessary for most ambulance transports,
as it is now possible for our FFS systems to capture and accurately
process fractional units on both paper and electronic forms.
Under our current instructions, providers and suppliers continue to
report loaded mileage as whole-number units on both paper and
electronic claims. Providers and suppliers utilize the appropriate
Healthcare Common Procedure Coding System (HCPCS) code for ambulance
mileage to report the number of miles traveled during a Medicare-
covered trip rounded up to the nearest whole mile at a minimum of 1
unit for the purpose of determining payment for mileage. Transmittal
AB-00-88 established a list of HCPCS codes accepted by Medicare for the
purpose of billing mileage. Providers and suppliers were instructed to
use these specific HCPCS codes and enter the total number of covered
miles in the ``units'' field of the claim form. For example, if a
covered trip from the point of pickup (POP) to the Medicare-approved
destination (see Sec. 414.40 for a list of approved destinations)
totaled 9.1 miles, the provider would enter the appropriate HCPCS code
for covered mileage and a ``10'' in the units field. Providers and
suppliers billing for trips totaling, for example, 0.5 covered miles,
would enter ``1'' in the units field along with the appropriate HCPCS
code for mileage.
b. Concerns Regarding the Potential for Inaccuracies in Reporting Units
and Associated Considerations
Often an ambulance provider will transport a distance that is
either not an exact whole number of miles or less than one whole mile
during a covered trip. Currently, providers and suppliers billing for
ambulance services must round up the total billable mileage to the
nearest whole mile for trips that include a fraction of a mile or less
than one whole mile. Under our current instructions, a provider or
supplier is required to bill as much as .9 of a mile more than what was
actually traveled.
We have been contacted by suppliers on several occasions with
concerns regarding our current instructions for reporting ambulance
mileage. Certain suppliers believe that our instructions require them
to bill inaccurately. One company in particular stated that they
routinely need to bill for trips totaling less than 1 mile. The
beneficiaries that are being transported by this company live in the
immediate vicinity of the facility to which they are being transported,
and therefore, the number of loaded miles for each trip totals
approximately one half of a mile. The company was concerned that since
Medicare requires that they enter a ``1'' in the units field of their
claims for mileage, they are being overpaid by

[[Page 40160]]

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

[[Page 40161]]

c. Billing of Fractional Units for Mileage
It is both reasonable and prudent that, in order to ensure accuracy
of payment, we facilitate and allow submission of the most accurate
information on all Medicare ambulance claims. Furthermore, since our
claims processing systems are currently capable of accepting and
processing fractional units of service, we believe that ambulance
mileage should be billed to and paid by Medicare in fractional amounts
to enhance payment accuracy. Based on all the considerations discussed
above, we are proposing to require that claims for mileage submitted by
ambulance providers and suppliers for an ambulance transport (ground
and air) be billed in fractional units, by rounding up to the nearest
tenth of a mile (with the exception discussed below). As discussed
above, we believe that requiring ambulance providers and suppliers to
round (and report) fractional mileage up to the next tenth of a mile
would allow us to provide for more accurate claims payment without
unduly burdening the ambulance community.
Therefore, we are proposing that, effective for claims with dates
of service on and after January 1, 2011, ambulance providers and
suppliers would be required to report mileage rounded up to the nearest
tenth of a mile for all claims for mileage totaling up to 100 covered
miles. Providers and suppliers would submit fractional mileage using a
decimal in the appropriate place (for example, 99.9). Since standard
vehicle mileage (analog, digital, and GPS) is or can be calculated
accurately to the nearest tenth of a mile, we are proposing that the
mileage billed to Medicare by ambulance providers and suppliers be
reported by rounding up to the next tenth of a mile.
Although the electronic claim formats can accommodate fractional
mileage when mileage is equal to or greater than 100 covered miles (for
example, 100.0), the paper claim cannot. Because the Form CMS-1500
paper claim currently only supports four characters (including the
decimal point) in the units field (Item 24G), we also propose that
mileage equal to or greater than 100 covered miles continue to be
reported in whole number miles on both paper and electronic claims. We
propose that providers and suppliers would round up fractional mileage
to the next whole number for mileage that exceeds 100 covered miles and
report the resulting whole number in the units' field. We would revise
the instructions set forth in our Claims Processing Manual to reflect
the revised procedures for submitting and paying claims for fractional
ambulance.

C. Clinical Laboratory Fee Schedule: Signature on Requisition

In the March 10, 2000 Federal Register, we published the ``Medicare
Program; Negotiated Rulemaking: Coverage and Administrative Policies
for Clinical Diagnostic Laboratory Services'' proposed rule (65 FR
13082) announcing and soliciting comments on the results of our
negotiated rulemaking committee tasked to establish national coverage
and administrative policies for clinical diagnostic laboratory tests
under Part B of Medicare. In our final rule published in the November
23, 2001 Federal Register (66 FR 58788), we explained our policy on
ordering clinical diagnostic laboratory services and amended Sec.
410.32 to make our policy more explicit. Our regulation at Sec.
410.32(a) states the requirement that ``[a]ll diagnostic x-ray tests,
diagnostic laboratory tests, and other diagnostic tests must be ordered
by the physician who is treating the beneficiary.'' In the November 23,
2001 final rule, we added paragraph (d)(2) to Sec. 410.32 to require
that the physician or qualified nonphysician practitioner (NPP) (that
is, clinical nurse specialists, clinical psychologists, clinical social
workers, nurse-midwives, nurse practitioners (NPs), and physician
assistants (PAs)) who orders the service must maintain documentation of
medical necessity in the beneficiary's medical record (66 FR 58809). In
the preamble discussions to the March 10, 2000 proposed rule and
November 23, 2001 final rule (65 FR 13089 and 66 FR 58802,
respectively), we noted that ``[w]hile the signature of a physician on
a requisition is one way of documenting that the treating physician
ordered the test, it is not the only permissible way of documenting
that the test has been ordered.'' In those preambles, we described the
policy of not requiring physician signatures on requisitions for
clinical diagnostic laboratory tests, but implicitly left in place the
existing requirements for a written order to be signed by the ordering
physician or NPP for clinical diagnostic laboratory tests, as well as
other types of diagnostic tests. We further stated in the preambles of
the proposed and final rules that we would publish an instruction to
Medicare contractors clarifying that the signature of the ordering
physician is not required for Medicare purposes on a requisition for a
clinical diagnostic laboratory test (65 FR 13089 and 66 FR 58802).
On March 5, 2002, we published a program transmittal implementing
the administrative policies set forth in the final rule, including the
following instruction: ``Medicare does not require the signature of the
ordering physician on a laboratory service requisition. While the
signature of a physician on a requisition is one way of documenting
that the treating physician ordered the service, it is not the only
permissible way of documenting that the service has been ordered. For
example, the physician may document the ordering of specific services
in the patient's medical record.'' (Transmittal AB-02-030, Change
Request 1998, dated March 5, 2002).
On January 24, 2003, we published a program transmittal in order to
manualize the March 5, 2002 Transmittal. (Transmittal 1787, Change
Request 2410, dated January 24, 2003). The cover note to the
transmittal states, ``Section 15021, Ordering Diagnostic Tests,
manualizes Transmittal AB-02-030, dated March 5, 2002. In accordance
with negotiated rulemaking for outpatient clinical diagnostic
laboratory services, no signature is required for the ordering of such
services or for physician pathology services.'' In the manual
instructions in that transmittal in a note, we stated: ``No signature
is required on orders for clinical diagnostic services paid on the
basis of the physician fee schedule or for physician pathology
services.'' The manual instructions did not explicitly reference
clinical diagnostic laboratory tests as the cover note did. Rather, the
transmittal seemed to extend the policy set forth in the Federal
Register (that no signature is required on requisitions for clinical
diagnostic laboratory tests paid under the Clinical Laboratory Fee
Schedule (CLFS)) to also apply to clinical diagnostic tests paid on the
basis of the Physician Fee Schedule (PFS) and physician pathology
services. In addition, the manual instructions used the term ``order''
instead of ``requisition,'' which some members of the industry have
asserted caused confusion.
When we transitioned from paper manuals to the current electronic
Internet Only Manual system, these manual instructions were
inadvertently omitted from the new Benefit Policy Manual (BPM).
In August 2008, we issued a program transmittal (Transmittal 94,
Change Request 6100, dated August 29, 2008) to update the BPM to
incorporate language that was previously contained in section 15021 of
the Medicare Carriers Manual. The reissued language states, ``No
signature is required on orders for clinical diagnostic tests paid on
the basis of the clinical laboratory fee schedule, the physician fee
schedule, or

[[Page 40162]]

for physician pathology services.'' Based on further review, we have
determined that there are no clinical diagnostic laboratory tests paid
under the PFS. After Transmittal 94 was published, we received numerous
inquiries from laboratory, diagnostic testing, and hospital
representatives who had questions about whether the provision applied
to all diagnostic services, including x-rays, MRIs, and other
nonclinical laboratory fee schedule diagnostic services.
To resolve any existing confusion surrounding the implementation of
the policy in 2001 and subsequent transmittals, we restated and
solicited public comments on our policy in the CY 2010 PFS proposed
rule (74 FR 33641). Our current policy is that a physician's signature
is not required on a requisition for clinical diagnostic laboratory
tests paid on the basis of the CLFS; however, it must be evident, in
accordance with our regulations at Sec. 410.32(d)(2) and (3), that the
physician ordered the services.
We note that we solicited and received comments on this signature
requirement during the notice and comment period for the March 10, 2000
proposed rule in the context of our proposal to add paragraph (d)(2)(i)
to Sec. 410.32 to require that the practitioner who orders a
diagnostic laboratory test must maintain documentation of medical
necessity in the beneficiary's medical record. The majority of comments
supported the adoption of a policy that the signature of the
practitioner on a requisition for a clinical diagnostic laboratory test
paid under the CLFS is not the only way of documenting that the test
has been ordered and, thus, should not be required provided such
documentation exists in an alternate form.
This policy regarding requisitions for clinical diagnostic
laboratory tests does not supersede other applicable Medicare
requirements (such as those related to hospital Conditions of
Participation (CoPs)) which require the medical record to include an
order signed by the physician who is treating the beneficiary. Nor do
we believe that anything in our policy regarding signatures on
requisitions for clinical diagnostic laboratory tests supersedes other
requirements mandated by professional standards of practice or
obligations regarding orders and medical records promulgated by
Medicare, the Joint Commission, or State law; nor do we believe the
policy would require providers to change their business practices.
We also restated and solicited public comment on our long-standing
policy consistent with the principle in Sec. 410.32(a) that a written
order for diagnostic tests including those paid under the CLFS and
those that are not paid under the CLFS (for example, that are paid
under the PFS or under the OPPS), such as X-rays, MRIs, and the TC of
physician pathology services, must be signed by the ordering physician
or NPP. That is, the policy that signatures are not required on
requisitions for clinical diagnostic laboratory tests paid based on the
CLFS applies only to requisitions (as opposed to written orders) (74 FR
33642).
Additionally, we solicited public comments about the distinction
between an order and a requisition (74 FR 33642). We note that an
``order'' as defined in our IOM, 100-02, Chapter 15, Section 80.6.1, is
a communication from the treating physician/practitioner requesting
that a diagnostic test be performed for a beneficiary. The order may
conditionally request an additional diagnostic test for a particular
beneficiary if the result of the initial diagnostic test ordered yields
to a certain value determined by the treating physician/practitioner
(for example, if test X is negative, then perform test Y). As set forth
in the CY 2010 MPFS final rule (FR 74 61930), an order may be delivered
via any of the following forms of communication:
A written document signed by the treating physician/
practitioner, which is hand-delivered, mailed, or faxed to the testing
facility.
A telephone call by the treating physician/practitioner or
his or her office to the testing facility.
An electronic mail, or other electronic means, by the
treating physician/practitioner or his or her office to the testing
facility.
If the order is communicated via telephone, both the treating
physician/practitioner, or his or her office, and the testing facility
must document the telephone call in their respective copies of the
beneficiary's medical records.
In the proposed rule (74 FR 33642), we defined a ``requisition'' as
the actual paperwork, such as a form, which is provided to a clinical
diagnostic laboratory that identifies the test or tests to be performed
for a patient. It may contain patient information, ordering physician
information, referring institution information, information about where
to send reports, billing information, specimen information, shipping
addresses for specimens or tissue samples, and checkboxes for test
selection. We believe it is ministerial in nature, assisting
laboratories with billing and handling of results, and serves as an
administrative convenience to providers and patients. We believe that a
written order, which may be part of the medical record, and the
requisition are two different documents, although a requisition that is
signed may serve as an order. We welcomed comments from the public
about the distinction between requisitions and orders.
During the proposed and final rulemaking process for CY 2010, we
received numerous comments on these issues, including, among others:
Expressions of continued confusion over the difference between an
``order'' and a ``requisition''; requests that CMS develop a single
policy for all outpatient laboratory services, without the distinction
for those paid under the CLFS or the PFS; and concerns about reference
laboratory technicians who felt compelled to perform a test in order to
protect the viability of the specimen although they did not have the
proper documentation. See 74 FR 61930-32 for a complete discussion of
the comments received and responses to these issues. In the CY 2010 PFS
final rule with comment period (74 FR 61931), we stated that, in light
of the issues and concerns raised during the comment period, and our
desire to create policy that will address the concerns in a meaningful,
clear and thoughtful way, we would continue to carefully consider the
issues of physician signatures on requisitions and orders and that we
plan to revisit these issues in the future paying particular attention
to the definitions of order and requisition.
Since the publication of the CY 2010 PFS final rule with comment
period, we have considered an approach that would address the concerns
raised. We are proposing to require a physician's or NPP's signature on
requisitions for clinical diagnostic laboratory tests paid on the basis
of the CLFS.
We believe that this policy would result in a less confusing
process. We believe that it would be less confusing because a
physician's signature would then be required for all requisitions and
orders, eliminating uncertainty over whether the documentation is a
requisition or an order, whether the type of test being ordered
requires a signature, or which payment system does or does not require
a physician or NPP signature. We also believe that it would not
increase the burden on physicians because it is our understanding that,
in most instances, physicians are annotating the patient's medical
record with either a signature or an initial (the ``order''), as well
as providing a signature on the paperwork that is provided to the
clinical diagnostic laboratory that identifies the

[[Page 40163]]

test or tests to be performed for a patient (the ``requisition'') as a
matter of course. Further, this policy would make it easier for the
reference laboratory technicians to know whether a test is
appropriately requested, and potential compliance problems would be
minimized for laboratories during the course of a subsequent Medicare
audit because a signature would be consistently required. As already
discussed, this minimizes confusion and provides a straightforward
directive for laboratories to meet.
We welcome comments on this proposal.

D. Discussion of Chiropractic Services Demonstration

Section 651 of MMA requires the Secretary to conduct a 2-year
demonstration to evaluate the feasibility and advisability of expanding
coverage for chiropractic services under Medicare. Medicare coverage
for chiropractic services is limited to manual manipulation of the
spine to correct a subluxation described in section 1861(r)(5) of the
Act. The demonstration expanded current Medicare coverage to include
``care for neuromusculoskeletal conditions typical among eligible
beneficiaries and diagnostic and other services that a chiropractor is
legally authorized to perform by the State or jurisdiction in which
such treatment is provided'' and was conducted in four geographically
diverse sites, two rural and two urban regions, with each type
including a Health Professional Shortage Area (HPSA). The two urban
sites were 26 counties in Illinois and Scott County, Iowa, and 17
counties in Virginia. The two rural sites were the States of Maine and
New Mexico. The demonstration, which ended on March 31, 2007, was
required to be budget neutral as section 651(f)(1)(B) of MMA mandates
the Secretary to ensure that ``the aggregate payments made by the
Secretary under the Medicare program do not exceed the amount which the
Secretary would have paid under the Medicare program if the
demonstration projects under this section were not implemented.''
In the CY 2006, 2007, and 2008 PFS final rules with comment period
(70 FR 70266, 71 FR 69707, 72 FR 66325, respectively), we included a
discussion of the strategy that would be used to assess budget
neutrality (BN) and the method for adjusting chiropractor fees in the
event the demonstration resulted in costs higher than those that would
occur in the absence of the demonstration. We stated BN would be
assessed by determining the change in costs based on a pre-post
comparison of Medicare costs for beneficiaries in the demonstration and
their counterparts in the control groups and the rate of change for
specific diagnoses that are treated by chiropractors and physicians in
the demonstration sites and control sites. We also stated that our
analysis would not be limited to only review of chiropractor claims
because the costs of the expanded chiropractor services may have an
impact on other Medicare costs.
In the CY 2010 PFS final rule with comment period (74 FR 61926), we
discussed the evaluation of this demonstration conducted by Brandeis
University and the two sets of analyses used to evaluate budget
neutrality. In the ``All Neuromusculoskeletal Analysis,'' which
compared the Medicare costs of all beneficiaries who received services
for a neuromusculoskeletal condition in the demonstration areas with
those of beneficiaries with similar characteristics from similar
geographic areas that did not participate in the demonstration, the
total effect of the demonstration to Medicare was $114 million. In the
``Chiropractic User Analysis,'' which compared the Medicare costs of
beneficiaries who used expanded chiropractic services to treat a
neuromusculoskeletal condition in the demonstration areas, with those
of beneficiaries with similar characteristics who used chiropractic
services as currently covered by Medicare to treat a
neuromusculoskeletal condition from similar geographic areas that did
not participate in the demonstration, the total effect of the
demonstration to Medicare was $50 million.
As explained in the CY 2010 PFS final rule, we based the BN
estimate on the ``Chiropractic User Analysis'' because of its focus on
users of chiropractic services rather than all Medicare beneficiaries
with neuromusculoskeletal conditions, including those who did not use
chiropractic services and who would not have become users of
chiropractic services even with expanded coverage for them (74 FR 61926
through 61927). Users of chiropractic services are most likely to have
been affected by the expanded coverage provided by this demonstration.
Cost increases and offsets, such as reductions in hospitalizations or
other types of ambulatory care, are more likely to be observed in this
group.
As explained in the CY 2010 PFS final rule (74 FR 61927), because
the costs of this demonstration were higher than expected and we did
not anticipate a reduction to the PFS of greater than 2 percent per
year, we finalized a policy to recoup $50 million in expenditures from
this demonstration over a 5-year period, that is, CYs 2010 through 2014
(74 FR 61927). Specifically, we are recouping $10 million for each such
year through adjustments to the chiropractic CPT codes. Payment under
the PFS for these codes will be reduced by approximately 2 percent. We
believe that spreading this adjustment over a longer period of time
will minimize its potential negative impact on chiropractic practices.
We are continuing the implementation of the required budget
neutrality adjustment by recouping $10 million in CY 2011. Our Office
of the Actuary estimates chiropractic expenditures in CY 2011 to be
approximately $524 million based on actual Medicare spending for
chiropractic services for the most recent available year. To recoup $10
million in CY 2011, the payment amount under the PFS for the
chiropractic CPT codes (that is, CPT codes 98940, 98941, and 98942)
will be reduced by approximately 2 percent. We are reflecting this
reduction only in the payment files used by the Medicare contractors to
process Medicare claims rather than through adjusting the RVUs.
Avoiding an adjustment to the RVUs would preserve the integrity of the
PFS, particularly since many private payers also base payment on the
RVUs.

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

Since August 1, 1983, payment for dialysis services furnished by
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. 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 patients on dialysis are separately billable.
Other than periodic updates, there were no significant changes to
the composite rate payment system until the implementation of the basic
case-mix adjusted composite rate payment system beginning January 1,
2005. The Congress has enacted a number of adjustments to the composite
rate since that time. As a result of the July 15, 2008 enactment of
MIPPA, we are required to implement an end-stage renal disease (ESRD)

[[Page 40164]]

bundled prospective payment system effective January 1, 2011 (referred
to as the ``ESRD PPS''). Below we briefly discuss the ESRD PPS, the
basic case-mix composite payment system, as well as our proposed
updates to the composite rate portion of the blended payment for CY
2011.
a. MIPPA--The ESRD PPS
On September 29, 2009, we published in the Federal Register a
proposed rule entitled ``End-Stage Renal Disease Prospective Payment
System'' (74 FR 49922). In that rule, we proposed to implement a case-
mix adjusted bundled PPS for renal dialysis services beginning January
1, 2011, in accordance with the statutory provisions set forth in
section 153(b) of MIPPA. The ESRD PPS would replace the current basic
case-mix adjusted composite payment system and the methodologies for
the reimbursement of separately billable outpatient ESRD services.
As explained in the ESRD PPS proposed rule (74 FR 50019), section
1881(b)(14)(E)(i) of the Act requires a 4-year transition (phase-in)
from the current composite payment system to the ESRD PPS, and section
1881(b)(14)(E)(ii) of the Act allows ESRD facilities to make a one-time
election to be excluded from the transition. Electing to be excluded
from the 4-year transition means that the ESRD facility receives
payment for renal dialysis services based on 100 percent of the payment
rate established under the ESRD PPS, rather than a blended rate under
each year of the transition based in part on the payment rate under the
current payment system and in part on the payment rate under the ESRD
PPS. As of January 1, 2011, ESRD facilities that elect to go through
the transition would be paid in the first year a blended amount that
will consist of 75 percent of the basic case-mix adjusted composite
payment system and the remaining 25 percent would be based on the ESRD
PPS payment. Thus, we must continue to update the basic case-mix
composite payment system for purposes of determining the composite rate
portion of the blended payment amount during the ESRD PPS 4-year
transition (CYs 2011 through 2013.) Accordingly, in this proposed rule,
we are proposing the composite rate portion of the blend, which
includes an update to the drug add-on and the application of the wage
index, as well as the payment amount for the first-year (CY 2011) of
the ESRD PPS transition. We anticipate that the final rule for the ESRD
PPS will be published this summer.
b. Medicare Modernization Act (MMA)--The Basic Case-Mix Adjusted
Composite Payment System
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 section 623(d) of the MMA, requires the establishment of a basic
case-mix adjusted composite payment system that includes services
comprising the composite rate and an add-on to the composite rate
component to account 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)(A) 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 imposed a budget neutrality (BN) requirement, so that aggregate
payments under the basic case-mix adjusted composite payment system
equal the aggregate payments for the same period if section 1881(b)(12)
of the Act did not apply.
1. CY 2005 Revisions
In the CY 2005 PFS final rule with comment period (69 FR 66319
through 66334), we implemented section 1881(b)(12) of the Act, as added
by section 623 of the MMA, and revised payments to ESRD facilities.
These revisions that were effective January 1, 2005, included an update
of 1.6 percent to the composite rate component of the payment system; 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.
Also, 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 (ASP+6).
In addition, effective April 1, 2005, we implemented the case-mix
adjustments to the composite rate for certain patient characteristics
(that is, age, low body mass index, and body surface area). For further
explanation of the development of the basic case-mix adjusted composite
payment system, see the CY 2005 PFS final rule with comment period (69
FR 66319 through 66334).
2. CY 2006 Revisions
In the CY 2006 PFS final rule with comment, we implemented
additional revisions to payments to ESRD facilities required under
section 623 of the MMA. We revised the drug payment methodology
applicable to drugs furnished by ESRD facilities. Effective January 1,
2006, all separately billed drugs and biologicals furnished by both
hospital-based and independent ESRD facilities were paid based on ASP+6
percent. The drug add-on adjustment was updated to 14.5 percent to
reflect the expected growth in expenditures for separately billable
drugs in CY 2006.
We also implemented a revised geographic adjustment authorized by
section 1881(b)(12)(D) of the Act. This adjustment revised the labor
market areas to incorporate the Core-Based Statistical Area (CBSA)
designations established by the Office of Management and Budget (OMB)
by providing a 4-year transition from the previous wage-adjusted
composite rates. Effective January 1, 2006, 25 percent of the payment
was based on the revised geographic adjustments, and the remaining 75
percent of payment was based on the metropolitan statistical area-based
(MSA-based) adjustments. Other adjustments included the elimination of
the wage index ceiling, and reducing the wage index floor to 0.8500, as
well as a revised labor portion of the composite rate to which the
geographic adjustment is applied.
In addition, section 5106 of the DRA (Pub. L. 109-171) provided for
a 1.6 percent update to the composite rate component of the basic case-
mix adjusted composite payment system, effective January 1, 2006. For
further explanation of the revisions to the basic case-mix adjusted
composite payment system, see the CY 2006 PFS final rule with comment
period (70 FR 70161 through 70771).
3. CY 2007 Revisions
In the CY 2007 PFS final rule with comment period, we implemented 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 of 0.5 percent to the drug add-on adjustment. Also,
section 103 of the MIEA-TRHCA (Pub. L. 109-432) established a 1.6
percent update to the composite rate portion of the payment system,
effective

[[Page 40165]]

April 1, 2007. The effect of this increase in the composite rate was a
reduction in the drug add-on adjustment to 14.9 percent, effective
April 1, 2007. As a result, the drug add-on adjustment to the composite
rate increased from 14.5 to 15.1 percent. Since we compute the drug
add-on adjustment as a percentage of the weighted average base
composite rate, increases in the composite rate portion of the payment
reduce the drug add-on percentage.
We provided an update to the wage index adjustments to reflect the
latest hospital wage data, including a BN adjustment factor. We also
implemented the second year of the transition to the CBSA-based wage
index, where 50 percent of the payment was based on the CBSA-based
geographic adjustments, and the remaining 50 percent of payment was
based on the MSA-based adjustments. In addition, we reduced the wage
index floor 0.85 to 0.80.
For further explanation of the development of the basic case-mix
adjusted composite payment system, see the CY 2007 PFS final rule with
comment period (71 FR 69681 through 69688).
4. CY 2008 Revisions
In the CY 2008 PFS final rule with comment period (72 FR 66280), we
implemented 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. In addition,
we updated the wage index adjustments to reflect the latest hospital
wage data, including a wage index BN adjustment of 1.055473 to the wage
index for CY 2008, and finally, for CY 2008, we implemented the third
year of the transition to the CBSA-based wage index, where 75 percent
of the payment was based on the the CBSA-based adjustments and the
remaining 25 percent of payment was based on the MSA-based adjustments.
In addition, we reduced the wage index floor from 0.80 to 0.75.
5. CY 2009 Revisions
For CY 2009, section 153(a) of the MIPPA updated sections
1881(b)(12)(G) and 1881(b)(12)(A) of the Act to revise payments to ESRD
facilities effective for services furnished on or after January 1, 2009
and January 1, 2010. The revisions included an update of 1 percent to
the composite rate, and the establishment of a site neutral composite
rate to both hospital-based and independent dialysis facilities that
reflects the labor share applicable to independent dialysis facilities
(53.711). The 1 percent increase to the independent dialysis facility's
CY 2008 composite rate of $132.49 resulted in a CY 2009 base composite
rate for hospital-based and independent dialysis facilities of $133.81.
The one percent increase in the composite rate portion of the payment
system effective January 1, 2009, reduced the drug add-on adjustment
from 15.5 to 15.2 percent.
Also, we updated the wage index adjustments to reflect the latest
available wage data, including a wage index BN adjustment of 1.056672
to the wage index for CY 2009. Finally, we completed the 4-year
transition to the CBSA-based geographic adjustments and reduced the
wage index floor from 0.7500 to 0.700. For further detail, regarding
the ESRD provisions, see the 2008 PFS final rule with comment period
(73 FR 61921 through 61926).
6. CY 2010 Revisions
For CY 2010, we updated the case-mix adjusted composite rate
payment system by updating the drug add-on component of the composite
rate system, as well as the wage index values used to adjust the labor
component of the composite rate. Specifically, to update the drug add-
on adjustment, we conducted a trend analysis of CY 2006 through 2008,
we implemented a zero growth update to the drug add-on adjustment to
the composite rates for 2010 required by section 1881(b)(12)(F) of the
Act.
Also, section 1881(b)(12)(G)(iv) of the Act, as added by section
153(a)(1) of the MIPPA, increased the composite rate by 1.0 percent for
ESRD services furnished on or after January 1, 2010. The 1.0 percent
increase resulted in a base composite rate of $135.15 per treatment and
reduced the drug add-on adjustment from 15.2 to 15.0 percent.
Lastly, we updated the wage index to reflect the latest available
wage data, including a revised BN adjustment factor of 1.057888. We
applied a reduction to the wage index floor from 0.700 to 0.6500.
For further detail, regarding the ESRD provisions, see the 2009
final rule with comment period (74 FR 33634 through 33639).
7. CY 2011 Proposals
For purposes of establishing the composite rate portion of the
blended payments under the ESRD PPS for those facilities electing to go
through the transition in CY 2011, CMS is proposing the following:
An update to the drug add-on adjustment to the composite
rate, using a refined methodology for projecting growth in drug
expenditures; and
An update to the wage index adjustment to reflect the
latest available wage data, including a revised BN adjustment.
A reduction in the ESRD wage index floor from 0.6500 to
0.600.
8. The Affordable Care Act
Section 1881(b)(14)(F) of the Act, as added by section 153(b) of
MIPPA and amended by section 3401(h) of ACA, governs the ESRD market
basket increase factor (that is, the ESRD market basket). As explained
in the ESRD PPS proposed rule (74 FR 4997), we described how the ESRD
Bundled market basket would be used to update the composite rate
portion of the ESRD payments during the PPS transition.
Ordinarily in updating the composite payment system, we discuss any
updates to the composite rate. However, beginning in 2011, the
composite payment would be used as part of the blended payments during
the ESRD PPS transition. Since the publication of the ESRD PPS proposed
rule, and as explained in the ESRD PPS final rule, which we anticipate
will be published this summer, we interpret this provision as requiring
that the composite rate portion of the blended payment amount be
increased in CY 2011 by the ESRD market basket percentage increase
factor (the ``ESRD market basket'').
For purposes of this proposed rule, for CY 2011, we anticipate an
estimate of a 2.5 percent increase to the ESRD composite rate portion
of the blended payment amount, resulting in a CY 2011 composite rate of
$138.53 ($135.15*1.025). This 2.5 percent increase does not apply to
the drug add-on adjustment to the composite rate. Also, we note that
the drug add-on percentage would be reduced from 15.0 to 14.7 as a
result of the proposed increase to the composite rate in CY 2011. (A
detailed explanation of the reduction to the drug add-on adjustment is
discussed below).
9. Proposed Update to the Drug Add-on Adjustment to the Composite Rate
a. Estimating Growth in Expenditures for Drugs and Biologicals in CY
2011
Section 1881(b)(12)(F) of the Act specifies that the drug add-on
increase must reflect ``the estimated growth in expenditures for drugs
and biologicals (including erythropoietin) that are separately billable
* * *.'' By referring to ``expenditures,'' 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.
Since we now have 4 years of drug expenditure data based on ASP
pricing,

[[Page 40166]]

we propose to continue estimating growth in drug expenditures based on
the trends in available data. Therefore, for CY 2011, we are proposing
to use trend analysis from drug expenditure data to update the per
treatment drug add-on adjustment. We then removed growth in enrollment
for the same time period from the expenditure growth so that the
residual reflects per patient expenditure growth (which includes price
and utilization combined).
We further propose to use the per patient growth update to the drug
add-on adjustment for CY 2011. To estimate drug expenditure growth
using trend analysis, we looked at the average annual growth in total
drug expenditures between 2006 and 2009. First, we estimated the total
drug expenditures for all ESRD facilities in CY 2009. For this proposed
rule, we used the final CY 2006, through CY 2008 ESRD claims data and
the latest available CY 2009 ESRD facility claims, updated through
December 31, 2009 (that is, claims with dates of service from January 1
through December 31, 2009, that were received, processed, paid, and
passed to the National Claims History File as of December 31, 2009).
For the CY 2011 PFS final rule, we plan to use additional updated CY
2009 claims with dates of service for the same timeframe. This updated
CY 2009 data file will include claims received, processed, paid, and
passed to the National Claims History File as of June 30, 2010.
While the CY 2009 claims file used in this proposed rule is the
most current available, 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 2008 claims data, we are proposing to
inflate the CY 2009 drug expenditures to estimate the June 30, 2010
update of the 2009 claims file. We used the relationship between the
December 2008 and the June 2009 versions of 2008 claims to estimate the
more complete 2009 claims that will be available in June 2010 and
applied that ratio to the 2009 claims data from the December 2009
claims file. The net adjustment to the CY 2009 claims data is an
increase of 12.22 percent to the 2009 expenditure data. This adjustment
allows us to more accurately compare the 2008 and 2009 drug expenditure
data to estimate per patient growth. As stated earlier in this section,
we plan to use additional updated CY 2009 claims in the CY 2011 PFS
final rule.
Using the full-year 2009 drug expenditure figure, we calculated the
average annual change in drug expenditures from 2006 through 2009. This
average annual change showed an increase of 2.1 percent for this
timeframe. We propose to use this 2.1 percent increase to project drug
expenditures for both 2010 and 2011.
b. Estimating Per Patient Growth
Once we had the projected growth in drug expenditures from 2010 to
2011, which is what we believe that section 1881(b)(12)(F) of the Act
requires us to use to update the drug add-on adjustment. To calculate
the per patient growth between CYs 2010 and 2011, we removed the
enrollment component by using the estimated growth in enrollment data
between CY 2010 and CY 2011. This was approximately 3.6 percent. To do
this, we divided the total drug expenditure change between 2010 and
2011 (1.021) by enrollment growth of 3.6 percent (1.036) for the same
timeframe. The result is a per patient growth factor equal to 0.986
(1.021/1.036 = 0.986). Thus, we are projecting a 1.4 percent decrease
in per patient growth in drug expenditures between 2010 and 2011.
c. 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
dollar amount of the CY 2006 growth by the projected growth in total
dialysis treatments 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
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. In the CY 2009 and 2010 PFS final rule with comment period
(73 FR 69755 through 69757 and 74 FR 61923), we applied a zero update
to per treatment drug add-on amount which left it at $20.33. As
discussed in detail below, for CY 2011, we are again proposing no
update to the per treatment drug add-on amount of $20.33 established in
CY 2008.
d. Proposed Update to the Drug Add-On Adjustment
As discussed previously in this section, we estimate a 2.1 percent
increase in drug expenditures between CY 2010 and CY 2011. Combining
this reduction with a 3.6 percent increase in enrollment, as described
above, we are projecting a 1.4 percent decrease in per patient growth
of drug expenditures between CY 2010 and CY 2011. Therefore, we are
projecting that the combined growth in per patient utilization and
pricing for CY 2011 would result in a negative update equal to 0.2
percent. However, similar to last year and as indicated above, we are
proposing a zero update to the drug add-on adjustment. We believe this
approach is consistent with the language under section 1881(b)(12)(F)
of the Act which states in part that ``the Secretary shall annually
increase'' the drug add-on amount based on the growth in expenditures
for separately billed ESRD drugs. Our understanding of the statute
contemplates ``annually increase'' to mean a positive or zero update to
the drug add-on. Therefore, we propose to apply a zero update, and to
maintain the $20.33 per treatment drug add-on amount for CY 2011.
e. Proposed Update to the Geographic Adjustments to the Composite Rate
The purpose of the wage index is to adjust the composite rates for
differing wage levels covering the areas in which ESRD facilities are
located. The wage indexes are calculated for each urban and rural area.
In addition, we generally have followed wage index policies 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.
f. Proposed 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

[[Page 40167]]

CBSA-based geographic area designations to develop revised urban/rural
definitions and corresponding wage index values for purposes of
calculating ESRD composite rates. The CBSA-based geographic area
designations are described in OMB Bulletin 03-04, originally issued
June 6, 2003, and is available online at http://www.whitehouse.gov/omb/bulletins/b03-04.html. In addition, OMB has published subsequent
bulletins regarding CBSA changes, including changes in CBSA numbers and
titles. We 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.
g. 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 ESRD wage index values for CY 2011 were developed from FY 2007 wage
and employment data obtained from the Medicare hospital cost reports.
As we indicated, the ESRD wage index values are calculated without
regard to geographic classifications authorized under sections
1886(d)(8) and (d)(10) of the Act and utilize pre-floor hospital data
that is unadjusted for occupational mix. We propose to use the same
methodology for CY 2011, with the exception that FY 2007 hospital data
would be used to develop the CY 2011 wage index values. For a detailed
description of the development of the proposed CY 2011 wage index
values based on FY 2007 hospital data, see the FY 2011 IPPS proposed
rule (75 FR 23944). Section III.G, of the preamble to the FY 2011 IPPS
proposed rule, ``Method for Computing the Proposed FY 2011 Unadjusted
Wage Index,'' describes the cost report schedules, line items, data
elements, adjustments, and wage index computations. The wage index data
affecting the ESRD composite rate 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 2011 Proposed Rule Occupational Mix Adjusted and
Unadjusted Average Hourly Wage and Pre-reclassified Wage Index by
CBSA.''
i. Reduction to the ESRD Wage Index Floor
In the CY 2010 PFS final rule with comment period, we stated our
intention to continue to reassess the need for a wage index floor (74
FR 61924). We also stated that a gradual reduction in the floor is
needed to support continuing patient access to dialysis in areas that
have low wage index values, especially in Puerto Rico where the wage
index values are below the current wage index floor.
In the ESRD PPS proposed rule (74 FR 49968), we stated our intent
to continue to reduce the wage index floor to the composite rate during
the transition. For CY 2011, we propose that the ESRD wage index floor
would be reduced from 0.65 to 0.60.
j. Proposed Wage Index Values for Areas With No Hospital Data
As discussed in the CY 2010 PFS final rule (74 FR 61925), and the
ESRD PPS proposed rule (74 FR 49969) we have a methodology for
identifying the 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. At that time those rules were
published, the affected areas were rural Puerto Rico, and the urban
area Hinesville-Fort Stewart, GA (CBSA 25980), and rural Massachusetts.
In the case of Massachusetts, the entire rural area consists of
Dukes and Nantucket Counties. We determined that the borders of Dukes
and Nantucket counties are contiguous with CBSA 12700, Barnstable Town,
MA, and CBSA 39300, Providence-New Bedford-Fall River, RI-MA. We intend
to use the same methodology for CY 2011. Under this methodology, this
results in a proposed CY 2011 wage index value of 1.3577 for the
composite rate portion of the blend, and a wage index value of 1.2844
for the ESRD PPS portion of the blend for Barnstable Town, MA (CBSA
12700) and also results in a proposed CY 2011 wage index value of
1.1343 for the composite rate portion of the blend, and a wage index
value of 1.0731 for the ESRD PPS portion of the blend for (Providence-
New Bedford-Fall River, RI-MA (CBSA 39300). These averages result in an
imputed proposed wage index value of 1.2460 for rural Massachusetts in
CY 2011, for the composite rate portion of the blend, and a wage index
value of 1.1788 for the ESRD PPS portion of the blend.
For Hinesville-Fort Stewart, 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 CYs 2006
through 2010. Specifically, we compute the average wage index value of
all urban areas within the State of Georgia. This results in a CY 2011
wage index value of 0.9465 for the composite rate portion of the blend,
and a wage index value of 0.8954 for the ESRD PPS portion of the blend
for Hinesville-Fort Stewart, GA (CBSA 25980).
For CY 2011, there is an additional urban area--Anderson, SC--with
no hospital data. For this urban area, Anderson, SC (CBSA 11340), we
propose to use the same methodology we have used for the other urban
area with no hospital data, that is, Hinesville-Fort Stewart, GA (CBSA
25980). Under the methodology used for that area, we compute the
average of all urban areas within the State of South Carolina. This
approach would result in a CY 2011 wage index value of 0.9480 for the
composite rate portion of the blend, and a wage index value of 0.8839
for the ESRD PPS portion of the blend for the Anderson, SC CBSA (CBSA
11340).
For Puerto Rico, because all geographic areas in Puerto Rico were
subject to the wage index floor in CYs 2006 through 2010, we applied
the ESRD wage index floor to rural Puerto Rico as well. Therefore, for
CY 2011, all urban areas in Puerto Rico that have a wage index are
eligible for the ESRD wage index floor of 0.60. Currently there are no
ESRD facilities located in rural Puerto Rico, however, should any
facilities open in rural Puerto Rico, we intend to apply the CY 2011
proposed wage index floor of 0.60 to facilities that are located in
rural Puerto Rico. The proposed reduction to the wage index floor of
0.60 remains higher than the actual wage index values for ESRD
facilities located in Puerto Rico, which currently range from 0.3674 to
0.4828. Also, in the CY 2010 PFS final rule with comment period (74 FR
61925), 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 2011 and subsequent years. To date, no data from other
sources, superior to that currently used in connection with the IPPS
wage index has emerged. For ESRD purposes, we continue to believe this
is an appropriate policy.
Finally, for CY 2011, we are proposing to use the FY 2011 wage
index data (collected from cost reports submitted by hospitals for cost
reporting

[[Page 40168]]

periods beginning FY 2007) to compute the ESRD composite payment rates
effective beginning January 1, 2011.
k. Budget Neutrality Adjustment
We have previously interpreted the statute as requiring that the
geographic adjustment be made in a budget neutral manner. Given our
application of the ESRD wage index, this means that aggregate payments
to ESRD facilities in CY 2011 would be the same as aggregate payments
that would have been made if we had not made any changes to the
geographic 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 required by the
MMA.
As we are not proposing any changes to the case-mix measures for CY
2011, the current case-mix BN adjustment of 0.9116 would remain in
effect for CY 2011. Consistent with prior rulemaking, For CY 2011, we
propose to apply the wage-index BN adjustment factor of 1.057057
directly to the ESRD wage index values to the composite rate portion of
the blend. Because the ESRD wage index is only applied to the labor-
related portion of the composite rate, we computed the BN adjustment
factor based on that proportion (53.711 percent).
To compute the proposed CY 2011 wage index BN adjustment factor
(1.057057), we used the FY 2007 pre-floor, pre-reclassified, non-
occupational mix-adjusted hospital data to compute the wage index
values, 2009 outpatient claims (paid and processed as of December 31,
2009), and geographic location information for each facility which may
be found through Dialysis Facility Compare Web page on the CMS Web site
at http://www.cms.hhs.gov/DialysisFacilityCompare/. The FY 2011
hospital wage index data for each urban and rural locale by CBSA may
also be accessed on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The wage index data are located in the
section entitled, ``FY 2011 Proposed Rule Occupational Mix Adjusted and
Unadjusted Average Hourly Wage and Pre-Reclassified Wage Index by
CBSA.''
Using treatment counts from the 2009 claims and facility-specific
CY 2010 composite rates, we computed the estimated total dollar amount
each ESRD provider would have received in CY 2010. The total of these
payments became the target amount of expenditures for all ESRD
facilities for CY 2011. Next, we computed the estimated dollar amount
that would have been paid for the same ESRD facilities using the
proposed ESRD wage index for CY 2011. The total of these payments
becomes the new CY 2011 amount of wage-adjusted composite rate
expenditures for all ESRD facilities.
After comparing these two dollar amounts (target amount divided by
the new CY 2011 amount), we calculated an adjustment factor that, when
multiplied by the applicable CY 2011 ESRD wage index value, would
result in aggregate payments to ESRD facilities that would remain
within the target amount of composite rate expenditures. When making
this calculation, the ESRD wage index floor value of 0.6000 is applied
whenever appropriate. The proposed wage BN adjustment factor for CY
2011 is 1.057057.
To ensure BN, we also must apply the BN adjustment factor to the
wage index floor of 1.057057 which results in an adjusted wage index
floor of 0.6343 (0.6000 x 1.057057) for CY 2011. This budget neutrality
factor is not applied to the wage index values for the ESRD PPS portion
of the blend.
l. ESRD Wage Index Tables
The CY 2011 ESRD proposed wage index tables are located in Addenda
K and L of this proposed rule. The wage index tables lists two separate
columns of wage index values. The first column lists the wage index
values will be applied under the composite rate portion and includes
the budget neutrality adjustment of 1057057. The second column lists
the wage index values that will be applied under the ESRD PPS.

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

1. Section 131: Physician Payment, Efficiency, and Quality
Improvements--Physician Quality Reporting Initiative (PQRI)
a. Program Background and Statutory Authority
The Physician Quality Reporting Initiative (PQRI) is a voluntary
reporting program, first implemented in 2007, that provides an
incentive payment to identified EPs (EPs) who satisfactorily report
data on quality measures for covered professional services furnished
during a specified reporting period. We propose to add Sec. 414.90 to
title 42 of the Code of Federal Regulations to implement the provisions
of the PQRI discussed in this section of the proposed rule.
Under section 1848(k)(3)(B) of the Act, the term ``EP'' means any
of the following: (1) A physician; (2) a practitioner described in
section 1842(b)(18)(C); (3) a physical or occupational therapist or a
qualified speech-language pathologist; or (4) a qualified audiologist.
The PQRI was first implemented in 2007 as a result of section 101 of
Division B of the Tax Relief and Health Care Act of 2006--the Medicare
Improvements and Extension Act of 2006 (Pub.L. 109-432) (MIEA-TRHCA),
which was enacted on December 20, 2006. The PQRI was extended and
further enhanced as a result of the Medicare, Medicaid, and SCHIP
Extension Act of 2007 (Pub. L. 110-173) (MMSEA), which was enacted on
December 29, 2007, and the MIPPA, which was enacted on July 15, 2008.
Changes to the PQRI as a result of these laws, as well as information
about the PQRI in 2007, 2008, 2009, and 2010 are discussed in detail in
the CY 2008 PFS proposed and final rules (72 FR 38196 through 38204 and
72 FR 66336 through 66353, respectively), CY 2009 PFS proposed and
final rules (73 FR 38558 through 38575 and 73 FR 69817 through 69847,
respectively), and CY 2010 PFS proposed and final rules (74 FR 33559
through 33600 and 74 FR 61788 through 61861, respectively). Further
detailed information, about the PQRI program, related laws, and help
desk resources, is available on the CMS Web site at http://www.cms.gov/PQRI.
The ACA makes a number of changes to the PQRI, including
authorizing incentive payments through 2014, and requiring a penalty
beginning in 2015 for EPs who do not satisfactorily report data on
quality measures in the applicable reporting period for the year. The
various provisions of the ACA, with respect to PQRI, are further
discussed in sections VI.F.1.b., VI.F.1.k., and VI.F.1.l. of this
proposed rule.
Prior to the enactment of the ACA, PQRI incentive payments were
only authorized through 2010. As discussed further in sections
VI.F.1.b. and VI.F.1.l. below, under section 1848(m)(1)(A) of the Act,
as amended by section 3002(a) of the ACA, PQRI incentive payments are
extended through 2014 for EPs that satisfactorily report data on PQRI
quality measures for the applicable reporting period. Section
1848(m)(1)(B) of the Act, as amended by section 3002(a) of the ACA,
authorizes a 1.0 percent incentive payment for program year 2011 and a
0.5 percent incentive payment for program years 2012 through 2014 for
qualified EPs who satisfactorily submit PQRI quality measures data.
Beginning in 2015, an incentive payment adjustment will be implemented
for EPs who do not satisfactorily report quality measures as required
by section 1848(a)(8) of the Act

[[Page 40169]]

and added by section 3002(b) of the ACA.
Section 3002(e) of the ACA amends section 1848(m)(5) of the Act to
require the Secretary to provide timely feedback to EPs on the
performance of the EP with respect to satisfactorily submitting data on
quality measures. This is discussed further in section VI.F.1.l.(4)
below.
Section 3002(f)(2) amends section 1848(m)(5) of the Act by adding a
requirement with respect to an informal appeals process. Specifically,
section 1848(m)(5)(I) of the Act, as discussed further in section
VI.F.1.l.(5) below, requries that the Secretary establish and have in
place an informal process by January 1, 2011, whereby EPs may seek a
review of the determination that an EP did not satisfactorily submit
data on quality measures for purposes of qualifying for a PQRI
incentive payment.
Section 1848(m)(7) of the Act (``Additional Incentive Payment''),
as added by section 10327(a) of the ACA, provides that for years 2011
through 2014, the applicable quality percent under PQRI for EPs
satisfactorily reporting PQRI quality measures data will be increased
by 0.5 percentage points, if the EP also meets certain requirements,
including satisfactorily reporting data on quality measures for a year
and having such data submitted on their behalf through a Maintenance of
Certification Program (MOCP) (as defined under section 1848(m)(7) of
the Act) and participating in an MOCP practice assessment more
frequently than is required to qualify for or maintain board
certification status. Section 1848(m)(7) of the Act (``Additional
Incentive Payment'') is discussed in more detail in section
VI.F.1.l.(2). Furthermore, section 3002(c) of the ACA, as amended by
section 10327(b) of the ACA authorizes the Secretary to incorporate
participation and successful completion in an MOCP and successful
completion of a qualified MOCP practice assessment into the composite
of measures of quality of care furnished under the PFS payment
modifier.
Also discussed further in section VI.F.1.k. below, section 10331 of
the ACA requires the Secretary to develop a Physician Compare Internet
web site by January 1, 2011, on which information on physicians
enrolled in the Medicare program and other EPs who participate in the
PQRI program would be posted. With respect to measures collected under
the PQRI program, to the extent practicable, the Secretary will
implement a plan by January 1, 2013, to report 2012 PQRI information on
the Physician Compare Web site.
Finally, section 1848(m)(7) of the Act (``Integration of Physician
Quality Reporting and EHR Reporting''), as added by section 3002 of the
ACA requires that not later than January 1, 2012, the Secretary shall
develop a plan to integrate reporting on quality measures under
subsection (o) relating to the meaningful use of electronic health
records (EHRs), as discussed further in section VI.F.1.l.(3) below.
b. Incentive Payments for the 2011 PQRI
As stated above, for years 2011 through 2014, section 3002(a) of
the ACA extends the opportunity for EPs to earn a PQRI incentive
payment for satisfactorily reporting PQRI quality measures. For 2011
PQRI, section 1848(m)(2)(B) of the Act, as amended by section 3002(a)
of the ACA, authorizes a 1.0 percent incentive, and for 2012 through
2014, a 0.5 percent incentive, for qualified EPs who satisfactorily
submit PQRI quality measures data. Regardless of the reporting
mechanism, and/or the associated reporting period (both discussed in
detail below) an EP chooses to report quality data for purposes of
PQRI, if the EP meets the respective criteria for satisfactory
reporting, the EP may receive a 1.0 percent incentive.
The PQRI incentive payment amount is calculated using estimated
Medicare Part B PFS allowed charges for all covered professional
services, not just those charges associated with the reported quality
measures. ``Allowed charges'' refers to total charges, including the
beneficiary deductible and coinsurance, and is not limited to the 80
percent paid by Medicare or the portion covered by Medicare where
Medicare is secondary payer. Amounts billed above the PFS amounts for
assigned and non-assigned claims will not be included in the
calculation of the incentive payment amount. In addition, since, by
definition under section 1848(k)(3)(A) of the Act, ``covered
professional services'' are limited to services for which payment is
made under, or is based on, the PFS and which are furnished by an EP,
other Part B services and items that may be billed by EPs, but are not
paid under or based upon the Medicare Part B PFS, are not included in
the calculation of the incentive payment amount.
As mentioned above, we are proposing a number of reporting
mechanisms that EPs may choose in order to participate in PQRI. Our
proposals for claims-based reporting, registry-based reporting, and
EHR-based reporting are discussed below with respect to the opportunity
for individual EPs to participate in PQRI. For satisfactory reporting
at the individual level in 2011, 1.0 percent of qualified charges would
be paid at the TIN/NPI level. These proposed reporting mechanisms are
addressed in section G.1.d. below. Our proposed criteria for
satisfactorily reporting using the various reporting mechanisms are
discussed in further detail in sections VI.F.1.e. and VI.F.1.f. below.
Our proposals with respect to the reporting mechanisms and criteria for
satisfactorily reporting for group practices are also addressed below,
in section VI.F.1.g. Those group practices that satisfactorily report
will also be paid a 1.0 percent incentive payment based upon the
qualified charges for the group practice TIN.
c. Proposed 2011 Reporting Periods for Individual EPs
Under section 1848(m)(6)(C) of the Act, the ``reporting period''
for the 2008 PQRI and subsequent years is defined to be the entire
year, but the Secretary is authorized to revise the reporting period
for years after 2009 if the Secretary determines such revision is
appropriate, produces valid results on measures reported, and is
consistent with the goals of maximizing scientific validity and
reducing administrative burden. For the 2011 PQRI, we propose the
following reporting periods: (1) 12-month reporting period for claims-
based reporting and registry-based reporting (that is, January 1, 2011
through December 31, 2011); (2) 12-month reporting period for EHR-based
reporting (that is, January 1, 2011 through December 31, 2011; and (3)
6-month reporting period for claims-based reporting and registry-based
reporting (that is, July 1, 2011 through December 31, 2011).
Additionally, as discussed further below in their respective sections,
we propose the 12-month reporting period for the group practice
reporting option (GPRO) for both PQRI and the eRx Prescribing Incentive
Program (January 1, 2011 through December 31, 2011).
The proposed 2011 PQRI reporting periods are consistent with the
2010 reporting periods. In addition, in prior program years, we
received input from stakeholders in support of partial year reporting
for all reporting mechanisms, to give more EPs the opportunity to begin
reporting later in the year. We agree that having the same reporting
periods for all mechanisms may be less complex, and may facilitate
participation in 2011 PQRI for certain EPs. In an effort to be
consistent with prior program years, and move in the direction of
maintaining program

[[Page 40170]]

stability and continuing program flexibility, while increasing
successful reporting of 2011 PQRI measures, we propose to retain 2010
PQRI reporting periods as described above. We invite comments on the
proposed reporting periods for 2011 PQRI.
d. Proposed 2011 PQRI Reporting Mechanisms for Individual EPs
When the PQRI was first implemented in 2007, there was only 1
reporting mechanism available to submit data on PQRI quality measures.
For the 2007 PQRI, EPs had to submit quality data codes (QDCs) on
Medicare Part B claims (claims-based reporting). QDCs are Current
Procedural Terminology (CPT) Category II codes or G-codes (where CPT
Category II codes are not yet available). CPT Category II codes and G-
codes are Healthcare Common Procedure Coding System (HCPCS) codes for
reporting quality data. For the 2008 PQRI, we added registry-based
reporting as an alternative reporting mechanism as required by section
1848(k)(4) of the Act. Under this option, EPs may submit data on PQRI
quality measures to a qualified PQRI registry and request the registry
to submit PQRI quality measures results and numerator and denominator
data on the 2008 PQRI quality measures or measures groups. For the 2009
PQRI, we retained the 2 reporting mechanisms used in the 2008 PQRI
(that is, claims-based reporting and registry-based reporting) for
reporting individual PQRI quality measures and for reporting measures
groups.
Finally, to promote the adoption of EHRs, and to facilitate quality
measure data reporting, we sought to establish an EHR reporting option
by conducting limited testing of EHR reporting for the 2008 and 2009
PQRI. This involved the submission of clinical quality data extracted
from an EHR, or the EHR-based reporting mechanism. No incentive payment
was available to those EPs who participated in testing the EHR-based
reporting mechanism.
For the 2010 PQRI, we retained the claims-based reporting
mechanism, the registry-based reporting mechanism, and established EHR
reporting for a limited subset of the 2010 PQRI quality measures, as
identified in Table 14 of the CY 2010 PFS final rule with comment
period (74 FR 61831), contingent upon the successful completion of our
2009 EHR data submission testing process and a determination based on
that testing process that accepting data from EHRs on quality measures
for the 2010 PQRI was practical and feasible. In the 2010 PQRI,
following the successful completion of the 2009 EHR data submission
testing process, it was determined that it is practical and feasible to
accept data from EHRs on quality measures for the 2010 PQRI.
For the 2011 PQRI, we are proposing to retain the claims-based
reporting mechanism and the registry-based reporting mechanism. We also
propose to retain the 2010 EHR-based reporting mechanism, by which we
will continue to accept quality measures data extracted from a
qualified EHR product for a limited subset of the proposed 2011 PQRI
quality measures, as identified in Tables 55 and 56. Under the 2011
PQRI, we propose that the EHR submission is optional.
For the 2011 PQRI, we are not proposing to offer additional
reporting options for individual EPs beyond those discussed above. In
contrast to prior program years (2008 PQRI, 2009 PQRI, and 2010 PQRI),
we believe that other options would not facilitate reporting of quality
data for PQRI by EPs. However, we seek public comment on these
proposals and invite suggestions as to other options that could be
included in the PQRI.
We recognize that there continues to be a number of limitations
associated with claims-based reporting since the claims processing
system was developed for billing purposes and not for the submission of
quality data. Claims submission, however, is available to all EPs. We
have observed that only about half of those EPs who participated in
PQRI via the claims-based reporting mechanism satisfied the criteria
for satisfactory reporting (that is, reported at least 3 PQRI measures
or 1-2 measures if there were fewer than 3 applicable measures, for at
least 80 percent of the EP's Medicare Part B FFS patients for whom
services were furnished during the reporting period to which the
measure applies) and qualified for the incentive. We have also found
that measures with complex specifications, such as those that require
multiple diagnosis codes are not as conducive to claims-based reporting
and may be associated with a greater number of invalidly reported QDCs.
Similarly, when multiple measures share the same codes it may be
difficult to determine which measure(s) the EP intended to report
through claims. Finally, for pragmatic efficiency it is not practical
to allow resubmission of claims for the sole purpose of adding QDCs.
This means that claims-based reporting must be concurrent with billing.
By contrast, our experience with the registry-based reporting
mechanism continues to be a favorable option, as the drawbacks
discussed above do not apply. Data has shown that not only have the
participation rates for registry-based reporting increased, but also
satisfactory reporting, resulting in an incentive payment for EPs, has
also increased. Furthermore, the available number of qualified
registries has also increased since 2008, and we expect additional
registries to become qualified in future years. For these reasons, we
maintain that the registry-based reporting option remains viable, and
furthermore, we anticipate continuing to expand this option in future
years.
We also believe that EHR-based reporting continues to be a viable
option for overcoming the limitations associated with claims-based
reporting of quality measures, as clinical quality data is extracted
from the EHR for submission. We believe further that retaining the EHR-
based reporting mechanism for 2011 PQRI will continue to promote the
adoption and use of EHRs and further align with the provision in the
ACA related to the integration of PQRI EHR measures and the EHR
incentive program measures in years after 2011, which is discussed in
further detail in section VI.F.1.l.(3) below.
In summary, we propose that for 2011, an EP may choose to report
data on PQRI quality measures through claims, a qualified registry (for
the proposed qualification requirements for registries, see section
VI.F.1.d.(4) of this proposed rule), or through a qualified EHR product
(for the proposed qualification requirements for the EHR vendors and
their products, see section VI.F.1.d.(5) of this proposed rule). As in
previous years, depending on which PQRI individual quality measures or
measures groups an EP selects, one or more of the proposed reporting
mechanisms may not be available for reporting a particular 2011 PQRI
individual quality measure or measures group. For example, the EHR
reporting mechanism currently is not available for reporting measures
groups and specifications for the electronic transmission of a measure
via an EHR are not available for all of the individual PQRI measures.
In addition, as discussed previously the specifications for some
measures are too complex for claims-based reporting. The proposed 2011
reporting mechanisms through which each proposed 2011 PQRI individual
quality measure and measures group could be reported are identified in
Tables 47 and 48. We invite comments on our proposal for the 2011
reporting mechanisms.
While we propose to retain the claims-based reporting mechanism for
2011, we note that we continue to

[[Page 40171]]

consider significantly limiting the claims-based mechanism of reporting
clinical quality measures in future program years. This limitation
continues to be contingent upon there being an adequate number and
variety of registries available and/or the continuation and/or
expansion of the EHR reporting option. Potentially, we would continue
to retain claims-based reporting in years after 2011 principally for
the reporting of structural measures, such as Measure 124
Health Information Technology (HIT): Adoption/Use of Electronic Health
Records (EHR), and in circumstances where claims-based reporting is the
only available mechanism for certain categories of EPs to report on
PQRI quality measures.
Continuing to reduce our reliance on the claims-based reporting
mechanism after 2011 would allow us and EPs to continue to devote
available resources towards maximizing the potential of registries and
EHRs for quality measurement reporting. Both mechanisms hold the
promise of more sophisticated and timely reporting of clinical quality
measures. Clinical data registries allow the collection of more
detailed data, including outcomes, without the necessity of a single
submission contemporaneously with claims billing, which overcomes some
of the limitations of the claims-based reporting mechanism. Registries
can also provide feedback and quality improvement information based on
reported data. Finally, clinical data registries can also receive data
from EHRs, and therefore, serve as an alternative means to reporting
clinical quality data extracted from an EHR. As we continue to qualify
additional registries (qualified registries are listed on the CMS PQRI
Web site http://www.cms.gov/PQRI/20_AlternativeReportingMechanisms.asp#TopOfPage), we believe there may be
a sufficient number of registries by 2012 to make it possible to reduce
the claims-based reporting mechanism for many measures after 2011. We
again invite comments on our intent to lessen our reliance on the
claims-based reporting mechanism for the PQRI program beyond 2011.
As in previous years, regardless of the reporting mechanism chosen
by an EP, there is no requirement for the EP to sign up or register to
participate in the PQRI. However, there may be some requirements for
participation through a specific reporting mechanism that are unique to
that particular reporting mechanism. In addition to the proposed
criteria for satisfactory reporting of individual measures and measures
groups described in section VI.F.1.e. and section VI.F.1.f.,
respectively, of this proposed rule, EPs must ensure that they meet all
requirements for their chosen reporting mechanism for 2011.
(1) Proposed Requirements for Individual EPs Who Choose the Claims-
Based Reporting Mechanism
For EPs who choose to participate in the 2011 PQRI by submitting
data on individual quality measures or measures groups through the
claims-based reporting mechanism, we propose the EP would be required
to submit the appropriate PQRI QDCs on the professionals' Medicare Part
B claims. QDCs for the EP's selected individual PQRI quality measures
or measures group may be submitted to CMS at any time during 2011.
Please note, however, that as required by section 1848(m)(1)(A) of the
Act, all claims for services furnished between January 1, 2011 and
December 31, 2011, would need to be processed by no later than February
28, 2012, to be included in the 2011 PQRI analysis.
(2) Proposed Requirements for Individual EPs Who Choose the Registry-
Based Reporting Mechanism
We propose that in order to report quality data on the 2011 PQRI
individual quality measures, or measures groups, through a qualified
clinical registry, an EP must enter into and maintain an appropriate
legal arrangement with a qualified 2011 PQRI registry. Such
arrangements would provide for the registry's receipt of patient-
specific data from the EP and the registry's disclosure of quality
measures results and numerator and denominator data on PQRI quality
measures or measures groups on behalf of the EP to CMS. Thus, the
registry would act as a Health Insurance Portability and Accountability
Act of 1996 (Pub. L. 104-191) (HIPAA) Business Associate and agent of
the EP. Such agents are referred to as ``data submission vendors.'' The
``data submission vendors'' would have the requisite legal authority to
provide clinical quality measures results and numerator and denominator
data on individual quality measures or measures groups on behalf of the
EP for the PQRI. We propose that the registry, acting as a data
submission vendor, would submit CMS-defined registry-derived measures
information to our designated database for the PQRI, using a CMS-
specified record layout, which would be provided to the registry by
CMS.
To maintain compliance with applicable statutes and regulations,
our program and our data system must maintain compliance with the HIPAA
requirements for requesting, processing, storing, and transmitting
data. EPs that conduct HIPAA covered transactions also would need to
maintain compliance with the HIPAA requirements.
We propose that EPs choosing to participate in PQRI through the
registry-based reporting mechanism for 2011 would need to select a
qualified PQRI registry and submit information on PQRI individual
quality measures or measures groups to the selected registry in the
form and manner and by the deadline specified by the registry.
We propose to post on the PQRI section of the CMS Web site at
http://www.cms.gov a list of qualified registries for the 2011 PQRI,
including the registry name, contact information, and the 2011
measure(s) and/or measures group(s) and eRx reporting (if qualified)
for which the registry is qualified and intends to report. As in the
2010 PQRI, we propose for the 2011 PQRI to post the names of the 2011
PQRI qualified registries in 3 phases, which are discussed below. In
any event, even though a registry is listed as ``qualified,'' we cannot
guarantee or assume responsibility for the registry's successful
submission of the required PQRI quality measures results or measures
group results or required data elements submitted on behalf of a given
EP.
In the first phase, we propose to post, by December 31, 2010, a
list of those registries qualified for the 2011 PQRI based on the
following: (1) Being a qualified registry for a prior PQRI program year
that successfully submitted 2008 and/or 2009 PQRI quality measures
results and numerator and denominator data on the quality measures; (2)
having received a letter indicating their continued interest in being a
PQRI registry for 2011 by October 31, 2010; and (3) the registry's
compliance with the 2011 PQRI registry requirements. This list may be
modified if any given registry fails to meet any new requirement(s)
proposed for 2011. The testing of any additional requirements will be
completed as soon as possible but by the end of the first quarter of
2011 at the latest. By posting this first list of qualified registries
for the 2011 PQRI, we seek to make available the names of registries
that can be used at the start of the 2011 reporting period.
We propose in the second phase, to add the names of the registries
that were initially qualified in 2010 and submitted actual quality data
on behalf of their EPs to CMS for the first time in early 2011.
Successful submission of data to CMS

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for the year in which a registry is qualified is the final step in the
qualification process and a necessary requirement if the registry
desires to continue to participate in PQRI in subsequent years. We
propose that these registries also must meet any new 2011 requirements
and will also undergo testing, which will be completed by the end of
the first quarter of 2011 at the latest.
In the third phase, we propose to complete posting of the list of
qualified 2011 registries as soon as we have completed vetting the
additional registries interested in and capable of participating in the
2011 PQRI. We anticipate this will be completed no later than the
summer of 2011. An EP's ability to report PQRI quality measures data
and numerator and denominator data on PQRI quality measures or measures
groups using the registry-based reporting mechanism should not be
impacted by the complete list of qualified registries for the 2011 PQRI
being made available after the start of the reporting period. First,
registries would not begin submitting EPs' PQRI quality measures
results and numerator and denominator data on the quality measures or
measures groups to CMS until 2012. Second, if an EP decides that he or
she is no longer interested in submitting quality measures data and
numerator and denominator data on PQRI individual quality measures or
measures group through the registry-based reporting mechanism after the
complete list of qualified registries becomes available, this would not
preclude the EP from attempting to meet the criteria for satisfactory
reporting through another 2011 PQRI reporting mechanism, such as claims
or EHR-based data submission.
In addition to meeting the above proposed requirements specific to
registry-based reporting, we propose that EPs who choose to participate
in PQRI through the registry-based reporting mechanism would need to
meet the relevant criteria proposed for satisfactory reporting of
individual measures or measures groups that all EPs must meet in order
to satisfactorily report for PQRI 2011. However, in 2011, we propose
not to count measures that are reported through a registry or EHR that
have a zero percent performance rate. That is, if the recommended
clinical quality action is not performed on at least 1 patient for a
particular measure or measures group reported by the EP via a registry
or EHR, we will not count the measure (or measures groups) as a measure
(or measures group) reported by an EP. We propose to disregard measures
(or measures groups) that are reported through a registry or EHR that
have a zero percent performance rate in the 2011 PQRI because we are
assuming that the measure was not applicable to the EP and was likely
reported from EHR-derived data (or from data mining) and was
unintentionally submitted from the registry or EHR to CMS. We also seek
to avoid the possibility of intentional submission of spurious data
solely for the purpose of receiving an incentive payment for reporting.
(3) Proposed Requirements for Individual EPs Who Choose the EHR-Based
Reporting Mechanism
For 2011, in addition to meeting the criteria for satisfactory
reporting of at least 3 individual measures, we propose the following
requirements associated with EHR-based reporting: (1) Selection of a
PQRI qualified EHR product; and (2) submission of clinical quality data
extracted from the EHR to a CMS clinical data warehouse in the CMS-
specified manner and format. These proposed requirements are identical
to the 2010 requirements for individual EPs who choose the EHR-based
requirements. We are proposing to retain the 2010 requirements because
results from 2010 EHR data submission will not be available until 2011.
A test of quality data submission from EPs who wish to report 2010
quality measure data directly from their qualified EHR product will be
required and occur in early 2011 immediately followed by the submission
of the EP's actual 2010 PQRI data. This entire final test/production
2010 data submission timeframe is expected to be January 2011 through
March 2011. As discussed in the CY 2010 PFS final rule with comment
period (74 FR 61800), throughout most of 2010, we will continue to vet
newly self-nominated EHR vendor products for possible qualification for
the 2011 PQRI program year. We expect to list any additional PQRI
qualified EHR products by January 2011. It is expected that these newly
qualified products would be able to submit 2011 PQRI data in early
2012.
Measures group reporting is not an option for EHR based quality
measure reporting for 2010. We propose to continue this policy for 2011
and therefore, propose not to include measures group reporting via EHRs
for the 2011 PQRI. We will receive 2010 production data in early 2011
and since this will be the first time we have an opportunity to receive
direct EHR data submission for quality reporting and to calculate the
results, we believe it is best not to add another reporting option
using EHRs at this time. We propose that EPs who choose the EHR-based
reporting mechanism for the 2011 PQRI would be required to (in addition
to meeting the criteria for satisfactory reporting of individual
measures)--
Have a qualified EHR product;
Have an active Individuals Authorized Access to CMS
Computer Services (IACS) user account with a data submission role or be
able to use the surrogate data submission method (if one exists) that
will be used to submit clinical quality data extracted from the EHR to
a CMS clinical data warehouse or another CMS approved means of securely
transmitting the quality measures data to CMS such as a CMS/OCSQ
approved HIE (health information exchange) if we are able to collect
data from HIEs in 2012 using the NHIN (national health information
network) or NHIN direct network;
Submit a test file containing real or test clinical
quality data extracted from the EHR to a CMS clinical data warehouse
via an approved data submission method such as IACS, an HIE, or the
NHIN between July 1, 2011 and September 30, 2011 (if technically
feasible); and
Submit a file containing the EP's 2011 PQRI clinical
quality data extracted from the EHR for the entire reporting period
(that is January 1, 2011 through December 31, 2011) via IACS or an
acceptable surrogate (if technically feasible) between January 1, 2012,
through February 28, 2012.
However, as stated above, the 2010 EHR Testing Program is still
ongoing. Since we are proposing that only EHR vendors that self-
nominated to participate in the 2011 EHR Testing Program and
successfully complete the 2011 EHR Testing Program would be considered
qualified EHR vendors for the 2011 PQRI, there is no guarantee that
there will be any additionally qualified EHR vendors available for the
2011 PQRI. In addition, as we complete the 2010 EHR Testing Program and
are better able to determine what is technically feasible, the actual
dates on which EPs are required to submit their test files and/or to
begin submitting their actual 2011 PQRI data are subject to change.
We cannot assume responsibility for the successful submission of
data from an EP's EHR. Any EP who chooses to submit PQRI data extracted
from an EHR should contact the EHR product's vendor to determine if the
product is qualified and has been updated to facilitate PQRI quality
measures data submission. Such professionals also should begin
attempting submission soon after the opening of the clinical data
warehouse in order to assure the

[[Page 40173]]

professional has a reasonable period of time to work with his or her
EHR and/or its vendor to correct any problems that may preclude
successful quality measures data submission through that EHR. As we
indicated above, we are proposing that data submission for the 2011
PQRI would need to be completed by February 28, 2012.
The specifications for the electronic transmission of the 2011 PQRI
measures, identified in Tables 55 and 56 of this proposed rule as being
available for EHR-based reporting in 2011, will be posted on the
Alternative Reporting Mechanisms page of the PQRI section of the CMS
Web site during the summer of 2010.
(4) Proposed Qualification Requirements for Registries
In order to be ``qualified'' to submit quality measures results and
numerator and denominator data on PQRI quality measures and measures
groups on behalf of EPs pursuing a PQRI incentive for the 2008, 2009,
and 2010 PQRI, we required registries to complete a self-nomination
process and to meet certain technical and other requirements. For the
2010 PQRI, registries that were qualified for 2009 did not need to be
``re-qualified'' for 2010 unless they were unsuccessful at submitting
2009 PQRI data (that is, failed to submit 2009 PQRI data per the 2009
PQRI registry requirements). Registries that were ``qualified'' for
2009 and wished to continue to participate in 2010 were only required
to communicate their desire to continue participation for 2010 by
submitting a letter to CMS indicating their continued interest in being
a PQRI registry for 2010 and their compliance with the 2010 PQRI
registry requirements by March 31, 2010.
For the 2011 PQRI, we are proposing to require a self-nomination
process for registries wishing to submit 2011 PQRI quality measures or
measures groups on behalf of EPs for services furnished during the
applicable reporting periods in 2011. We propose that the registry
self-nomination process for the 2011 PQRI would be based on a registry
meeting specific technical and other requirements, as discussed below.
To be considered a qualified registry for purposes of submitting
individual quality measures and measures groups on behalf of EPs who
choose to report using this reporting mechanism under the 2011 PQRI, we
propose that all registries (new to PQRI and those previously
qualified) must:
Be in existence as of January 1, 2011;
Have at least 25 participants by January 1, 2011;
Provide at least 1 feedback report per year to
participating EPs;
Not be owned and managed by an individual locally-owned
single-specialty group (in other words, single-specialty practices with
only 1 practice location or solo practitioner practices would be
prohibited from self-nominating to become a qualified PQRI registry);
Participate in ongoing 2011 PQRI mandatory support
conference calls hosted by CMS (approximately 1 call per month),
including an in-person registry kick-off meeting to be held at CMS
headquarters in Baltimore, MD. Registries that miss more than one
meeting will be precluded from submitting PQRI data for the reporting
year (2011);
Be able to collect all needed data elements and transmit
to CMS the data at the TIN/NPI level for at least 3 measures in the
2011 PQRI program (according to the posted 2011 PQRI Measure
Specifications);
Be able to calculate and submit measure-level reporting
rates or the data elements needed to calculate the reporting rates by
TIN/NPI;
Be able to calculate and submit, by TIN/NPI, a performance
rate (that is, the percentage of a defined population who receive a
particular process of care or achieve a particular outcome) for each
measure on which the TIN/NPI reports or the data elements needed to
calculate the reporting rates;
Be able to separate out and report on Medicare Part B FFS
patients;
Provide the name of the registry;
Provide the reporting period start date the registry will
cover;
Provide the reporting period end date the registry will
cover;
Provide the measure numbers for the PQRI quality measures
on which the registry is reporting;
Provide the measure title for the PQRI quality measures on
which the registry is reporting;
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 (EP receives credit for reporting, not for performance);
Be able to transmit this data in a CMS-approved XML
format. We expect that this CMS-specified record layout will be
substantially the same as for the 2008, 2009, and 2010 PQRI if
aggregate level data is continued but will likely change if individual
data elements are required, as discussed below. This layout will be
provided to registries in 2011;
Comply with a CMS-specified secure method for data
submission, such as submitting the registry's data in an XML file
through an IACS user account or another approved method such as over
the NHIN (national health information network) if technically feasible;
Submit an acceptable ``validation strategy'' to CMS by
March 31, 2011. A validation strategy ascertains whether EPs have
submitted accurately and on at least the minimum number (80 percent) of
their eligible patients, visits, procedures, or episodes for a given
measure. Acceptable validation strategies often include such provisions
as the registry being able to conduct random sampling of their
participant's data, but may also be based on other credible means of
verifying the accuracy of data content and completeness of reporting or
adherence to a required sampling method;
Perform the validation outlined in the strategy and send
the results to CMS by June 30, 2012 for the 2011 reporting year's data;
Enter into and maintain with its participating
professionals an appropriate Business Associate agreement that provides
for the registry's receipt of patient-specific data from the EPs, as
well as the registry's disclosure of quality measure results and
numerator and denominator data on behalf of EPs who wish to participate
in the PQRI program;
Obtain and keep on file signed documentation that each
holder of an NPI whose data are submitted to the registry has
authorized the registry to submit quality measures and numerator and
denominator data to CMS for the purpose of PQRI participation. This
documentation must be obtained at the time the EP signs up with the
registry to submit PQRI quality measures data to the registry and must
meet any applicable laws, regulations, and contractual business
associate agreements;
Provide CMS access (if requested for validation purposes)
to review the Medicare beneficiary data on which 2011 PQRI registry-
based submissions are founded or provide to CMS a copy of the actual
data (if requested);
Provide the reporting option (reporting period and
reporting criteria) that the EP has satisfied or chosen;
Provide CMS a signed, written attestation statement via
mail or e-mail which states that the quality measure results and any
and all data including numerator and denominator data

[[Page 40174]]

provided to CMS are accurate and complete;
Indicate the reporting period chosen for each EP who
chooses to submit data on measures groups;
Base reported information on measures groups only on
patients to whom services were furnished during the 12-month reporting
period of January through December 2011 or the 6-month reporting period
of July 1, 2011 through December 31, 2011;
Agree that the registry's data may be inspected or a copy
requested by CMS and provided to CMS under our oversight authority;
Be able to report data on all applicable measures in a
given measures group on either 30 or more Medicare Part B FFS patients
from January 1, 2011 through December 31, 2011, or on 80 percent of
applicable Medicare Part B FFS patients for each EP (with a minimum of
15 patients during the January 1, 2011, through December 31, 2011,
reporting period or a minimum of 8 patients during the July 1, 2011,
through December 31, 2011, reporting period).
These proposed qualification requirements for 2011 registries are
similar to the PQRI qualification requirements for registries for
previous years. However, we note, that registries would no longer be
permitted to include non-Medicare patients for measures group reporting
(see section VI.F.1.f. of this proposed rule for further discussion of
the criteria for satisfactory reporting of measures groups by
individual EPs).
In addition, in prior years registries were permitted to develop
their own algorithms to calculate measure results (that is, reporting
and performance rates) from the data provided to them from their EP
members. For the 2011 PQRI, we propose that all current and future
registries would have to meet the following new requirements proposed
for 2011:
Use PQRI measure specifications and the CMS provided
measure calculation algorithm to calculate reporting rates or
performance rates unless otherwise stated if aggregated measures data
is continued for 2011 PQRI registry reporting. CMS will provide
registries a calculation algorithm for each measure and/or measures
group they intend to report in 2011.
Provide a calculated result using the CMS supplied
algorithm and XML file for each measure that the registry intends to
calculate (as described below). This applies to all registries; those
that are new to the program, and those that were previously qualified.
The registries will be required to show that they can calculate the
proper measure results (that is, reporting and performance rates) using
the CMS-supplied algorithm and send the calculated data back to CMS in
the specified format.
Provide us the individual data elements used to calculate
the measures if so requested by CMS for validation purposes, if
aggregated data submission is still the selected method of data
collection. Registries that are subject to validation will be asked to
send discrete data elements for a measure (determined by CMS) in the
required data format for us to recalculate the registries' reported
results. Validation will be conducted for several measures at a
randomly selected sample of registries in order to validate their data
submissions.
While registries allow EPs to collect data over a broader timeframe
enabling us to implement more sophisticated measures in PQRI and
despite their apparent success as a vehicle for quality reporting (over
90.0 percent of EPs who participated in the 2008 PQRI through registry-
based reporting were incentive eligible), registry data results have
been inconsistent when we have validated the registry data against
claims. Even though qualified registries go through a thorough vetting
and testing process, we have found differences in measure results (that
is, performance rates) reported by the registries when compared to
measure results calculated from claims data for the same EP. This makes
it difficult for EPs to analyze their performance results for practice
improvement in that the information may not be reliable and
reproducible from registry to registry. This also makes possible
physician comparison difficult and inconsistent. We believe there are
likely several reasons for these inconsistencies, including the fact
that some registries are getting their data from an EP's EHR, the use
of non-Medicare patients by registries for measures groups, and the use
of different algorithms by registries to calculate measures. We believe
the proposed new requirements for registries discussed above will help
us in validating the registry data we receive by addressing some of the
reasons leading to the inconsistencies. The proposal for 2011 to retain
many of the 2010 requirements while introducing some new requirements
is intended to improve the registry-based reporting mechanism by
capitalizing on some of the registry's existing quality improvement
functions, maximizing the registry's ability to successfully submit
EP's quality measure results and numerator and denominator data on PQRI
individual quality measures or measures groups to CMS, and discouraging
small physicians' offices or an individual EP from self-nominating to
become a qualified registry. We continue to be concerned that an
individual EP or a small practice does not have either the resources,
or the capabilities, to successfully submit quality measures results
and numerator and denominator data on PQRI individual measures or
measures groups through the registry data submission process. We invite
comments on the process and requirements that we propose to use to
determine whether a registry is qualified to submit quality measures
results (performance rates and reporting rates) and numerator and
denominator data on PQRI quality measures or measures groups on an EP's
behalf.
As stated previously, registries currently calculate the measure
results (that is reporting and performance rates) from the data
submitted to them by their EP members and send us the measure results
for each participating EP, which are aggregated, nonpatient
identifiable data. An advantage of this approach is that less data will
need to be transmitted to CMS (since we only receive aggregated data),
which means there is less data for CMS to analyze.
Another option that we considered was changing the requirements
with respect to the type of data that registries send us. For 2011, we
considered requiring registries, instead, to send discrete data
elements for a measure (as determined by CMS) in the required data
format for us to calculate the EP's measure results. Thus, the registry
would be required to send CMS beneficiary-level data provided to the
registry by the EP and CMS would use the data to calculate the EP's
measure results (that is, reporting and performance rates). This
approach is similar to the approach that was contemplated when registry
data submission began in 2008 and was referred to as ``Option 2'' in
the CY 2008 PFS proposed rule (72 FR 38203). An advantage of this
approach is that it allows us to calculate the measure results and
reduces the variation that occurs when registries try to aggregate
their data and calculate the measure results themselves. Reducing the
variation would facilitate comparison of EPs' results should we move
towards public reporting of performance results in the future. Also, if
the measure specifications change from year to year, this approach
would require the registry to make fewer systems changes. The registry
would not need to update the algorithms used to calculate the

[[Page 40175]]

measure's results. We invite comments on this alternative that was
considered.
We propose to post the final 2011 PQRI registry requirements,
including the exact date by which registries that wish to qualify for
2011 must submit a self-nomination letter and instructions for
submitting the self-nomination letter, on the PQRI section of the CMS
Web site at http://www.cms.gov/PQRI by November 15, 2010. We anticipate
that new registries that wish to self-nominate for 2011 would be
required to do so by January 31, 2011.
Similar to 2010 PQRI, we propose that registries that were
``qualified'' for 2010 and wish to continue to participate in 2011 will
not need to be ``re-qualified'' for 2011 except to the extent that the
requirements change for 2011 (as proposed above). If this occurs, we
propose that all previously qualified registries would need to
demonstrate that they can meet the new 2011 data submission
requirements. Additionally, we propose that registries that are
unsuccessful submitting 2010 PQRI data (that is, fail to submit 2010
PQRI data per the 2010 PQRI registry requirements) will need to go
through a full self-nomination vetting process for 2011. Successful
2010 PQRI registries that choose to report on new or different 2011
PQRI measures would also need to qualify for these additional measures
and/or methods. We also propose that registries that are ``qualified''
for 2010, who were successful in submitting 2010 PQRI data, and wish to
continue to participate in 2011 would need to indicate their desire to
continue participation for 2011 by submitting a letter to CMS
indicating their continued interest in being a PQRI registry for 2011
and their compliance with the 2011 PQRI registry requirements by no
later than October 31, 2010. Instructions regarding the procedures for
submitting this letter will be provided to qualified 2010 PQRI
registries on the 2010 PQRI registry support conference calls.
Similar to 2010 PQRI, we propose that if a qualified 2010 PQRI
registry fails to submit 2010 PQRI data per the 2010 PQRI registry
requirements, the registry would be considered unsuccessful at
submitting 2010 PQRI data and would need to go through the full self-
nomination process again to participate in the 2011 PQRI. By March 31,
2011, registries that are unsuccessful at submitting quality measures
results and numerator and denominator data for 2010 would need to be
able to meet the 2011 PQRI registry requirements and go through the
full vetting process again. This would include CMS receiving the
registry's self-nomination by March 31, 2011. As discussed further
under section VI.F.2. of this proposed rule, we propose that the above
registry requirements would apply not only for the purpose of a
registry qualifying to report 2011 PQRI quality measure results and
numerator and denominator data on PQRI individual quality measures or
measures groups, but also for the purpose of a registry qualifying to
submit the proposed electronic prescribing measure for the 2011
Electronic Prescribing Incentive Program. We invite comments on the
proposed qualification requirements for registries for the 2011 PQRI.
(5) Proposed Qualification Requirements for EHR Vendors and Their
Products
In 2010 PQRI, EHR products were listed on the PQRI section of the
CMS Web site at http://www.cms.hhs.gov/PQRI as a ``qualified'' EHR
product (that is, the name of the vendor software product and the
version that was qualified), and were available for the product's users
to submit quality data on Medicare beneficiaries to CMS directly from
their system for the 2010 PQRI. This list of qualified EHR vendors and
products was posted upon completion of the 2009 EHR Testing Program in
January 2010.
Vendors' EHR products that were listed as ``qualified'' products
for the 2010 PQRI were selected because the vendor self-nominated to
participate in the 2009 EHR Testing Program and demonstrated that their
products met the ``Requirements for Electronic Health Record (EHR)
Vendors to Participate in the 2009 PQRI EHR Testing Program'' that were
posted on the Alternative Reporting Mechanisms page of the PQRI section
of the CMS Web site at http://www.cms.gov/PQRI/20_AlternativeReportingMechanisms.asp#TopOfPage on December 31, 2008.
Additionally, a vendor's EHR system was required to be updated
according to the Final 2010 EHR specifications, which were posted in
January 2010 on the Alternative Reporting Mechanisms page of the PQRI
section of the CMS Web site in order for an EHR vendor and its product
to be qualified to submit information on 2010 PQRI measures.
The EHR vendor qualification process for the 2011 PQRI was
finalized in the 2010 PFS final rule with comment period (74 FR 61800
through 61802) and is currently underway. We anticipate the EHR vendor
vetting process for the 2011 PQRI will be complete in early 2011. At
the conclusion of the 2011 PQRI EHR vendor vetting process, those EHR
products that meet all of the 2011 EHR vendor requirements will be
listed on the PQRI section of the CMS Web site as a ``qualified'' PQRI
EHR product, which indicates that the product's users may submit
quality data to CMS for the 2011 PQRI. We continue to caution there is
no guarantee that there will be any qualified EHR vendors available for
the 2011 PQRI. However, since seven EHR vendors and their programs were
``qualified'' to submit quality data to CMS directly from their EPs for
2010 PQRI reporting, we are optimistic that for 2011 PQRI and
subsequent years there will continue to be multiple ``qualified'' EHR
vendors available for EPs.
During 2011, we propose to use the same self-nomination process
described in the ``Requirements for Electronic Health Record (EHR)
Vendors to Participate in the 2011 PQRI EHR Testing Program'' posted on
the PQRI section of the CMS Web site at http://www.cms.gov/PQRI/20_AlternativeReportingMechanisms.asp#TopOfPage, to qualify additional EHR
vendors and their EHR products to submit quality data extracted from
their EHR products to the CMS clinical quality data warehouse for 2012
PQRI. We propose that any EHR vendor interested in having one or more
of their EHR products ``qualified'' to submit quality data extracted
from their EHR products to the CMS clinical quality data warehouse for
2012 and subsequent years will be required to submit their self-
nomination letter by January 31, 2011. Instructions for submitting the
self-nomination letter will be provided in the 2012 EHR vendor
requirements, which we expect to post in the 4th quarter of CY 2010.
Specifically, for the 2012 PQRI, we propose that only EHR vendors that
self-nominate to participate in the 2012 EHR Test Program will be
considered qualified EHR vendors for the 2012 PQRI. We propose that the
2011 PQRI EHR test vendors, who, if their testing is successful, may
report 2012 PQRI data to CMS, must meet the following requirements:
Be able to collect and transmit all required data elements
according to the 2012 EHR Specifications.
Be able to separate out and report on Medicare Part B FFS
patients only.
Be able to include TIN/NPI information submitted with an
EP's quality data.
Be able to transmit this data in the CMS-approved format.
Comply with a secure method for data submission.
Not be in a beta test form.
Have at least 25 active users.
Additionally, we propose that previously qualified PQRI EHR vendors
and 2012 EHR test vendors must also

[[Page 40176]]

participate in ongoing PQRI mandatory support conference calls hosted
by CMS (approximately one call per month). These requirements would
apply not only for the purpose of a vendor's EHR product being
qualified so that the product's users may submit data extracted from
the EHR for the 2012 PQRI in 2013, but also for the purpose of a
vendor's EHR product being qualified so that the product's users may
electronically submit data extracted from the EHR for the electronic
prescribing measure for the 2012 eRx Incentive Program in 2013. We
propose that if a vendor misses more than one mandatory support call or
meeting, the vendor and their product would be disqualified for the
PQRI reporting year, which is covered by the call.
We propose that previously qualified vendors and new vendors will
need to incorporate any new EHR measures (measures electronically-
specified) added to PQRI for the reporting year they wish to maintain
their PQRI qualification, as well as update their electronic measure
specifications and data transmission schema should either or both
change. This proposed requirement ensures that all PQRI qualified EHR
products can be used by EPs to report any PQRI EHR measure. We invite
comments on the proposed qualification requirements for EHR Vendors and
their products for the 2012 PQRI.
e. Proposed Criteria for Satisfactory Reporting of Individual Quality
Measures for Individual EPs
Section 1848(m)(3)(A) of the Act established the criteria for
satisfactorily submitting data on individual quality measures as at
least 3 measures in at least 80 percent of the cases in which the
measure is applicable. If fewer than 3 measures are applicable to the
services of the professional, the professional may meet the criteria by
submitting data on 1 or 2 measures for at least 80 percent of
applicable cases where the measures are reportable. This section
establishes the presumption that if an EP submits quality data codes
for a particular measure the measure applies to the EP.
For years after 2009, section 1848(m)(3)(D) of the Act provides
additional authority to the Secretary, in consultation with
stakeholders and experts, to revise the criteria for satisfactorily
reporting data on quality measures. Based on this authority and the
input we have previously received from stakeholders, we propose, for
2011, the following 2 criteria for claims-based reporting of individual
measures by individual EPs:
Report on at least 3 measures that apply to the services
furnished by the professional; and
Report each measure for at least 50 percent of the EP's
Medicare Part B FFS patients for whom services were furnished during
the reporting period to which the measure applies.
To the extent that an EP has fewer than 3 PQRI measures that apply
to the EP's services, then we propose the EP would be able to meet the
criteria for satisfactorily reporting data on individual quality
measures by meeting the following 2 criteria:
Report on all measures that apply to the services
furnished by the professional (that is 1 to 2 measures); and
Report each measure for at least 50 percent of the EP's
Medicare Part B FFS patients for whom services were furnished during
the reporting period to which the measure applies.
We also propose for 2011 the requirement that an EP who reports on
fewer than 3 measures through the claims-based reporting mechanism may
be subject to the Measure Applicability Validation (MAV) process, which
would allow us to determine whether an EP should have reported quality
data codes for additional measures. This process was applied in prior
years. Under the proposed MAV process, when an EP reports on fewer than
3 measures, we propose to review whether there are other closely
related measures (such as those that share a common diagnosis or those
that are representative of services typically provided by a particular
type of EP). We further propose that if an EP who reports on fewer than
3 measures in 2011 reports on a measure that is part of an identified
cluster of closely related measures and did not report on any other
measure that is part of that identified cluster of closely related
measures, then the EP would not qualify as a satisfactory reporter in
2011 PQRI or earn an incentive payment. In 2011, we propose that these
criteria for satisfactorily reporting data on fewer than 3 individual
quality measures would apply for the claims-based reporting mechanism
only.
We note that the proposed 2011 criteria for satisfactory reporting
of individual quality measures through claims submission are different
from the 2010 criteria, which required reporting on at least 80 percent
of the EP's Medicare Part B FFS patients for whom services were
furnished during the reporting period to which the measure applies.
The rationale for an 80 percent reporting rate is that this sample
size would prevent selective reporting to achieve higher performance
rates. However, we now have experience with claims based reporting,
which has proved challenging for EPs, as discussed above. In 2007,
approximately half of PQRI participants (defined as submitting at least
one QDC), qualified for the PQRI incentive payment. Following the 2007
program completion, we performed an extensive review and made a number
of analytic changes that we detailed in our 2007 PQRI Experience
Report. For 2008, the analytic changes that we made following the
completion of the 2007 program resulted in substantial increases in
valid QDC reporting and the number of professionals qualifying for an
incentive payment. However, the number who qualified for the incentive
for the 2008 program year remained at about half of those who
participated. A major reason for this was reporting at less than the
required 80 percent reporting requirement. As a result of our review of
the 2007 and 2008 program results, we believe that we can reduce the
reporting sample requirement to 50 percent for claims-based submission
without increasing the likelihood that professionals will selectively
report based on whether the performance expectation of a measure is met
for that particular patient. Inasmuch as we do not allow resubmission
of a claim solely for the purpose of resubmission of a QDC, EPs will
still need to submit QDCs contemporaneously with the claim. Therefore,
we believe that even at a 50 percent reporting it would be difficult to
selectively report for the purpose of better performance. Based on our
review, we further believe that by reducing the reporting sample, there
will be substantial increases in the portion of participating
professionals who qualify for the PQRI incentive. Thus, we believe we
can encourage significantly broader participation which otherwise might
be deterred if physicians and other EPs do not believe that they are
likely to qualify for the incentive.
As previously stated, we propose that the 50 percent reporting
sample would apply only to the 2011 PQRI claims-based reporting
mechanism available for reporting individual PQRI quality measures and
not registry-based reporting or EHR-based reporting.
For the 2011 PQRI, we propose the following 2 criteria for
satisfactory reporting of data on individual PQRI quality measures for
registry-based and EHR-based reporting:
Report on at least 3 measures that apply to the services
furnished by the professional; and

[[Page 40177]]

Report each measure for at least 80 percent of the EP's
Medicare Part B FFS patients for whom services were furnished during
the reporting period to which the measure applies.
We do not believe that reducing the reporting sample to 50 percent
for registry-based reporting or EHR-based reporting would substantially
impact the portion of participating professionals who qualify for the
PQRI incentive. As stated previously, over 90.0 percent of EPs
submitting data through registries were incentive eligible.
The proposed 2011 criteria for satisfactory reporting of data on
individual PQRI quality measures are summarized in Table 47 and are
arranged by reporting mechanism and reporting period. We seek public
comment on these proposed reporting criteria. We are particularly
interested in receiving comments on our proposal to lower the reporting
criteria for claims-based reporting of individual measures from 80
percent to 50 percent. We seek input on whether 50 percent is an
appropriate threshold or if another threshold would be more
appropriate. We had considered lowering the reporting criteria to a
higher threshold (such as 60 percent or 75 percent) but we found that
differences in the performance rates at 50 percent and 80 percent
reporting were not substantial while differences in the proportion of
EPs satisfactorily reporting at the two different thresholds were
substantial.

Table 47--Proposed 2011 Criteria for Satisfactory Reporting of Data on
Individual PQRI Quality Measures, by Reporting Mechanism and Reporting
Period
------------------------------------------------------------------------
Reporting mechanism Reporting criteria Reporting period
------------------------------------------------------------------------
Claims-based reporting........ Report at January 1, 2011-
least 3 PQRI December 31,
measures, or 1-2 2011.
measures if less than
3 measures apply to
the EP; and
Report each
measure for at least
50% of the EP's
Medicare Part B FFS
patients seen during
the reporting period
to which the measure
applies.
Claims-based reporting........ Report at July 1, 2011-
least 3 PQRI December 31,
measures, or 1-2 2011.
measures if less than
3 measures apply to
the EP; and
Report each
measure for at least
50% of the EP's
Medicare Part B FFS
patients seen during
the reporting period
to which the measure
applies.
Registry-based reporting...... Report at January 1, 2011-
least 3 PQRI December 31,
measures; and 2011.
Report each
measure for at least
80% of the EP's
Medicare Part B FFS
patients seen during
the reporting period
to which the measure
applies.
Registry-based reporting...... Report at July 1, 2011-
least 3 PQRI December 31,
measures; and 2011.
Report each
measure for at least
80% of the EP's
Medicare Part B FFS
patients seen during
the reporting period
to which the measure
applies.
EHR-based reporting........... Report at January 1, 2011-
least 3 PQRI December 31,
measures; and 2011.
Report each
measure for at least
80% of the EP's
Medicare Part B FFS
patients seen during
the reporting period
to which the measure
applies.
------------------------------------------------------------------------

Table 47 illustrates that there are a total of 5 proposed reporting
options for 2011, or ways in which an EP may meet the criteria for
satisfactorily reporting on individual quality measures for the 2011
PQRI. Each proposed reporting option consists of the criteria for
satisfactorily reporting such data and results on individual quality
measures relevant to a given reporting mechanism and reporting period.
EPs may potentially qualify for an incentive as satisfactorily
reporting individual quality measures under more than one of the
proposed reporting criteria, proposed reporting mechanism, and or for
more than one proposed reporting period; however, only one incentive
payment will be made to an EP based on the longest reporting period for
which the EP satisfactorily reports.
f. Proposed Criteria for Satisfactory Reporting Measures Groups for
Individual EPs
We also propose that individual EPs have the option to report
measures groups instead of individual quality measures to qualify for
the 2011 PQRI incentive, using claims or registries. As stated
previously, we do not propose to make the EHR-based reporting mechanism
available for reporting on measures groups in 2011. The criteria that
we propose for 2011 for satisfactory reporting of measures groups
through claims-based or registry-based reporting for either the 12-
month or 6-month reporting period are as follows: (1) For claims-based
reporting, the reporting of at least 1 measures group for at least 50
percent of patients to whom the measures group applies, during the
reporting period; or (2) for registry-based reporting, the reporting of
at least 1 measures group for at least 80 percent of patients to whom
the measures group applies during the reporting period. EPs, for both
claims-based and registry-based reporting under these criteria, would
be required to submit data on a minimum of 15 unique Medicare Part B
FFS patients for the 12-month reporting period and a minimum of 8
Medicare Part B FFS patients for the 6-month reporting period. We note
that the proposed criteria for 2011 are the same criteria as for 2010
PQRI reporting on measures groups, with the exception of our reducing
the reporting sample from 80 percent to 50 percent for claims-based
submission of measures groups. We propose to reduce the reporting
sample requirement for claims-based submission of measures groups for
the same reasons discussed in section VI.F.1.e. of this proposed rule
for claims-based submission of individual measures. In other words, we
believe that reducing the reporting sample from 80 percent to 50
percent will substantially increase the portion of participating EPs
who qualify for a 2011 PQRI incentive without encouraging EPs to
selectively report only those cases that will increase their
performance rates. Additionally for 2011, we propose to retain the
criteria, available only for the 12-month reporting period, based on
reporting on at least 1 measures group for at least 30 patients for
whom

[[Page 40178]]

services were furnished between January 1, 2011, and December 31, 2011,
to whom the measures group applies. We also propose that the 30
patients on which an EP would need to report a measures group for 2011
would not need to be consecutive patients. We propose that the EP may
report on any 30 unique patients seen during the reporting period to
which the measures group applies. As in previous years, we propose that
for 2011, the patients, for claims-based reporting, would be limited to
Medicare Part B FFS patients.
Finally, for registry-based reporting in 2011, in contrast to prior
program years, we propose to require that the minimum patient numbers
or percentages must be met by Medicare Part B FFS patients exclusively
and not non-Medicare Part B FFS patients. The reason for this is the
difficulty of analyzing data we receive from registries, where patients
other than Medicare Part B FFS patients are included. For example,
under our proposal we would be able to compare claims data with
registry submitted data to compare patients in the denominator of the
measure for validation. The proposed 2011 criteria for satisfactory
reporting of data on measures groups are summarized in Table 48 and are
arranged by reporting mechanism and reporting period.

Table 48--Proposed 2011 Criteria for Satisfactory Reporting on Measures Groups, by Reporting Mechanism and
Reporting Period
----------------------------------------------------------------------------------------------------------------
Reporting mechanism Reporting criteria Reporting period
----------------------------------------------------------------------------------------------------------------
Claims-based reporting................. Report at least 1 PQRI measures January 1, 2011-December
group; 31, 2011.
Report each measures group for at
least 30 Medicare Part B FFS patients.
Claims-based reporting................. Report at least 1 PQRI measures January 1, 2011-December
group; 31, 2011.
Report each measures group for at
least 50% of the EP's Medicare Part B FFS
patients seen during the reporting period
to whom the measures group applies; and
Report each measures group on at
least 15 Medicare Part B FFS patients seen
during the reporting period to which the
measures group applies.
Claims-based reporting................. Report at least 1 PQRI measures January 1, 2011-December
group; 31, 2011.
Report each measures group for at
least 50% of the EP's Medicare Part B FFS
patients seen during the reporting period
to whom the measures group applies; and
Report each measures group on at
least 8 Medicare Part B FFS patients seen
during the reporting period to which the
measures group applies.
Registry-based reporting............... Report at least 1 PQRI measures January 1, 2011-December
group; 31, 2011.
Report each measures group for at
least 30 Medicare Part B FFS patients.
Registry-based reporting............... Report at least 1 PQRI measures January 1, 2011-December
group; 31, 2011.
Report each measures group for at
least 80% of the EP's Medicare Part B FFS
patients seen during the reporting period
to whom the measures group applies; and
Report each measures group on at
least 15 Medicare Part B FFS patients seen
during the reporting period to which the
measures group applies.
Registry-based reporting............... Report at least 1 PQRI measures January 1, 2011-December
group; 31, 2011.
Report each measures group for at
least 80% of the EP's Medicare Part B FFS
patients seen during the reporting period
to whom the measures group applies; and
Report each measures group on at
least 8 Medicare Part B FFS patients seen
during the reporting period to which the
measures group applies.
----------------------------------------------------------------------------------------------------------------

As illustrated in Table 48, there are a total of 6 proposed
reporting options, or ways in which EPs may meet the criteria for
satisfactory reporting of measures groups for the 2011 PQRI. Each
proposed reporting option consists of the criteria for satisfactory
reporting relevant to a given reporting mechanism and reporting period.
As stated previously, EPs may potentially qualify as satisfactorily
reporting for 2011 PQRI on measures groups under more than one of the
reporting criteria, reporting mechanisms, and/or for more than one
reporting period; however, only one incentive payment will be made to
an EP based on the longest reporting period for which the EP
satisfactorily reports. Similarly, an EP could also potentially qualify
for the PQRI incentive payment by satisfactorily reporting both
individual measures and measures groups. However, only one incentive
payment will be made to the EP based on the longest reporting period
for which the EP satisfactorily reports. We invite comments on the
proposed criteria for satisfactory reporting measures groups for
individual EPs.
g. Proposed Reporting Option for Satisfactory Reporting on Quality
Measures by Group Practices
(1) Background and Authority
Section 1848(m)(3)(C)(i) of the Act requires the Secretary to
establish and have in place a process by January 1, 2010 under which
EPs in a group practice (as defined by the Secretary) shall be treated
as satisfactorily submitting data on quality measures

[[Page 40179]]

under PQRI if, in lieu of reporting measures under PQRI, the group
practice reports measures determined appropriate by the Secretary, such
as measures that target high-cost chronic conditions and preventive
care, in a form and manner, and at a time specified by the Secretary.
Section 1848(m)(3)(C)(ii) of the Act requires that this process provide
for the use of a statistical sampling model to submit data on measures,
such as the model used under the Medicare Physician Group Practice
(PGP) demonstration project under section 1866A of the Act. A group
practice reporting option (GPRO) was established for the 2010 PQRI in
the CY 2010 PFS final rule with comment period (74 FR 61807 through
61811).
In addition, payments to a group practice under section 1848(m) of
the Act by reason of the process proposed herein shall be in lieu of
the PQRI incentive payments that would otherwise be made to EPs in the
group practice for satisfactorily submitting data on quality measures
(that is, prohibits double payments). Therefore, for the 2011 PQRI, we
propose to continue to allow a group practice, as a whole (that is, for
the TIN(s)), to participate in 2011 PQRI and to submit PQRI quality
measures for 2011 and qualify to earn an incentive. If, however, an
individual EP is affiliated with a group practice participating in the
GPRO and the group practice satisfactorily reports under the GPRO, the
EP will be considered as satisfactorily reporting PQRI quality measures
data at the individual level under that same TIN(s) (that is, for the
same TIN/NPI combination).
(2) Definition of ``Group Practice''
As stated above, section 1848(m)(3)(C)(i) of the Act authorizes the
Secretary to define ``group practice.'' For purposes of determining
whether a group practice satisfactorily submits PQRI quality measures
data, we propose that for the 2011 PQRI a ``group practice'' would
consist of a physician group practice, as defined by a TIN, with 2 or
more individual EPs (or, as identified by NPIs) who have reassigned
their billing rights to the TIN. This proposed definition for group
practice is different from the 2010 PQRI definition of group practice
in that we propose to change the minimum group size from 200 to 2 to
enable more group practices to participate in the PQRI GPRO in 2011.
Generally, our intent continues to be to build on an existing
quality reporting program that group practices may already be familiar
with by modeling some aspects of the the PQRI GPRO after the PGP
demonstration while concurrently expanding the availability of the GPRO
to more group practices. Since the PGP demonstration is a demonstration
program for large group practices, one of the requirements for group
practices participating in the PGP demonstration is for each practice
to have 200 or more members. To be consistent with the PGP
demonstration, we propose one GPRO process, which we refer to as ``GPRO
I'' that would be available only to similar large group practices. For
group practices that have fewer than 200 members, we propose, if
technically feasible, an alternative GPRO process which we refer to as
``GPRO II''. We invite comments on the proposed definition of ``group
practice'' and our proposal to expand the definition of group practice
to include groups with 2 or more members.
In order to participate in the 2011 PQRI through the GPRO, we
propose to require group practices to complete a self-nomination
process and to meet certain technical and other requirements. The
proposed self-nomination process and participation requirements for
GPRO I and GPRO II are separately discussed below.
As discussed further in section VI.F.2. of this proposed rule,
participation in the Electronic Prescribing (eRx) Incentive Program is
voluntary for group practices selected to participate in the PQRI group
practice reporting option. However, for 2011, we propose that group
practices must participate in the PQRI group practice reporting option
in order to be eligible to participate in the eRx group practice
reporting option for 2011 PQRI. This is the current requirement under
the 2010 PQRI and ERx Incentive programs. Therefore, we propose that a
group practice that wishes to participate in both the PQRI group
practice reporting option and the electronic prescribing group practice
reporting option must notify CMS of its desire to do so at the time
that it self-nominates to participate in the PQRI group practice
reporting option.
In addition, we propose that group practices that are participating
in Medicare demonstration projects, as approved by the Secretary, would
also be considered group practices for purposes of the 2011 PQRI GPRO.
Specifically, for the 2011 PQRI we propose to deem group practices
participating in the PGP, Medicare Care Management Performance (MCMP),
and EHR demonstrations to be participating in the PQRI GPRO since many
of the measures being reported under these demonstration programs are
similar to PQRI measures. As a result, such practices do not need to
separately self-nominate to participate in the PQRI GPRO, although it
would be necessary for such groups to meet the requirements for
incentive qualification under their respective approved demonstration
project. For example, the MCMP demonstration sites would be required to
meet the requirements for earning a PQRI incentive specified under the
MCMP demonstration.
For purposes of the 2011 eRx Incentive Program, however, we propose
that group practices participating in CMS-approved demonstration
projects discussed above would be required to meet the proposed 2011
eRx Incentive Program GPRO requirements or the proposed 2011 eRx
Incentive Program requirements for individual EPs in order to qualify
for a 2011 eRx incentive. Such group practices would not be able to
qualify for a 2011 eRx incentive via participation in an approved
demonstration project since there is no eRx requirement under these
demonstrations.
(3) Proposed Process for Physician Group Practices To Participate
as Group Practices and Criteria for Satisfactory Reporting
(i) Group Practice Reporting Option for Physician Group Practices With
200 or More NPIs-GPRO I
As stated above, we propose that group practices interested in
participating in GPRO I must self-nominate to do so. Specifically, we
propose that the 2011 PQRI self-nomination letter for group practices
interested in participating in the 2011 PQRI through the GPRO I must be
accompanied by an electronic file submitted in a format specified by
CMS (such as, a Microsoft Excel file) that includes the group
practice's TIN(s) and name of the group practice, the name and e-mail
address of a single point of contact for handling administrative
issues, as well as the name and e-mail address of a single point of
contact for technical support purposes. This information was also
required as part of the self-nomination process for the 2010 PQRI GPRO.
One change that we propose from the 2010 PQRI GPRO is that we
propose for 2011 PQRI GPRO I to validate that the group practice
consists of a minimum of 200 NPIs and we will supply group practices
with this list. We invite comment on this proposed change for self
nomination criteria. In addition, we propose that the self-nomination
letter must also indicate the group practice's compliance with the
following requirements:
Have an active IACS user account;

[[Page 40180]]

Agree to attend and participate in all mandatory GPRO
training sessions; and
Have billed Medicare Part B on or after January 1, 2010
and prior to October 29, 2010.

We propose to post the final 2011 PQRI participation requirements
for group practices, including instructions for submitting the self-
nomination letter and other requested information, on the PQRI section
of the CMS Web site at http://www.cms.gov/PQRI by November 15, 2010.
Group practices that wish to self-nominate for 2011 would be required
to do so by January 31, 2011. Upon receipt of the self-nomination
letters we propose to assess whether the participation requirements
were met by each self-nominated group practice using 2010 Medicare
claims data. We do not propose to preclude a group practice from
participating in the GPRO I if we discover, from analysis of the 2010
Medicare claims data, that there are some EPs (identified by NPIs) that
are not established Medicare providers (that is, have not billed
Medicare Part B on or after January 1, 2010 and prior to October 29,
2010) as long as the group has at least 200 established Medicare
providers. NPIs who are not established Medicare providers, however,
would not be included in our incentive payment calculations. We propose
that group practices that were selected to participate in the 2010 PQRI
GPRO would automatically be qualified to participate in the 2011 PQRI
GPRO I and would not need to complete the 2011 PQRI GPRO I self-
nomination process.
For physician groups selected to participate in the PQRI GPRO I for
2011, we propose to retain the existing 12-month reporting period
beginning January 1, 2011. We propose that group practices
participating in GPRO I submit information on these measures using a
data collection tool based on the GPRO Tool used in 2010 PQRI GPRO by
36 participating group practices to report quality measures under PQRI.
The 2010 PQRI GPRO Tool will be updated as needed to include the 2011
PQRI GPRO I measures. We believe that use of the GPRO data collection
tool allows group practices the opportunity to calculate their own
performance rates for reporting quality measures. We propose that
physician groups selected to participate in the 2011 PQRI through the
GPRO I report on a proposed common set of 26 NQF-endorsed quality
measures that are based on measures currently used for 2010 PQRI GPRO.
We believe these measures target high-cost chronic conditions and
preventive care. The proposed quality measures are identified in Table
71.
The proposed 2011 PQRI GPRO I quality measures are based on a
subset of the Doctor's Office Quality (DOQ) quality measures set
developed under the direction of CMS and were used in the PGP and/or
MCMP demonstration programs, and have subsequently been used in 2010
PQRI GPRO. Contributors to the development of the DOQ measures set
included the American Medical Association's Physician Consortium for
Performances Improvement (AMA-PCPI), the American College of Cardiology
(ACC), the American Heart Association (AHA), the National Diabetes
Quality Improvement Alliance, the National Committee for Quality
Assurance (NCQA), and the Veterans Health Administration (VA). In most
instances, these measures overlap with the proposed 2011 PQRI measures
for reporting by individual EPs, however, there are some measures
proposed for GPRO I that are not proposed for individual EPs.
These quality measures are grouped into four disease modules:
coronary artery disease; diabetes; heart failure; and preventive care
services. On February 2, 2010, we hosted a 2011 PQRI listening session
to solicit input on a number of aspects of the PQRI, including measures
for the 2011 PQRI GPRO. Since we received no suggestions for additional
disease modules for the GPRO I from this listening session, we are not
proposing any additional measures for the 2011 PQRI GPRO I. We invite
comments on our proposal to use the 26 measures identified in Table 71
for inclusion in 2011 PQRI GPRO I. We specifically request comments on
whether these measures can and/or should be expanded for the group
practice reporting option for future program years. Disease modules and
measures should address high cost conditions and/or a gap in care.
Further detail on criteria for measure selection can be found in
section VI.F.1.h. below.
The proposed process that group practices will be required to use
to report data on quality measures for the 2011 PQRI GPRO I and the
proposed associated criteria for satisfactory reporting of data on
quality measures by group practices, are summarized in Table 49. Under
our proposed 2011 program, group practices participating in PQRI GPRO I
as a group practice would be required to report on all of the measures
listed in Table 71.
As part of the data submission process for 2011 GPRO I, we propose
that during 2012, each group practice would be required to report
quality measures with respect to services furnished during the 2011
reporting period (that is, January 1, 2011, through December 31, 2011)
on an assigned sample of Medicare beneficiaries. We propose to analyze
the January 1, 2011 through October 31, 2011 (that is, the last
business day of October 2011) National Claims History (NCH) file to
assign Medicare beneficiaries to each physician group practice using a
patient assignment methodology modeled after the patient assignment
methodology used in the PGP demonstration. Based on our desire to model
the PQRI GPRO I after the PGP demonstration, we will also consider
applying any refinements made to the patient assignment methodology
used in the PGP demonstration prior to January 1, 2011 to the 2011 PQRI
GPRO I. Assigned beneficiaries would be limited to those Medicare FFS
beneficiaries with Medicare Parts A and B for whom Medicare is the
primary payer. Assigned beneficiaries would not include Medicare
Advantage enrollees. A beneficiary would be assigned to the physician
group that provides the plurality of a beneficiary's office or other
outpatient evaluation and management allowed charges (based on Medicare
Part B claims submitted for the beneficiary for dates of services
between January 1, 2011, and October 31, 2011). Beneficiaries with only
1 visit to the group practice between January 1, 2011 and October 31,
2011, would be eliminated from the group practice's assigned patient
sample for purposes of 2011 PQRI GPRO I. For inclusion in the sample,
assigned beneficiaries would be required to have at least 2 visits to
the group practice between January 1, 2011, and October 31, 2011.
Once the beneficiary assignment has been made for each physician
group during the fourth quarter of 2011, we propose to provide each
physician group selected to participate in the PQRI GPRO I with access
to a database (that is, a data collection tool) that will include the
group's assigned beneficiary samples and the quality measures listed in
Table 71. We propose to pre-populate the data collection tool with the
assigned beneficiaries' demographic and utilization information based
on all of their Medicare claims data. We intend to provide the selected
physician groups with access to this pre-populated database by no later
than the first quarter of 2012. The physician group would be required
to populate the remaining data fields necessary for capturing quality
measure information on each of the assigned beneficiaries. Numerators
for each of the quality measures would include all

[[Page 40181]]

beneficiaries in the denominator population who also satisfy the
quality performance criteria for that measure. Denominators for each
quality measure would include a sample of the assigned beneficiaries
who meet the eligibility criteria for that disease module or each
preventive care quality measure. All of the assigned patients'
inpatient, outpatient, and physician claims would be used in
determining clinical eligibility for each module, regardless if they
were submitted by the group practice or other providers. Identical to
the sampling method used in the PGP demonstration, we propose that the
random sample must consist of at least 411 assigned beneficiaries. If
the pool of eligible assigned beneficiaries is less than 411, then the
group practice must report on 100 percent, or all, of the assigned
beneficiaries to satisfactorily participate in the group practice
reporting option. For each disease module or preventive care measure,
the physician group would be required to report information on the
assigned patients in the order in which they appear in the group's
sample (that is, consecutively). These proposed reporting criteria are
identical to the reporting criteria used in the PGP demonstration and
in the 2010 PQRI GPRO. By building on an existing demonstration program
that large group practices may already have experience with, we hope to
minimize burden on both group practices and CMS.

Table 49--2011 Proposed Process for Physician Group Practices To
Participate as Group Practices and Criteria for Satisfactory Reporting
of Data on Quality Measures by Group Practices for GPRO I
------------------------------------------------------------------------
Reporting mechanism Reporting criteria Reporting period
------------------------------------------------------------------------
A pre-populated data Report on all January 1, 2011-
collection tool provided by measures included in December 31,
CMS. the data collection 2011.
tool (26 measures);
and
Complete the
tool for the first
411 consecutively
ranked and assigned
beneficiaries in the
order in which they
appear in the group's
sample for each
disease module or
preventive care
measure. If the pool
of eligible assigned
beneficiaries is less
than 411, then report
on 100% of assigned
beneficiaries.
------------------------------------------------------------------------

For 2011, we propose an exclusive reporting mechanism for EPs
identified as part of the group practice with respect to the group as
identified by the TIN. However, EPs who are part of the group practice,
and who separately practice with respect to another TIN to which the EP
has reassigned benefits, could separately qualify as individual EPs
with respect to the other practice (TIN). As discussed above, we
propose that each physician group selected to participate in the PQRI
GPRO I would have access to a data base (that is a data collection
tool) that would include the assigned beneficiary sample and the
quality measures. This data collection tool was originally developed
for use in the PGP demonstration, updated for use in the MCMP
demonstration, and will continue to be updated as needed for use in the
PQRI. The assigned beneficiaries' demographic and utilization
information is pre-populated based on claims data. We anticipate being
able to provide the selected physician groups with access to this pre-
populated database by the first quarter of 2012. The physician group
would be required to populate the remaining data fields necessary for
capturing quality measure information on each of the assigned
beneficiaries. Numerators for each of the quality measures would
include all beneficiaries in the denominator population who also
satisfy the quality performance criteria for that measure. Denominators
for each quality measure would include a sample of the assigned
beneficiaries who meet the eligibility criteria for that quality
measure module or preventive care measure.
We expect that use of the PQRI GPRO I data collection tool allows
group practices the opportunity to calculate their own performance
rates for reporting quality measures. This provides group practices
with the chance to preview their information prior to the public
posting of performance data should we choose to do so in future program
years.
We invite comment on our proposal for 2011 to retain 200 as the
number of NPIs for a TIN required for each group practice under the
GPRO I. We also invite comment on our proposal to allow those
``qualified'' for 2010 GPRO to be rolled over for automatic
qualification for 2011 GPRO I.
(ii) Group Practice Reporting Option for Group Practices of 2--199
NPIs--GPRO-II
As discussed previously, section 1848(m)(3)(C) of the Act
authorizes us to define the term ``group practice'' and requires us to
establish a process under which EPs in group practices shall be treated
as satisfactorily submitting data on PQRI quality measures, but is not
prescriptive with regard to the characteristics of this process.
Although for 2010 we did not provide a process for groups of less than
200 NPIs to report under the GPRO, we believe that there are
significant potential benefits to allowing reporting at the group level
generally. At present, for example, where more than one individual
professional sees the same patient, each may have to report separately
with respect to the patient even for processes of care that do not need
to be repeated at each visit. Thus, there is significant duplication of
reporting. Additionally, while we are not proposing to report
performance information with respect to the 2011 PQRI GPRO, the public
reporting of performance information at the group level raises
substantially fewer issues, such as privacy, and the potential adverse
impact of public reporting on the individual physician, and the lack of
sufficient numbers of patients for any one physician to meaningfully
differentiate performance results. Finally, we believe that many
process-of-care measures depend on general functioning of the practice,
such as in coordinating and tracking care, as opposed to a quality of a
particular professional in the group, particularly for measures related
to prevention and care of chronic illnesses.
As a result, based on our authority under section 1848(m)(3)(C) of
the Act to establish a process for group practices and our discretion
to define ``group practice'' under this section we are proposing
multiple processes for reporting at the group level for groups of EPs
of all sizes for purposes of qualifying for a PQRI incentive payment.
The proposed process for groups of 200 or more EPs, known as GPRO I,
was discussed above. If technically feasible, we propose a new group
practice reporting option (GPRO

[[Page 40182]]

II) for groups of 2-199 NPIs in a TIN for 2011. For GPRO II in 2011, we
propose to require groups of EPs who decide to report as a group to
self-nominate. The self-nomination process would consist of sending a
letter with the name of the group, the TIN, an e-mail address of the
contact person, and the names and NPIs of all of the EPs practicing
under that group's TIN. We do not propose to preclude a group practice
from participating in the GPRO II if we discover, from analysis of the
2010 Medicare claims data, that there are some EPs (identified by NPIs)
that are not established Medicare providers (that is, have not billed
Medicare Part B on or after January 1, 2010 and prior to October 29,
2010) as long as the group has at least 2 established Medicare
providers. NPIs who are not established Medicare providers, however,
would not be included in our incentive payment calculations.
We also propose that self-nominating groups would need to indicate
in this letter if the group intends to report as a group for the eRx
Incentive Program and the reporting mechanism the group intends to use
to report as a group for the eRx Incentive Program. We would require
that this information be sent to: GPRO II, c/o CMS, 7500 Security
Blvd., Mail Stop S3-02-01, Baltimore, MD 21244, and must be postmarked
by January 31, 2011, for consideration in the program.
Since GPRO II would be a new process available to groups in 2011,
we propose to initially pilot the GPRO II process with a limited number
of groups. We propose to select the first 500 groups that meet the
proposed eligibility requirements to participate in the 2011 GPRO II.
We propose to use the postmark to determine the order in which groups
self-nominated for GPRO II. We propose to consider only self-nomination
letters postmarked between January 3, 2011 and January 31, 2011. We do
not propose to consider letters postmarked prior to January 3, 2011 to
prevent groups from self-nominating before the GPRO II requirements are
finalized and to discourage groups from self-nominating for GPRO II
prior to reviewing the final GPRO II requirements.
For purposes of quality data submission, we propose, for the GPRO
II, to allow EPs to submit their data through claims or through a
qualified GPRO registry to the extent registries are technically
capable of collecting, calculating and transmitting the required data
to CMS and that we are able to accept such data from registries.
For GPRO II, as discussed in greater detail below, we propose that
in addition to reporting a specific number of individual measures, the
group would have to report one or more proposed 2011 PQRI measures
groups identified in Tables 57 through 70 of this proposed rule
depending on the size of the group practice. In this way we seek to
address a concern expressed regarding PQRI for individual reporting
that EPs are able to select any three of a large array of measures
making comparison data difficult whether for the same individual or
among professionals. We believe that by having a smaller set of
measures to choose from, we hope to focus on topics of major
significance, and make the information obtained with respect to quality
more meaningful.
For purposes of satisfying the requirements under section
1848(m)(3)(C)(i) of the Act for groups of 2-199 NPIs, we propose that
in order to be treated as satisfactorily reporting under GPRO II, the
group practice would be required to report on 50 percent or more (if
submitting through claims) of all Medicare Part B patients who fit into
the measures group denominator or 80 percent or more of Medicare
patients if using a registry to report.
Additionally, to earn a PQRI incentive payment for all allowed
Medicare Part B services that are provided by the TIN, we propose that
a group practice must report on three to six individual 2011 PQRI
measures, depending on the size of the group. We propose that the group
practice may select from among any of the 2011 PQRI measures on which
to submit data, provided the measures selected are not duplicated in
the measures group(s) reported.
We propose that, to satisfactorily report individual PQRI measures,
a group must report each measure at the same rate (percentage) as
determined by the method of submission as individual EPs. For example,
if reporting via claims, to satisfactorily report individual measures,
each measure would need to be reported on at least 50 percent of
eligible Medicare Part B FFS patients.
An alternative which we considered was to require that the
individual measures be selected from a more limited set of measures,
such as measures closely linked to improved population health, or other
measures perceived to address the greatest potential benefit from
improved performance. While there are potential benefits to this
approach of encouraging broad reporting of a more limited set of
measures, we are concerned that any limited measures set may not be
applicable to all groups, such as single specialty groups. Further we
are concerned that this would diminish an important strength of the
overall PQRI measures set, which is its broad applicability. We invite
comments on the potential benefits of a core measures set, as opposed
to allowing groups to select from among the array of PQRI measures,
what measures should be included in that set, whether there are any
PQRI measures that all professionals in group practices should report,
where the measure applies to patients of the group.
A second alternative that we considered was to require group
practices, as part of the self-nomination process, to designate whether
they were a multispecialty group with primary care, a multispecialty
group without primary care, or a single specialty group, and if so, the
specialty. Depending on what type of specialty the group is, we would
identify a set of PQRI measures pertaining to the group's specialty and
require the group practice to report on the identified set of
specialty-specific PQRI measures. We invite comments on the potential
benefits of this approach as opposed to allowing groups to select from
among the array of PQRI measures or requiring all groups, regardless of
specialty, to report on the same core set of measures.
Table 50 sets forth the proposed criteria for satisfactory
reporting under the 2011 PQRI GPRO II and requirements for each group
based on their respective group size (number of EPs).
If a group does not satisfactorily report as a GPRO II group, we
propose to analyze the individual professional's data to see if they
satisfactorily reported at the individual TIN/NPI level. If the EP
satisfactorily reported at the individual level, he or she would
receive a PQRI incentive, which is calculated using the EP's TIN/NPI
Medicare Part B allowed charges.
If a group practice participating in the 2011 PQRI GPRO II wants to
also participate in the 2011 eRx Incentive Program as a small group, we
propose that the group would need to indicate that preference in their
self-nomination letter and would need to report on the number of unique
encounters based on their group size as listed in Table 50 below. For
the 2011 eRx reporting for GPRO II, we propose the following reporting
mechanisms: claims, a GPRO eRx qualified registry or a GPRO qualified
EHR. As with the 2011 eRx Incentive Program for individual EPs and the
2011 eRx GPRO I, at least 10 percent of a GPRO II group's charges would
need to be comprised of codes in the denominator of the electronic

[[Page 40183]]

prescribing measure and the group would need to use an electronic
prescribing system that meets the requirements of the 2011 eRx measure.
Similar to proposed GPRO I, if a GPRO II group self-nominates to report
the eRx measure as a group, we propose that all members of the group
practicing under the group's TIN would be ineligible to report as an
individual electronic prescriber.

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

The required number of unique visits where an electronic
prescription was generated to be a successful electronic prescriber was
determined by taking the midpoint of the group size range and
multiplying the number by 12.5 and then rounding this number to the
nearest multiple of 5. This is consistent with how the 2010 eRx GPRO
requirements, which requires that the group practice report that at
least 1 prescription during an encounter was generated and transmitted
using a qualified electronic prescribing system in at least 2,500
instances during the reporting period, were derived. For the 2010 eRx
Incentive Program, we assumed that half the members of an average
sized-group (which we assumed to be 200 EPs) do not furnish the
services represented by the electronic prescribing measure's
denominator codes, and thus, would not have an opportunity to report
the electronic prescribing measure. For the remaining EPs within the
group who do have an opportunity to report the electronic prescribing
measure, we sought to hold those EPs to the same standard as individual
EPs. Thus, for an average 200 EP group, each of the 100 EPs with an
opportunity to report the electronic prescribing measure would be
expected to have 25 unique electronic prescribing events for a total of
2,500 unique electronic prescribing events for the group.
We propose posting the information required by section
1848(m)(5)(G) of the Act for those group practices that are selected to
participate in the 2011 PQRI under the GPRO II. That is, we propose to
post the names of group practices that satisfactorily report under GPRO
II as we propose to do for group practices that satisfactorily report
under the 2011 PQRI GPRO I.
We invite comment on our proposal to add this second option (GPRO
II) for group practices to report PQRI quality data measures and the
GPRO II process. We also invite comments regarding our proposal to
publicly report GPRO II information with respect to satisfactory PQRI
participation.
(iii) Alternatives Considered for Expanding the GPRO in 2011
In addition to the GPRO II, another option that we considered for
expanding the GPRO for 2011 was to expand GPRO I to include smaller
group practices. Specifically, we considered allowing groups of 100 or
more EPs to participate in the PQRI under GPRO using the same reporting
mechanism and reporting criteria required under the 2010 PQRI GPRO and
proposed for the 2011 PQRI GPRO I. We also considered modifying the
definition of ``group practice'' to include groups that have and use
multiple TINs. We invite comments on these alternatives.
h. Statutory Requirements and Other Considerations for 2011 PQRI
Measures
(1) Statutory Requirements for 2011 PQRI Measures
Under section 1848(k)(2)(C)(i) of the Act, the PQRI quality
measures shall be such measures selected by the Secretary from measures
that have been endorsed by the entity with a contract with the
Secretary under subsection 1890(a) of the Act (that is, the National
Quality Forum, or NQF). However, in the case of a specified area or
medical topic determined appropriate by the Secretary for which a
feasible and practical measure has not been endorsed by the NQF,
section 1848(k)(2)(C)(ii) of the Act authorizes the Secretary to
specify a measure that is not so endorsed as long as due consideration
is given to measures that have been endorsed or adopted by a consensus
organization identified by the Secretary, such as the AQA alliance. In
light of these statutory requirements, we believe that, except in the
circumstances specified in the statute, each proposed 2011 PQRI quality
measure would need to be endorsed by the NQF. The NQF endorsement
status of each of the proposed measures is identified for each measure.
The basis for including certain measures that are not endorsed by NQF
is discussed further below.
Additionally, section 1848(k)(2)(D) of the Act requires that for
each 2011 PQRI quality measure, ``the Secretary shall ensure that EPs
have the opportunity to provide input during the development,
endorsement, or selection of measures applicable to services they
furnish.'' We believe that this requirement is met for all proposed
measures in several ways. Measure developers generally include a public
comment phase in their measure development process. As part of the
measures development process, measures developers typically solicit
public comments on measures that they are testing in order to determine
whether additional refinement of the measure(s) is needed prior to
submission for consensus endorsement. For example, information on the
measure development process, employed by us when CMS or our contractor
is the measure developer, is available in the ``Measures Management
System Blueprint'' found on the CMS Web site at http://www.cms.gov/apps/QMIS/mmsBlueprint.asp. EPs also have the opportunity to provide
input on a measure as the measure is being vetted

[[Page 40184]]

through the NQF consensus endorsement process. The NQF employs a public
comment period for measures vetted through its consensus endorsement
process (and previously, for the AQA consensus adoption process).
Additionally, we have invited suggestions for measures during the last
3 years, including most recently via the Listening Session held at CMS
on February 2, 2010. The goal of the Listening Session was to discuss
and solicit feedback on suggestions received on individual quality
measures and measures groups for possible inclusion in the proposed set
of quality measures for use in the 2011 PQRI program. Finally, as in
previous program years, EPs also have an opportunity to provide input
on the measures proposed for inclusion in the 2011 PQRI through this
proposed rule, which provides a 60-day comment period. Accordingly,
with regard to the 2011 PQRI, we believe we have satisfied this
requirement in multiple ways.
The statutory requirements under section 1848(k)(2)(C) of the Act,
subject to the exception noted above, require only that the measures be
selected from measures that have been endorsed by the entity with a
contract with the Secretary under section 1890(a) (that is, the NQF)
and are silent with respect to how the measures that are submitted to
the NQF for endorsement were developed. The basic steps for developing
measures applicable to physicians and other EPs prior to submission of
the measures for endorsement may be carried out by a variety of
different organizations. We do not believe there needs to be any
special restrictions on the type or make up of the organizations
carrying out this basic development of physician measures, such as
restricting the initial development to physician-controlled
organizations. Any such restriction would unduly limit the basic
development of quality measures and the scope and utility of measures
that may be considered for endorsement as voluntary consensus
standards.
(2) Other Considerations for Measures Proposed for Inclusion in the
2011 PQRI
As stated previously, in addition to reviewing the 2010 PQRI
measures for purposes of developing the proposed 2011 PQRI measures, we
reviewed and considered measure suggestions including comments received
in response to the CY 2010 PFS proposed rule and final rule with
comment period. Additionally, suggestions and input received through
other venues, such as an invitation for measures suggestions via the
Listening Session held February 2, 2010, were also reviewed and
considered for purposes of our development of the list of proposed 2011
PQRI quality measures. A summary of the measures suggestions received
via the Listening Session is included in the background paper that was
provided to Listening Session participants. The Listening Session
background paper is posted on CMS Sponsored Calls page of the PQRI
section of the CMS Web site at: http://www.cms.gov/PQRI/04_CMSSponsoredCalls.asp#TopOfPage.
With respect to the selection of new measures (that is, measures
that have never been selected as part of a PQRI quality measure set for
2010 or any prior year), we propose to apply the following
considerations, which include many of the same considerations applied
to the selection of 2009 and 2010 PQRI quality measures for inclusion
in the 2011 PQRI quality measure set described above:
High Impact on Healthcare.

++ Measures that are high impact and support CMS and HHS priorities for
improved quality and efficiency of care for Medicare beneficiaries.
These current and long-term priority topics include the following:
Prevention; chronic conditions; high cost and high volume conditions;
elimination of health disparities; healthcare-associated infections and
other conditions; improved care coordination; improved outcomes;
improved efficiency; improved patient and family experience of care;
improved end-of-life/palliative care; effective management of acute and
chronic episodes of care; reduced unwarranted geographic variation in
quality and efficiency; and adoption and use of interoperable HIT.

Measures that are included in, or facilitate alignment
with, other Medicare, Medicaid, and CHIP programs in furtherance of
overarching healthcare goals.
NQF Endorsement.

++ Measures must be NQF-endorsed by June 1, 2010, in order to be
considered for inclusion in the 2011 PQRI quality measure set except as
provided under section 1848(k)(2)(C)(ii) of the Act.
++ Section 1848(k)(2)(C)(ii) of the Act provides an exception to the
requirement that the Secretary select measures that have been endorsed
by the entity with a contract under section 1890(a) of the Act (that
is, the NQF). As long as an area or medical topic for which a feasible
and practical NQF-endorsed measure is not available has been identified
and due consideration has been given to measures that have been adopted
by the AQA or other consensus organization identified by Secretary. As
discussed above, we anticipate not including measures which only have
AQA adoption for future program years.
++ The statutory requirements under section 1848(k)(2)(C) of the Act,
subject to the exception noted above, require only that the measures be
selected from measures that have been endorsed by the entity with a
contract with the Secretary under section 1890(a) (that is, the NQF)
and are silent with respect to how the measures that are submitted to
the NQF for endorsement are developed. The basic steps for developing
measures applicable to physicians and other EPs prior to submission of
the measures for endorsement may be carried out by a variety of
different organizations. We do not believe there needs to be any
special restrictions on the type or makeup of the organizations
carrying out this basic development of physician measures, such as
restricting the initial development to physician-controlled
organizations. Any such restriction would unduly limit the basic
development of quality measures and the scope and utility of measures
that may be considered for endorsement as voluntary consensus
standards. The requirements under section 1848(k)(2)(C) of the Act
pertain only to the selection of measures and not to the development of
measures.

Address Gaps in PQRI Measure Set.

++ Measures that increase the scope of applicability of the PQRI
measures to services furnished to Medicare beneficiaries and expand
opportunities for EPs to participate in PQRI. We continue to seek the
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 EPs have at
least three measures applicable to their practice and measures that
help expand the number of measures groups with at least four measures
in a group.

Measures of various aspects of clinical quality including
outcome measures, where appropriate and feasible, process measures,
structural measures, efficiency measures, and measures of patient
experience of care.
Other considerations that we propose to apply to the selection of
measures for 2011, regardless of whether the measure was a 2010 PQRI
measure or not, were:

[[Page 40185]]

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 2010 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 any new measures
considered for 2011 PQRI, preference is given to those that can be most
efficiently implemented for data collection and submission. Therefore,
any measures that have previously been found to be technically
impractical to report because they are analytically challenging due to
any number of factors, including those that are claims-based, will
again not been included for 2011 PQRI. For example, in some cases, we
are proposing to replace existing 2010 PQRI measures with updated and
improved measures that are less technically challenging to report. For
example, we are proposing to replace existing 2010 PQRI measures
114 and 115 with updated and improved measure
TBD (Preventive Care and Screening: Tobacco Use: Screening and
Cessation Intervention), which is less technically challenging to
report.
In 2011 PQRI, as in 2010 PQRI, 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. For the 2011 PQRI, we propose to retain those
measures that had previously been available for claims-based reporting
and registry-based reporting, which were changed for 2010 PQRI to
registry-based reporting only because they were technically challenging
to report and/or analyze through the claims-based reporting mechanism.
We welcome comments on the implication of including or excluding
any given measure or measures for our proposed 2011 PQRI quality
measure set, as well as feedback relative to our proposed approach in
selecting measures. We recognize that some commenters may also wish to
recommend additional measures for inclusion in the 2011 PQRI measures
that we are not proposing. 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 final 2011 measure set.
As discussed above, section 1848(k)(2)(D) of the Act requires that
the public have the opportunity to provide input during the selection
of measures. We also are required by other applicable statutes to
provide opportunity for public comment on provisions of policy or
regulation that are established via notice and comment rulemaking.
Measures that were not included in this proposed rule for inclusion in
the 2011 PQRI that are recommended to CMS via comments on this proposed
rule cannot be included in the 2011 measure set.
As discussed above, section 1848(k)(2)(D) of the Act requires that
the public have the opportunity to provide input during the selection
of measures. We also are required by other applicable statutes to
provide opportunity for public comment on provisions of policy or
regulation that are established via notice and comment rulemaking.
Measures that were not included in this proposed rule for inclusion in
the 2011 PQRI that are recommended to CMS via comments on this proposed
rule have not been placed before the public to comment on the selection
of those measures within the rulemaking process. Even when measures
have been published in the Federal Register, but in other contexts and
not specifically proposed as PQRI measures, such publication does not
provide true opportunity for public comment on those measures'
potential inclusion in PQRI. Thus, such additional measures recommended
for selection for the 2011 PQRI via comments on this proposed rule
cannot be included in the 2011 measure set. However, as discussed
above, we will consider comments and recommendations for measures,
which may not be applicable to the final set of 2011 PQRI measures, for
purposes of identifying measures for possible use in future years' PQRI
or other initiatives to which those measures may be pertinent.
In addition, as in prior years, we again note that we do not use
notice and comment rulemaking as a means to update or modify measure
specifications. Quality measures that have completed the consensus
process have a designated party (usually, the measure developer/owner)
who has accepted responsibility for maintaining the measure. In
general, it is the role of the measure owner, developer, or maintainer
to make changes to a measure. Therefore, comments requesting changes to
a specific proposed PQRI measure's title, definition, and detailed
specifications or coding should be directed to the measure developer
identified in Tables 52 through 70. Contact information for the 2010
PQRI measure developers is listed in the ``2010 PQRI Quality Measures
List,'' which is available on the PQRI section of the CMS Web site at
http://www.cms.gov/PQRI.
However, we stress that inclusion of measures that are not NQF
endorsed or AQA adopted is an exception to the requirement under
section 1848(k)(2)(C)(i) of the Act that measures be endorsed by the
NQF. We may exercise this exception authority in a specified area or
medical topic for which a feasible and practical measure has not been
endorsed by NQF, so long as due consideration is given to measures that
have been endorsed by the NQF.
i. Proposed 2011 PQRI Quality Measures for Individual EPs
As in 2010 PQRI, individual EPs have the choice of reporting PQRI
quality measures data on either individual quality measures or on
measures groups for 2011 PQRI.
Consistent with statutory requirements for identifying and
including measures for 2011 PQRI, the individual quality measures
identified for use in the 2011 PQRI will be selected from those we
propose in this rule and will ultimately be finalized as of the date
the CY 2011 PFS final rule with comment period is available for public
inspection at the Office of the Federal Register. No changes (that is,
additions or deletions of measures) will be made after publication of
the CY 2011 PFS final rule with comment period. However, as was the
case in previous program years, we may make modifications or
refinements, such as revisions to measures titles and code additions,
corrections, or revisions to the detailed specifications for the 2011
measures until the beginning of the reporting period. The 2011 measures
specifications for individual quality measures will be available on the
PQRI section of the CMS Web site at http://www.cms.gov/PQRI when they
are sufficiently developed or finalized. We are targeting finalization
and publication of the detailed specifications for all 2011 PQRI
measures on the PQRI section of the CMS Web site by November 15, 2010
and will, in no event, publish these specifications later than December
31, 2010. The detailed specifications will include instructions for
reporting and will identify the circumstances in which each measure is
applicable. For 2011,

[[Page 40186]]

we are proposing that for the most part, final PQRI quality measures
will be selected from the 2010 PQRI measures.
In response to the February 2, 2010 Listening Session, CMS received
146 individual measure suggestions and 9 measures groups suggestions,
one of which included modifications to an existing measures group, for
possible inclusion in the 2011 PQRI.
We propose to include a total of 198 measures (this includes both
individual measures and measures that are part of a proposed 2011
measures group) on which individual EPs can report for the 2011 PQRI.
The individual PQRI quality measures proposed for the 2011 PQRI are
listed in Tables 52 through 56 and fall into four broad categories as
set forth below. The four categories are the following:
Proposed 2011 Individual Quality Measures Selected From
the 2010 PQRI Quality Measures Set Available for Claims-Based Reporting
and Registry-Based Reporting;
Proposed 2011 Individual Quality Measures Selected From
the 2010 PQRI Quality Measures Set Available for Registry-Based
Reporting Only;
New Individual Quality Measures Proposed for 2011; and
Proposed 2011 Measures Available for EHR-Based Reporting.
In addition, we are also proposing the inclusion of 1 new measures
group for 2011 PQRI. The measures proposed for 2011 measures groups are
listed in Tables 57 through 70. Please note Table 51 includes 2010 PQRI
measures that are not proposed for inclusion in 2011 PQRI.

Table 51--2010 PQRI Quality Measures Not Proposed for Inclusion in the
2011 PQRI
------------------------------------------------------------------------
Measure No. Measure title
------------------------------------------------------------------------
114................................... Preventive Care and Screening:
Inquiry Regarding Tobacco Use.
115................................... Preventive Care and Screening:
Advising Smokers and Tobacco
Users to Quit.
135................................... Chronic Kidney Disease (CKD):
Influenza Immunization.
136................................... Melanoma: Follow-Up Aspects of
Care.
139................................... Cataracts: Comprehensive
Preoperative Assessment for
Cataract Surgery with
Intraocular Lens (IOL)
Placement.
------------------------------------------------------------------------

After careful consideration of 2010 PQRI measures, we propose to
retire these 5 measures because they did not meet one or more of the
considerations for selection of proposed 2011 measures discussed in
section VI.F.1.h. above. Specifically, we are proposing to retire PQRI
measures 135, 136, and 139, for 2011 because
they have been considered by NQF for possible endorsement but
ultimately were not NQF-endorsed. In addition we propose to replace
existing 2010 PQRI measures 114 and 115 with an
updated and improved measure (TBD ``Preventive Care and
Screening: Tobacco Use: Screening and Cessation Intervention''), which
is less technically challenging to report. We invite comments on our
proposal to retire the 2010 measures listed in Table 51 for the 2011
PQRI.
(1) Proposed 2011 Individual Quality Measures Selected From the 2010
PQRI Quality Measures Set Available for Claims-Based Reporting and
Registry-Based Reporting
For 2011, we propose to retain 170 measures currently used in the
2010 PQRI. These 170 proposed measures include 45 registry-only
measures currently used in the 2010 PQRI, but do not include any
measures that are proposed to be included as part of the 2011 Back Pain
measures group (see section VI.F.1.i.(5) of this proposed rule).
Similar to the 2010 PQRI, for 2011, we propose that any 2011 PQRI
measures that are included in the Back Pain measures group would not be
reportable as individual measures through claims-based reporting or
registry-based reporting.
The 125 individual 2010 PQRI measures proposed for inclusion in the
2011 PQRI quality measure set as individual quality measures for either
claims-based reporting or registry-based reporting are listed by their
Measure Number and Title in Table 52, along with the name of the
measure's developer/owner, and the NQF measure number, if applicable.
The PQRI Measure Number is a unique identifier assigned by CMS to all
measures in the PQRI measure set. Once a PQRI Measure Number is
assigned to a measure, it will not be used again to identify a
different measure, even if the original measure to which the number was
assigned is subsequently retired from the PQRI measure set. A
description of the measures listed in Table 52 can be found in the
``2010 PQRI Quality Measures List,'' which is available on the Measures
and Codes page of the PQRI section of the CMS Web site at http://cms.gov/PQRI.
The 2010 measures that are proposed to be available for registry-
based reporting only for the 2011 PQRI are discussed and identified in
section VI.F.1.i.(2) of this proposed rule.

Table 52--Proposed 2011 Measures Selected From the 2010 PQRI Quality Measure Set Available for Either Claims-
Based Reporting or Registry-Based Reporting
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title Measure developer NQF Measure No.
----------------------------------------------------------------------------------------------------------------
1............................ Diabetes Mellitus: Hemoglobin NCQA.................... 0059.
A1c Poor Control in Diabetes
Mellitus.
2............................ Diabetes Mellitus: Low NCQA.................... 0064.
Density Lipoprotein (LDL-C)
Control in Diabetes Mellitus.
3............................ Diabetes Mellitus: High Blood NCQA.................... 0061.
Pressure Control in Diabetes
Mellitus.
6............................ Coronary Artery Disease AMA-PCPI................ 0067.
(CAD): Oral Antiplatelet
Therapy Prescribed for
Patients with CAD.
9............................ Major Depressive Disorder NCQA.................... 0105.
(MDD): Antidepressant
Medication During Acute
Phase for Patients with MDD.
10........................... Stroke and Stroke AMA-PCPI/NCQA........... 0246.
Rehabilitation: Computed
Tomography (CT) or Magnetic
Resonance Imaging (MRI)
Reports.

[[Page 40187]]

12........................... Primary Open Angle Glaucoma AMA-PCPI/NCQA........... 0086.
(POAG): Optic Nerve
Evaluation.
14........................... Age-Related Macular AMA-PCPI/NCQA........... 0087.
Degeneration (AMD): Dilated
Macular Examination.
18........................... Diabetic Retinopathy: AMA-PCPI/NCQA........... 0088.
Documentation of Presence or
Absence of Macular Edema and
Level of Severity of
Retinopathy.
19........................... Diabetic Retinopathy: AMA-PCPI/NCQA........... 0089.
Communication with the
Physician Managing On-Going
Diabetes Care.
20........................... Perioperative Care: Timing of AMA-PCPI/NCQA........... 0270.
Antibiotic Prophylaxis--
Ordering Physician.
21........................... Perioperative Care: Selection AMA-PCPI/NCQA........... 0268.
of Prophylactic Antibiotic--
First OR Second Generation
Cephalosporin.
22........................... Perioperative Care: AMA-PCPI/NCQA........... 0271.
Discontinuation of
Prophylactic Antibiotics
(Non-Cardiac Procedures).
23........................... Perioperative Care: Venous AMA-PCPI/NCQA........... 0239.
Thromboembolism (VTE)
Prophylaxis (When Indicated
in ALL Patients).
24........................... Osteoporosis: Communication AMA-PCPI/NCQA........... 0045.
with the Physician Managing
On-Going Care Post-Fracture
of Hip, Spine or Distal
Radius for Men and Women
Aged 50 Years and Older.
28........................... Aspirin at Arrival for Acute AMA-PCPI/NCQA........... 0092.
Myocardial Infarction (AMI).
30........................... Perioperative Care: Timely AMA-PCPI/NCQA........... 0270.
Administration of
Prophylactic Parenteral
Antibiotics.
31........................... Stroke and Stroke AMA-PCPI/NCQA........... 0240
Rehabilitation: Deep Vein
Thrombosis Prophylaxis (DVT)
for Ischemic Stroke or
Intracranial Hemorrhage.
32........................... Stroke and Stroke AMA-PCPI/NCQA........... 0325.
Rehabilitation: Discharged
on Antiplatelet Therapy.
35........................... Stroke and Stroke AMA-PCPI/NCQA........... 0243.
Rehabilitation: Screening
for Dysphagia.
36........................... Stroke and Stroke AMA-PCPI/NCQA........... 0244.
Rehabilitation:
Consideration of
Rehabilitation Services.
39........................... Screening or Therapy for AMA-PCPI/NCQA........... 0046.
Osteoporosis for Women Aged
65 Years and Older.
40........................... Osteoporosis: Management AMA-PCPI/NCQA........... 0045.
Following Fracture of Hip,
Spine or Distal Radius for
Men and Women Aged 50 Years
and Older.
41........................... Osteoporosis: Pharmacologic AMA-PCPI/NCQA........... 0049.
Therapy for Men and Women
Aged 50 Years and Older.
43........................... Coronary Artery Bypass Graft Society of Thoracic 0516 or 0134.
(CABG): Use of Internal Surgeons (STS).
Mammary Artery (IMA) in
Patients with Isolated CABG
Surgery.
44........................... Coronary Artery Bypass Graft STS..................... 0127 or 0236.
(CABG): Preoperative Beta-
Blocker in Patients with
Isolated CABG Surgery.
45........................... Perioperative Care: AMA-PCPI/NCQA........... 0637.
Discontinuation of
Prophylactic Antibiotics
(Cardiac Procedures).
46........................... Medication Reconciliation: AMA-PCPI/NCQA........... 0097.
Reconciliation After
Discharge From an Inpatient
Facility.
47........................... Advance Care Plan............ AMA-PCPI/NCQA........... 0326.
48........................... Urinary Incontinence: AMA-PCPI/NCQA........... 0098.
Assessment of Presence or
Absence of Urinary
Incontinence in Women Aged
65 Years and Older.
49........................... Urinary Incontinence: AMA-PCPI/NCQA........... 0099.
Characterization of Urinary
Incontinence in Women Aged
65 Years and Older.
50........................... Urinary Incontinence: Plan of AMA-PCPI/NCQA........... 0100.
Care for Urinary
Incontinence in Women Aged
65 Years and Older.
51........................... Chronic Obstructive Pulmonary AMA-PCPI................ 0091.
Disease (COPD): Spirometry
Evaluation.
52........................... Chronic Obstructive Pulmonary AMA-PCPI................ 0102.
Disease (COPD):
Bronchodilator Therapy.
53........................... Asthma: Pharmacologic Therapy AMA-PCPI................ 0047.
54........................... 12-Lead Electrocardiogram AMA-PCPI/NCQA........... 0090.
(ECG) Performed for Non-
Traumatic Chest Pain.
55........................... 12-Lead Electrocardiogram AMA-PCPI/NCQA........... 0093.
(ECG) Performed for Syncope.
56........................... Community-Acquired Pneumonia AMA-PCPI/NCQA........... 0232
(CAP): Vital Signs.
57........................... Community-Acquired Pneumonia AMA-PCPI/NCQA........... 0094.
(CAP): Assessment of Oxygen
Saturation.
58........................... Community-Acquired Pneumonia AMA-PCPI/NCQA........... 0234.
(CAP): Assessment of Mental
Status.
59........................... Community-Acquired Pneumonia AMA-PCPI/NCQA........... 0096.
(CAP): Empiric Antibiotic.
64........................... Asthma: Asthma Assessment.... AMA-PCPI................ 0001.

[[Page 40188]]

65........................... Treatment for Children With NCQA.................... 0069.
Upper Respiratory Infection
(URI): Avoidance of
Inappropriate Use.
66........................... Appropriate Testing for NCQA.................... 0002.
Children With Pharyngitis.
67........................... Myelodysplastic Syndrome AMA-PCPI/American 0377.
(MDS) and Acute Leukemias: Society of Hematology
Baseline Cytogenetic Testing (ASH).
Performed on Bone Marrow.
68........................... Myelodysplastic Syndrome AMA-PCPI/ASH............ 0378.
(MDS): Documentation of Iron
Stores in Patients Receiving
Erythropoietin Therapy.
69........................... Multiple Myeloma: Treatment AMA-PCPI/ASH............ 0380.
With Bisphosphonates.
70........................... Chronic Lymphocytic Leukemia AMA-PCPI/ASH............ 0379.
(CLL): Baseline Flow
Cytometry.
71........................... Breast Cancer: Hormonal AMA-PCPI/American 0387.
Therapy for Stage IC-IIIC Society of Clinical
Estrogen Receptor/ Oncology (ASCO)/
Progesterone Receptor (ER/ National Comprehensive
PR) Positive Breast Cancer. Cancer Network (NCCN).
72........................... Colon Cancer: Chemotherapy AMA-PCPI/ASCO/NCCN...... 0385.
for Stage III Colon Cancer
Patients.
76........................... Prevention of Catheter- AMA-PCPI................ 0464.
Related Bloodstream
Infections (CRBSI): Central
Venous Catheter (CVC)
Insertion Protocol.
79........................... End[dash]Stage Renal Disease AMA-PCPI................ 0227.
(ESRD): Influenza
Immunization in Patients
with ESRD.
84........................... Hepatitis C: Ribonucleic Acid AMA-PCPI................ 0395.
(RNA) Testing Before
Initiating Treatment.
85........................... Hepatitis C: HCV Genotype AMA-PCPI................ 0396.
Testing Prior to Treatment.
86........................... Hepatitis C: Antiviral AMA-PCPI................ 0397.
Treatment Prescribed.
87........................... Hepatitis C: HCV Ribonucleic AMA-PCPI................ 0398.
Acid (RNA) Testing at Week
12 of Treatment.
89........................... Hepatitis C: Counseling AMA-PCPI................ 0401.
Regarding Risk of Alcohol
Consumption.
90........................... Hepatitis C: Counseling AMA-PCPI................ 0394.
Regarding Use of
Contraception Prior to
Antiviral Therapy.
91........................... Acute Otitis Externa (ACE): AMA-PCPI................ AQA adopted Currently
Topical Therapy. under NQF review.
92........................... Acute Otitis Externa (ACE): AMA-PCPI................ AQA adopted Currently
Pain Assessment. under NQF review.
93........................... Acute Otitis Externa (ACE): AMA-PCPI................ AQA adopted Currently
Systemic Antimicrobial under NQF review.
Therapy--Avoidance of
Inappropriate Use.
94........................... Otitis Media with Effusion AMA-PCPI................ AQA adopted Currently
(OME): Diagnostic under NQF review.
Evaluation--Assessment of
Tympanic Membrane Mobility.
99........................... Breast Cancer Resection AMA-PCPI/College of 0391.
Pathology Reporting: pT American Pathologists
Category (Primary Tumor) and (CAP).
pN Category (Regional Lymph
Nodes) With Histologic Grade.
100.......................... Colorectal Cancer Resection AMA-PCPI/CAP............ 0392.
Pathology Reporting: pT
Category (Primary Tumor) and
pN Category (Regional Lymph
Nodes) With Histologic Grace.
102.......................... Prostate Cancer: Avoidance of AMA-PCPI................ 0389.
Overuse of Bone Scan for
Staging Low-Risk Prostate
Cancer Patients.
104.......................... Prostate Cancer: Adjuvant AMA-PCPI................ 0390.
Hormonal Therapy for High-
Risk Prostate Cancer
Patients.
105.......................... Prostate Cancer: Three- AMA-PCPI................ 0388.
Dimensional (3D)
Radiotherapy.
106.......................... Major Depressive Disorder AMA-PCPI................ 0103.
(MDD): Diagnostic Evaluation.
107.......................... Major Depressive Disorder AMA-PCPI................ 0104.
(MDD): Suicide Risk
Assessment.
108.......................... Rheumatoid Arthritis (RA): NCQA.................... 0054.
Disease Modifying Anti-
Rheumatic Drug (DMARD)
Therapy.
109.......................... Osteoarthritis: Function and AMA-PCPI................ 0050.
Pain Assessment.
110.......................... Preventive Care and AMA-PCPI................ 0041.
Screening: Influenza
Immunization for Patients >=
50 Years Old.
111.......................... Preventive Care and NCQA.................... 0043.
Screening: Pneumonia
Vaccination for Patients 65
Years and Older.
112.......................... Preventive Care and NCQA.................... 0031.
Screening: Screening
Mammography.
113.......................... Preventive Care and NCQA.................... 0034.
Screening: Colorectal Cancer
Screening.
116.......................... Antibiotic Treatment for NCQA.................... 0058.
Adults with Acute
Bronchitis: Avoidance of
Inappropriate Use.
117.......................... Diabetes Mellitus: Dilated NCQA.................... 0055.
Eye Exam in Diabetic Patient.
119.......................... Diabetes Mellitus: Urine NCQA.................... 0062.
Screening for Microalbumin
or Medical Attention for
Nephropathy in Diabetic
Patients.

[[Page 40189]]

121.......................... Chronic Kidney Disease (CKD): AMA-PCPI................ Combined: 0570, 0571,
Laboratory Testing (Calcium, 0572, 0626.
Phosphorous, Intact
Parathyroid Hormone (iPTH)
and Lipid Profile).
122.......................... Chronic Kidney Disease (CKD): AMA-PCPI................ AQA adopted.
Blood Pressure Management.
123.......................... Chronic Kidney Disease (CKD): AMA-PCPI................ AQA adopted.
Plan of Care--Elevated
Hemoglobin for Patients
Receiving Erythropoiesis-
Stimulating Agents (ESA).
124.......................... Health Information Technology CMS/Quality Insights of 0488.
(HIT): Adoption/Use of Pennsylvania (QIP).
Electronic Health Records
(EHR).
126.......................... Diabetes Mellitus: Diabetic American Podiatric 0417.
Foot and Ankle Care, Medical Association
Peripheral Neuropathy-- (APMA).
Neurological Evaluation.
127.......................... Diabetes Mellitus: Diabetic APMA.................... 0416.
Foot and Ankle Care, Ulcer
Prevention--Evaluation of
Footwear.
128.......................... Preventive Care and CMS/QIP................. 0421.
Screening: Body Mass Index
(BMI) Screening and Follow-
Up.
130.......................... Documentation and CMS/QIP................. 0419.
Verification of Current
Medications in the Medical
Record.
131.......................... Pain Assessment Prior to CMS/QIP................. 0420.
Initiation of Patient
Therapy and Follow-Up.
134.......................... Screening for Clinical CMS/QIP................. 0418.
Depression and Follow-Up
Plan.
140.......................... Age-Related Macular AMA-PCPI/NCQA........... 0566.
Degeneration (AMD):
Counseling on Antioxidant
Supplement.
141.......................... Primary Open-Angle Glaucoma AMA-PCPI/NCQA........... 0563.
(POAG): Reduction of
Intraocular Pressure (IOP)
by 15% OR Documentation of
Plan of Care.
142.......................... Osteoarthritis (OA): AMA-PCPI................ 0051.
Assessment for Use of Anti-
Inflammatory or Analgesic
Over-the-Counter (OTC)
Medications.
145.......................... Radiology: Exposure Time AMA-PCPI/NCQA........... 0510.
Reported for Procedures
Using Fluoroscopy.
146.......................... Radiology: Inappropriate Use AMA-PCPI/NCQA........... 0508.
of ``Probably Benign''
Assessment Category in
Mammography Screening.
147.......................... Nuclear Medicine: Correlation AMA-PCPI................ 0511.
With Existing Imaging
Studies for All Patients
Undergoing Bone Scintigraphy.
153.......................... Chronic Kidney Disease (CKD): AMA-PCPI................ AQA adopted.
Referral for Arteriovenous
(AV) Fistula.
154.......................... Falls: Risk Assessment....... AMA-PCPI/NCQA........... AQA adopted.
155.......................... Falls: Plan of Care.......... AMA-PCPI/NCQA........... AQA adopted.
156.......................... Oncology: Radiation Dose AMA-PCPI................ 0382
Limits to Normal Tissues.
157.......................... Thoracic Surgery: Recording STS..................... 0455.
of Clinical Stage for Lung
Cancer and Esophageal Cancer
Resection.
158.......................... Carotid Endarterectomy: Use Society of Vascular 0466.
of Patch During Conventional Surgeons (SVS).
Carotid Endarterectomy.
163.......................... Diabetes Mellitus: Foot Exam. NCQA.................... 0056.
172.......................... Hemodialysis Vascular Access SVS..................... 0259.
Decision-Making by Surgeon
To Maximize Placement of
Autogenous Arterial Venous
(AV) Fistula.
173.......................... Preventive Care and AMA-PCPI................ AQA adopted.
Screening: Unhealthy Alcohol
Use--Screening.
175.......................... Pediatric End[dash]Stage AMA-PCPI................ AQA adopted.
Renal Disease (ESRD):
Influenza Immunization.
176.......................... Rheumatoid Arthritis (RA): AMA-PCPI/NCQA........... AQA adopted.
Tuberculosis Screening.
177.......................... Rheumatoid Arthritis (RA): AMA-PCPI/NCQA........... AQA adopted.
Periodic Assessment of
Disease Activity.
178.......................... Rheumatoid Arthritis (RA): AMA-PCPI/NCQA........... AQA adopted.
Functional Status Assessment.
179.......................... Rheumatoid Arthritis (RA): AMA-PCPI/NCQA........... AQA adopted.
Assessment and
Classification of Disease
Prognosis.
180.......................... Rheumatoid Arthritis (RA): AMA-PCPI/NCQA........... AQA adopted.
Glucocorticoid Management.
181.......................... Elder Maltreatment Screen and CMS/QIP................. AQA adopted.
Follow-Up Plan.
182.......................... Functional Outcome Assessment CMS/QIP................. AQA adopted.
in Chiropractic Care.
183.......................... Hepatitis C: Hepatitis A AMA-PCPI................ 0399.
Vaccination in Patients with
HCV.
184.......................... Hepatitis C: Hepatitis B AMA-PCPI................ 0400.
Vaccination in Patients with
HCV.
185.......................... Endoscopy & Polyp AMA-PCPI/NCQA........... AQA adopted Currently
Surveillance: Colonoscopy under NQF review.
Interval for Patients With a
History of Adenomatous
Polyps--Avoidance of
Inappropriate Use.
186.......................... Wound Care: Use of AMA-PCPI/NCQA........... AQA adopted.
Compression System in
Patients With Venous Ulcers.
188.......................... Referral for Otologic Audiology Quality Not applicable.
Evaluation for Patient With Consortium (AQC).
Congenital or Traumatic
Deformity of the Ear.

[[Page 40190]]

189.......................... Referral for Otologic AQC..................... Not applicable.
Evaluation for Patient With
History of Active Drainage
From the Ear Within the
Previous 90 days.
190.......................... Referral for Otologic AQC..................... Not applicable.
Evaluation for Patient With
a History of Sudden or
Rapidly Progessive Hearing
Loss.
193.......................... Perioperative Temperature AMA-PCPI................ 0454.
Management.
194.......................... Oncology: Cancer Stage AMA-PCPI/ASCO........... 0386.
Documented.
195.......................... Stenosis Measurement in AMA-PCPI/NCQA........... 0507.
Carotid Imaging Studies.
201.......................... Ischemic Vascular Disease NCQA.................... 0084.
(IVD): Blood Pressure
Management Control.
202.......................... Ischemic Vascular Disease NCQA.................... 0073.
(IVD): Complete Lipid
Profile.
203.......................... Ischemic Vascular Disease NCQA.................... 0075.
(IVD): Low Density
Lipoprotein (LDL-C) Control.
204.......................... Ischemic Vascular Disease NCQA.................... 0068
(IVD): Use of Aspirin or
Another Anti-thrombotic.
----------------------------------------------------------------------------------------------------------------

It is our understanding that measures 188, 189,
and 190 were considered by NQF for possible endorsement but
were not ultimately NQF-endorsed. However, since we are not aware of
any other NQF-endorsed measures that are available to audiologists, we
propose to exercise our exception authority under section
1848(k)(2)(C)(ii) of the Act. Therefore, we propose to use measures
188, 189, and 190 for the 2011 PQRI despite
the fact that they are neither NQF-endorsed nor AQA adopted.
Please note that detailed measure specifications, including the
measure's title, for 2010 individual PQRI quality measures may have
been updated or modified during the NQF endorsement process or for
other reasons prior to 2011. The 2011 PQRI quality measure
specifications for any given individual quality measure may, therefore,
be different from specifications for the same quality measure used for
2010. Specifications for all 2011 individual PQRI quality measures,
whether or not included in the 2010 PQRI program, must be obtained from
the specifications document for 2011 individual PQRI quality measures,
which will be available on the PQRI section of the CMS Web site on or
before December 31, 2010.
(2) Proposed 2011 Individual Quality Measures Selected From the 2010
PQRI Quality Measures Set Available for Registry-Based Reporting Only
For the 2011 PQRI, we propose to include 45 registry-only
individual measures from the 2010 PQRI. As in 2010 PQRI, we are
proposing to designate these measures as registry-only measures for
2011 to relieve ongoing analytical difficulties encountered with
claims-based reporting of these measures in prior program years. We
encourage comments on our proposal to designate these 45 2010 measures
as registry-only measures for the 2011 PQRI.
Although we are proposing to designate certain measures as
registry-only measures for 2011, we cannot guarantee that there will be
a registry qualified to submit each registry-only measure for 2011. We
rely on registries to self-nominate and identify the types of measures
for which they would like to be qualified to submit quality measures
results and numerator and denominator data on quality measures. If no
registry self-nominates to submit measure results and numerator and
denominator data on a particular type of measure for 2011, then an EP
would not be able to report that particular measure type via a
registry. The Measure Number and Measure Title for these proposed
registry-only measures are listed in Table 53 along with the NQF
measure number, if applicable, and the name of the measure's developer/
owner. As mentioned above, a description of the measures listed in
Table 53 can be found in the ``2010 PQRI Quality Measures List,'' which
is available on the Measures and Codes page of the PQRI section of the
CMS Web site at http://www.cms.gov/PQRI.

Table 53: 2011 Proposed Measures Selected From the 2010 PQRI Quality Measure Set Available for Registry-Based
Reporting Only
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title Measure developer NQF Measure No.
----------------------------------------------------------------------------------------------------------------
5............................ Heart Failure: Angiotensin- AMA-PCPI................ 0081.
Converting Enzyme (ACE)
Inhibitor or Angiotensin
Receptor Blocker (ARB)
Therapy for Left Ventricular
Systolic Dysfunction (LVSD).
7............................ Coronary Artery Disease AMA-PCPI................ 0070.
(CAD): Beta-Blocker Therapy
for CAD Patients With Prior
Myocardial Infarction (MI).
8............................ Heart Failure: Beta-Blocker AMA-PCPI................ 0083.
Therapy for Left Ventricular
Systolic Dysfunction (LVSD).
33........................... Stroke and Stroke AMA-PCPI/NCQA........... 0241.
Rehabilitation:
Anticoagulant Therapy
Prescribed for Atrial
Fibrillation at Discharge.
81........................... End[dash]Stage Renal Disease AMA-PCPI................ 0323.
(ESRD): Plan of Care for
Inadequate Hemodialysis in
ESRD Patients.
82........................... End[dash]Stage Renal Disease AMA-PCPI................ 0321
(ESRD): Plan of Care for
Inadequate Peritoneal
Dialysis.
83........................... Hepatitis C: Testing for AMA-PCPI................ 0393.
Chronic Hepatitis C--
Confirmation of Hepatitis C
Viremia.

[[Page 40191]]

118.......................... Coronary Artery Disease AMA-PCPI................ 0066.
(CAD): Angiotensin-
Converting Enzyme (ACE)
Inhibitor or Angiotensin
Receptor Blocker (ARB)
Therapy for Patients With
CAD and Diabetes and/or Left
Ventricular Systolic
Dysfunction (LSVD).
137.......................... Melanoma: Continuity of Care-- AMA-PCPI/NCQA........... 0650.
Recall System.
138.......................... Melanoma: Coordination of AMA-PCPI/NCQA........... 0561.
Care.
143.......................... Oncology: Medical and AMA-PCPI................ 0384.
Radiation--Pain Intensity
Quantified.
144.......................... Oncology: Medical and AMA-PCPI................ 0383.
Radiation--Plan of Care for
Pain.
159.......................... HIV/AIDS: CD4+ Cell Count or AMA-PCPI/NCQA........... 0404.
CD4+ Percentage.
160.......................... HIV/AIDS: Pneumocystis AMA-PCPI/NCQA........... 0405.
Jiroveci Pneumonia (PCP)
Prophylaxis.
161.......................... HIV/AIDS: Adolescent and AMA-PCPI/NCQA........... 0406.
Adult Patients With HIV/AIDS
Who Are Prescribed Potent
Antiretroviral Therapy.
162.......................... HIV/AIDS: HIV RNA Control AMA-PCPI/NCQA........... 0407.
After Six Months of Potent
Antiretroviral Therapy.
164.......................... Coronary Artery Bypass Graft STS..................... 0129.
(CABG): Prolonged Intubation
(Ventilation).
165.......................... Coronary Artery Bypass Graft STS..................... 0130.
(CABG): Deep Sternal Wound
Infection Rate.
166.......................... Coronary Artery Bypass Graft STS..................... 0131.
(CABG): Stroke/
Cerebrovascular Accident
(CVA).
167.......................... Coronary Artery Bypass Graft STS..................... 0114.
(CABG): Postoperative Renal
Insufficiency.
168.......................... Coronary Artery Bypass Graft STS..................... 0115.
(CABG): Surgical Re-
Exploration.
169.......................... Coronary Artery Bypass Graft STS..................... 0116.
(CABG): Antiplatelet
Medications at Discharge.
170.......................... Coronary Artery Bypass Graft STS..................... 0117.
(CABG): Beta-Blockers
Administered at Discharge.
171.......................... Coronary Artery Bypass Graft STS..................... 0118.
(CABG): Lipid Management and
Counseling.
174.......................... Pediatric End[dash]Stage AMA-PCPI................ AQA adopted Currently
Renal Disease (ESRD): Plan under NQF review.
of Care for Inadequate
Hemodialysis.
187.......................... Stroke and Stroke AHA/ASA/................ 0437.
Rehabilitation: Thrombolytic TJC.....................
Therapy.
191.......................... Cataracts: 20/40 or Better AMA-PCPI/NCQA........... 0565.
Visual Acuity Within 90 Days
Following Cataract Surgery.
192.......................... Cataracts: Complications AMA-PCPI/NCQA........... 0564.
Within 30 Days Following
Cataract Surgery Requiring
Additional Surgical
Procedures.
196.......................... Coronary Artery Disease AMA-PCPI................ 0065.
(CAD): Symptom and Activity
Assessment.
197.......................... Coronary Artery Disease AMA-PCPI................ 0074.
(CAD): Drug Therapy for
Lowering LDL-Cholesterol.
198.......................... Heart Failure: Left AMA-PCPI................ 0079.
Ventricular Function (LVF)
Assessment.
199.......................... Heart Failure: Patient AMA-PCPI................ 0082.
Education.
200.......................... Heart Failure: Warfarin AMA-PCPI................ 0084.
Therapy Patients With Atrial
Fibrillation.
205.......................... HIV/AIDS: Sexually AMA-PCPI/NCQA........... 0409.
Transmitted Disease
Screening for Chlamydia and
Gonorrhea.
206.......................... HIV/AIDS: Screening for High AMA-PCPI/NCQA........... 0413.
Risk Sexual Behaviors.
207.......................... HIV/AIDS: Screening for AMA-PCPI/NCQA........... 0415.
Injection Drug Use.
208.......................... HIV/AIDS: Sexually AMA-PCPI/NCQA........... 0410.
Transmitted Disease
Screening for Syphilis.
209.......................... Functional Communication American Speech Language 0445.
Measure--Spoken Language Haring Association
Comprehension. (ASHA).
210.......................... Functional Communication ASHA.................... 0449.
Measure--Attention.
211.......................... Functional Communication ........................ 0448.
Measure--Memory.
212.......................... Functional Communication ASHA.................... 0447.
Measure--Motor Speech.
213.......................... Functional Communication ASHA.................... 0446.
Measure--Reading.
214.......................... Functional Communication ASHA.................... 0444.
Measure--Spoken Language
Expression.
215.......................... Functional Communication ASHA.................... 0442.
Measure--Writing.
216.......................... Functional Communication ASHA.................... 0443.
Measure--Swallowing.
----------------------------------------------------------------------------------------------------------------

Please note, as previously discussed above, detailed measure
specifications, including a measure's title, for 2010 PQRI quality
measures may be updated or modified during the NQF endorsement process
or for other reasons during 2010. Therefore, the 2011 PQRI quality
measure specifications for any given quality measure may be different
from specifications for the same quality measure used for 2010.
Specifications

[[Page 40192]]

for all 2011 individual PQRI quality measures, whether or not included
in the 2010 PQRI program, must be obtained from the specifications
document for 2011 individual PQRI quality measures, which will be
available on the PQRI section of the CMS Web site on or before December
31, 2010.
(3) New Individual Quality Measures Proposed for 2011
We propose to include in the 2011 PQRI quality measure set 20
measures that were not included in the 2010 PQRI quality measures set
provided that each measure obtains NQF endorsement by June 1, 2010 and
its detailed specifications are completed and ready for implementation
in PQRI by August 15, 2010. Besides having NQF endorsement, we again
propose that the development of a measure is considered complete for
the purposes of the 2011 PQRI if by August 15, 2010: (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, 2011. The titles of these proposed
additional, or new, measures are listed in Table 54 along with the name
of the measure developer and the proposed reporting mechanism (that is,
whether the measure is proposed to be reportable using claims,
registries, or both). For these 20 proposed measures, a PQRI Measure
Number will be assigned to a measure if and when the measure is
included in the final set of 2011 PQRI measures.
Due to the complexity of their measure specifications, we propose
that 8 of these 20 measures would be available as registry-only
measures for the 2011 PQRI. The remaining 15 measures are proposed to
be available for reporting through either claims-based reporting or
registry-based reporting.

Table 54--New Individual Quality Measures Proposed for 2011
----------------------------------------------------------------------------------------------------------------
Measure title NQF Measure number Measure developer Reporting mechanism(s)
----------------------------------------------------------------------------------------------------------------
Change in Risk-Adjusted Functional 0422................. FOTO................. Registry.
Status for Patients With Knee
Impairments.
Change in Risk-Adjusted Functional 0423................. FOTO................. Registry.
Status for Patients With Hip
Impairments.
Change in Risk-Adjusted Functional 0424................. FOTO................. Registry.
Status for Patients With Lower
Leg, Foot or Ankle Impairments.
Change in Risk-Adjusted Functional 0425................. FOTO................. Registry.
Status for Patients With Lumbar
Spine Impairments.
Change in Risk-Adjusted Functional 0426................. FOTO................. Registry.
Status for Patients With Shoulder
Impairments.
Change in Risk-Adjusted Functional 0427................. FOTO................. Registry.
Status for Patients With Elbow,
Wrist or Hand Impairments.
Change in Risk-Adjusted Functional 0428................. FOTO................. Registry.
Status for Patients With a
Functional Deficit of the Neck,
Cranium, Mandible, Thoracic Spine,
Ribs or Other General Orthopedic
Impairment.
Care Transitions: Reconciled Currently under NQF Society of Hospital Claims, Registry.
Medication List Received by review. Medicine (SMH) AMA-
Discharged Patients (Inpatient PCPI/NCQA.
Discharges to Home/Self Care or
Any Other Site of Care).
Care Transitions: Transition Record Currently under NQF Society of Hospital Claims, Registry.
with Specified Elements Received review. Medicine (SMH) AMA-
by Discharged Patients (Inpatient PCPI/NCQA.
Discharges to Home/Self Care or
Any Other Site of Care).
Care Transitions: Timely Currently under NQF Society of Hospital Claims, Registry.
Transmission of Transition Record review. Medicine (SMH) AMA-
(Inpatient Discharges to Home/Self PCPI/NCQA.
Care or Any Other Site of Care).
Care Transitions: Transition Record Currently under NQF Society of Hospital Claims, Registry.
with Specified Elements Received review. Medicine (SMH) AMA-
by Discharged Patients (Emergency PCPI/NCQA.
Department Discharges to
Ambulatory Care [Home/Self Care]
or Home Health Care).
Hypertension (HTN): Plan of Care... 0017................. AMA-PCPI............. Claims, Registry.
Heart Failure (HF): Left 79................... CMS.................. Registry.
Ventricular Function (LVF) Testing.
Melanoma: Overutilization of 0562................. AMA-PCPI............. Claims, Registry.
Imaging Studies in Stage 0-IA
Melanoma.
Radiology: Reminder System for 0509................. AMA-PCPI............. Claims, Registry.
Mammograms.
Asthma: Assessment of Asthma Risk-- Currently under NQF AMA-PCPI............. Claims, Registry.
Emergency Department/Inpatient review.
Setting.
Asthma: Discharge Plan--Emergency Currently under NQF AMA-PCPI............. Claims, Registry.
Department/Inpatient Setting. review.
Preventive Care and Screening: 0028................. AMA-PCPI............. Claims, Registry.
Tobacco Use: Screening and
Cessation Intervention.
Recording of Performance Status 0457................. Society of Thoracic Claims, Registry.
Prior to Lung or Esophageal Cancer Surgery (STS).
Resection.
Pulmonary Function Tests Before 0458................. Society of Thoracic Claims, Registry.
Major Anatomic Lung Resection. Surgery (STS).
----------------------------------------------------------------------------------------------------------------

These measures are being proposed for the 2011 PQRI because they meet
one or more of the considerations for measure selection discussed in
section VI.F.1.h. of this proposed rule.

[[Page 40193]]

(4) Proposed 2011 Measures Available for EHR-Based Reporting
For 2011, we propose to again accept PQRI data from EHRs for a
limited subset of the proposed 2011 PQRI quality measures, contingent
upon the successful completion of our 2010 EHR data submission process
and a determination that accepting data from EHRs on quality measures
for the 2011 PQRI continues to be practical and feasible.
We propose to make a total of 22 measures available for EHR-based
reporting in the 2010 PQRI. These include the 10 measures available for
EHR-based reporting in the 2010 PQRI, which are identified in Table 55
and 12 additional measures identified in Table 56 that overlap with the
clinical quality measures used in the EHR incentive program established
by the American Recovery and Reinvestment Act (ARRA). Again, this year,
we propose to make these measures available for electronic submission
via an EHR because these measures target preventive care or common
chronic and high-cost conditions.

Table 55--Proposed 2011 Measures Available for EHR-Based Reporting From 2010 PQRI
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title Measure developer NQF Measure No.
----------------------------------------------------------------------------------------------------------------
1.......................... Diabetes Mellitus: NCQA.................. 0059.
Hemoglobin A1c Poor
Control in Diabetes
Mellitus.
2.......................... Diabetes Mellitus: Low NCQA.................. 0064.
Density Lipoprotein (LDL-
C) Control in Diabetes
Mellitus.
3.......................... Diabetes Mellitus: High NCQA.................. 0061.
Blood Pressure Control in
Diabetes Mellitus.
5.......................... Heart Failure: Angiotensin- AMA-PCPI.............. 0081.
Converting Enzyme (ACE)
Inhibitor or Angiotensin
Receptor Blocker (ARB)
Therapy for Left
Ventricular Systolic
Dysfunction (LVSD).
7.......................... Coronary Artery Disease AMA-PCPI.............. 0070.
(CAD): Beta-Blocker
Therapy for CAD Patients
with Prior Myocardial
Infarction (MI).
110........................ Preventive Care and AMA-PCPI.............. 0041.
Screening: Influenza
Immunization for Patients
>= 50 Years Old.
111........................ Preventive Care and NCQA.................. 0043.
Screening: Pneumonia
Vaccination for Patients
65 Years and Older.
112........................ Preventive Care and NCQA.................. 0031.
Screening: Screening
Mammography.
113........................ Preventive Care and NCQA.................. 0034.
Screening: Colorectal
Cancer Screening.
124........................ Health Information CMS/QIP............... 0488.
Technology (HIT): Adoption/
Use of Electronic Health
Records (EHR).
----------------------------------------------------------------------------------------------------------------

Table 56: Proposed 2011 Medicare ARRA--HITECH Measures Available for EHR-Based Reporting
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title Measure developer NQF Measure No.
----------------------------------------------------------------------------------------------------------------
TBD........................ Hypertension (HTN): Blood AMA-PCPI.............. 0013.
Pressure Measurement.
128........................ Preventive Care and CMS/Quality Insights 0421.
Screening: Body Mass Index of Pennsylvania.
(BMI) Screening and Follow-
Up.
TBD........................ Preventive Care and AMA-PCPI.............. 0028.
Screening: Tobacco Use:
Screening and Cessation
Intervention.
TBD........................ Childhood Immunization NCQA.................. 0038.
Status.
TBD........................ Body Mass Index (BMI) 2 National Initiative 0024.
Through 18 Years of Age. for Children's
Healtcare Quality.
39......................... Screening or Therapy for AMA-PCPI/NCQA......... 0046.
Osteoporosis for Women
Aged 65 Years and Older.
47......................... Advance Care Plan.......... AMA-PCPI/NCQA......... 0326.
48......................... Urinary Incontinence: AMA-PCPI/NCQA......... 0098.
Assessment of Presence or
Absence of Urinary
Incontinence in Women Aged
65 Years and Older.
173........................ Preventive Care & AMA-PCPI.............. AQA Adopted.
Screening: Unhealthy
Alcohol Use--Screening.
TBD........................ Drugs To Be Avoided in the NCQA.................. 0022.
Elderly.
41......................... Osteoporosis: Pharmacologic ...................... 0049.
Therapy for Men and Women
Aged 50 Years and Older.
142........................ Osteoarthritis: Assessment AMA-PCPI.............. 0051.
of Use of Anti-
Inflammatory or Analgesic
OTC Meds.
----------------------------------------------------------------------------------------------------------------

(5) Measures Proposed for Inclusion in 2011 Measures Groups
We propose to retain the following 13 2010 PQRI measures groups for
the 2011 PQRI: (1) Diabetes Mellitus; (2) CKD; (3) Preventive Care; (4)
CABG; (5) Rheumatoid Arthritis; (6) Perioperative Care; (7) Back Pain;
(8) CAD; (9) Heart Failure; (10) IVD; (11) Hepatitis C; (12) HIV/AIDS;
and (13) CAP. We are proposing to include these measures groups in 2011
PQRI because they each contain at least 4 PQRI quality measures that
share a common denominator definition.
For 2011, we propose that the CABG, CAD, Heart Failure, HIV/AIDS
measures groups continue to be reportable through the registry-based
reporting mechanism only, while the remaining Diabetes Mellitus, CKD,
Preventive Care, Rheumatoid Arthritis, Perioperative Care, Back Pain,
IVD, Hepatitis C, and CAP measures groups will continue to be
reportable through either claims-based reporting or registry-based
reporting for the 2011 PQRI. The 4 2011 proposed measures groups
reportable via registry-based reporting only are identified with an
asterisk (*) below.

[[Page 40194]]

For 2010, the 13 measures groups that we propose to retain in the
2011 PQRI, combined with the one additional measures group we are
proposing for 2011, makes a total of 14 measures groups for the 2011
PQRI. The 1 additional measures group we propose for the 2011 PQRI,
identified in Table 70, is an Asthma Measures Group. The Asthma
Measures Group is proposed to be reportable through either claims-based
reporting or registry-based reporting.
We believe that the measure groups proposed for the 2011 PQRI
address gaps in quality reporting and are those that have a high impact
on HHS and CMS priority topics for improved quality and efficiency for
Medicare beneficiaries (such as prevention, chronic conditions,
improved care coordination, improved efficiency, improved patient and
family experience of care, and effective management of acute and
chronic episodes).
Finally, as in previous program years, for 2011, we continue to
propose that except for the measures included in the Back Pain measures
group, the measures included in any proposed 2011 measures group be
reportable either as individual measures or as part of a measures
group. For 2011, we propose that the measures proposed for inclusion in
the Back Pain measures group will continue to be reportable only as
part of a measures group and not as individual measures in 2011. We
propose that measures selected for inclusion in all 2011 PQRI measures
groups (except for the Back Pain measures group) are reportable either
as individual measures or as part of a measures group.
The measures proposed for inclusion in each of the 2011 measures
groups are identified in Tables 57 through 70. As stated previously,
the PQRI Measure Number is a unique identifier assigned by CMS to all
measures in the PQRI measure set. Once a PQRI Measure Number is
assigned to a measure, it will not be used again, even if the measure
is subsequently retired from the PQRI measure set. Measures that are
not preceded by a number (in other words, those preceded by ``TBD'') in
Tables 57 through 71 were never part of a PQRI measure set prior to
2011. A number will be assigned to such measures for 2011, if we
finalize inclusion of the measures in the 2011 PQRI.
As with measures group reporting in the 2008, 2009, and 2010 PQRI,
we propose that each EP electing to report a group of measures for 2011
must report all measures in the group that are applicable to each
patient or encounter to which the measures group applies at least up to
the minimum number of patients required by the applicable reporting
criteria.

Table 57--Measures Proposed for 2011 Diabetes Mellitus Measures Group
----------------------------------------------------------------------------------------------------------------
Measure No. Measure Title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
1.......................... Diabetes Mellitus: 0059.................. NCQA.
Hemoglobin A1c Poor
Control in Diabetes
Mellitus.
2.......................... Diabetes Mellitus: Low 0064.................. NCQA.
Density Lipoprotein (LDL-
C) Control in Diabetes
Mellitus.
3.......................... Diabetes Mellitus: High 0061.................. NCQA.
Blood Pressure Control in
Diabetes Mellitus.
117........................ Diabetes Mellitus: Dilated 0055.................. NCQA.
Eye Exam in Diabetic
Patient.
119........................ Diabetes Mellitus: Urine 0062.................. NCQA.
Screening for Microalbumin
or Medical Attention for
Nephropathy in Diabetic
Patients.
163........................ Diabetes Mellitus: Foot 0056.................. NCQA.
Exam.
----------------------------------------------------------------------------------------------------------------

Table 58--Measures Proposed for 2011 CKD Measures Group
----------------------------------------------------------------------------------------------------------------
Measure No. Measure Title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
121........................ Chronic Kidney Disease 0570, 0571, 0572, 0626 AMA-PCPI.
(CKD): Laboratory Testing
(Calcium, Phosphorus,
Intact Parathyroid Hormone
(iPTH) and Lipid Profile).
122........................ Chronic Kidney Disease AQA adopted........... AMA-PCPI.
(CKD): Blood Pressure
Management.
123........................ Chronic Kidney Disease AQA adopted........... AMA-PCPI.
(CKD): Plan of Care--
Elevated Hemoglobin for
Patients Receiving
Erythropoiesis-Stimulating
Agents (ESA).
153........................ Chronic Kidney Disease AQA adopted........... AMA-PCPI.
(CKD): Referral for
Arteriovenous (AV) Fistula.
----------------------------------------------------------------------------------------------------------------

Table 59--Measures Proposed for 2011 Preventive Care Measures Group
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
39......................... Screening or Therapy for 0046.................. AMA-PCPI/NCQA.
Osteoporosis for Women
Aged 65 Years and Older.
48......................... Urinary Incontinence: 0098.................. AMA-PCPI/NCQA.
Assessment of Presence or
Absence of Urinary
Incontinence in Women Aged
65 Years and Older.
110........................ Preventive Care and 0041.................. AMA-PCPI.
Screening: Influenza
Immunization for Patients
>= 50 Years Old.
111........................ Preventive Care and 0043.................. NCQA.
Screening: Pneumonia
Vaccination for Patients
65 Years and Older.
112........................ Preventive Care and 0031.................. NCQA.
Screening: Screening
Mammography.
113........................ Preventive Care and 0034.................. NCQA.
Screening: Colorectal
Cancer Screening.
128........................ Preventive Care and 0421.................. CMS/QIP.
Screening: Body Mass Index
(BMI) Screening and Follow-
Up.
173........................ Preventive Care and AQA adopted........... AMA-PCPI.
Screening: Unhealthy
Alcohol Use--Screening.

[[Page 40195]]

TBD........................ Preventive Care and 0028.................. AMA-PCPI.
Screening: Tobacco Use:
Screening and Cessation
Intervention.
----------------------------------------------------------------------------------------------------------------

Table 60--Measures Proposed for 2011 CABG Measures Group *
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
43......................... Coronary Artery Bypass 0516, 0134............ Society of Thoracic Surgeons
Graft (CABG): Use of (STS).
Internal Mammary Artery
(IMA) in Patients with
Isolated CABG Surgery.
44......................... Coronary Artery Bypass 0127, 0236............ STS.
Graft (CABG): Preoperative
Beta-Blocker in Patients
with Isolated CABG Surgery.
164........................ Coronary Artery Bypass 0129.................. STS.
Graft (CABG): Prolonged
Intubation (Ventilation).
165........................ Coronary Artery Bypass 0130.................. STS.
Graft (CABG): Deep Sternal
Wound Infection Rate.
166........................ Coronary Artery Bypass 0131.................. STS.
Graft (CABG): Stroke/
Cerebrovascular Accident
(CVA).
167........................ Coronary Artery Bypass 0114.................. STS.
Graft (CABG):
Postoperative Renal
Insufficiency.
168........................ Coronary Artery Bypass 0115.................. STS.
Graft (CABG): Surgical Re-
exploration.
169........................ Coronary Artery Bypass 0116.................. STS.
Graft (CABG): Antiplatelet
Medications at Discharge.
170........................ Coronary Artery Bypass 0117.................. STS.
Graft (CABG): Beta-
Blockers Administered at
Discharge.
171........................ Coronary Artery Bypass 0118.................. STS.
Graft (CABG): Lipid
Management and Counseling.
----------------------------------------------------------------------------------------------------------------
* This measures group is reportable through registry-based reporting only.

Table 61--Measures Proposed for 2011 Rheumatoid Arthritis Measures Group
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
108........................ Rheumatoid Arthritis (RA): 0054.................. NCQA.
Disease Modifying Anti-
Rheumatic Drug (DMARD)
Therapy.
176........................ Rheumatoid Arthritis (RA): AQA adopted........... AMA-PCPI/NCQA.
Tuberculosis Screening.
177........................ Rheumatoid Arthritis (RA): AQA adopted........... AMA-PCPI/NCQA.
Periodic Assessment of
Disease Activity.
178........................ Rheumatoid Arthritis (RA): AQA adopted........... AMA-PCPI/NCQA.
Functional Status
Assessment.
179........................ Rheumatoid Arthritis (RA): AQA adopted........... AMA-PCPI/NCQA.
Assessment and
Classification of Disease
Prognosis.
180........................ Rheumatoid Arthritis (RA): AQA adopted........... AMA-PCPI/NCQA.
Glucocorticoid Management.
----------------------------------------------------------------------------------------------------------------

Table 62--Measures Proposed for 2011 Perioperative Care Measures Group
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
20......................... Perioperative Care: Timing 0270.................. AMA-PCPI/NCQA.
of Antibiotic Prophylaxis--
Ordering Physician.
21......................... Perioperative Care: 0268.................. AMA-PCPI/NCQA.
Selection of Prophylactic
Antibiotic--First OR
Second Generation Cepha
losporin.
22......................... Perioperative Care: 0271.................. AMA-PCPI/NCQA.
Discontinuation of
Prophylactic Antibiotics
(Non-Cardiac Procedures).
23......................... Perioperative Care: Venous 0239.................. AMA-PCPI/NCQA.
Thromboembolism (VTE)
Prophylaxis (When
Indicated in ALL Patients).
----------------------------------------------------------------------------------------------------------------

Table 63--Measures Proposed for 2011 Back Pain Measures Group
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
148........................ Back Pain: Initial Visit... 0322.................. NCQA.
149........................ Back Pain: Physical Exam... 0319.................. NCQA.
150........................ Back Pain: Advice for 0315.................. NCQA.
Normal Activities.
151........................ Back Pain: Advice Against 0313.................. NCQA.
Bed Rest.
----------------------------------------------------------------------------------------------------------------

[[Page 40196]]

Table 64--Measures Proposed for 2011 CAD Measures Group*
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
6.......................... Coronary Artery Disease 0067.................. AMA-PCPI.
(CAD): Oral Antiplatelet
Therapy Prescribed for
Patients with CAD.
196........................ Coronary Artery Disease 0065.................. AMA-PCPI.
(CAD): Symptom and
Activity Assessment.
197........................ Coronary Artery Disease 0074.................. AMA-PCPI.
(CAD): Drug Therapy for
Lowering LDL-Cholesterol.
TBD........................ Preventive Care and 0028.................. AMA-PCPI.
Screening: Tobacco Use:
Screening and Cessation
Intervention.
----------------------------------------------------------------------------------------------------------------
* This measures group is reportable through registry-based reporting only.

Table 65--Measures Proposed for 2011 Heart Failure Measures Group*
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
5.......................... Heart Failure: Angiotensin- 0081.................. AMA-PCPI.
Converting Enzyme (ACE)
Inhibitor or Angiotensin
Receptor Blocker (ARB)
Therapy for Left
Ventricular Systolic
Dysfunction (LVSD).
8.......................... Heart Failure: Beta-Blocker 0083.................. AMA-PCPI.
Therapy for Left
Ventricular Systolic
Dysfunction (LVSD).
198........................ Heart Failure: Left 0079.................. AMA-PCPI.
Ventricular Function (LVF)
Assessment.
199........................ Heart Failure: Patient 0082.................. AMA-PCPI.
Education.
TBD........................ Preventive Care and 0028.................. AMA-PCPI.
Screening: Tobacco Use:
Screening and Cessation
Intervention.
----------------------------------------------------------------------------------------------------------------
* This measures group is reportable through registry-based reporting only.

Table 66--Measures Proposed for 2011 IVD Measures Group
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
201........................ Ischemic Vascular Disease 0073.................. NCQA.
(IVD): Blood Pressure
Management Control.
202........................ Ischemic Vascular Disease 0075.................. NCQA.
(IVD): Complete Lipid
Profile.
203........................ Ischemic Vascular Disease 0075.................. NCQA.
(IVD): Low Density
Lipoprotein (LDL-C)
Control.
204........................ Ischemic Vascular Disease 0068.................. NCQA.
(IVD): Use of Aspirin or
Another Anti-thrombotic.
TBD........................ Preventive Care and 0028.................. AMA-PCPI.
Screening: Tobacco Use:
Screening and Cessation
Intervention.
----------------------------------------------------------------------------------------------------------------

Table 67--Measures Proposed for 2011 Hepatitis C Measures Group
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
84......................... Hepatitis C: Ribonucleic 0395.................. AMA-PCPI.
Acid (RNA) Testing Before
Initiating Treatment.
85......................... Hepatitis C: HCV Genotype 0396.................. AMA-PCPI.
Testing Prior to Treatment.
86......................... Hepatitis C: Antiviral 0397.................. AMA-PCPI.
Treatment Prescribed.
87......................... Hepatitis C: HCV 0398.................. AMA-PCPI.
Ribonucleic Acid (RNA)
Testing at Week 12 of
Treatment.
89......................... Hepatitis C: Counseling 0401.................. AMA-PCPI.
Regarding Risk of Alcohol
Consumption.
90......................... Hepatitis C: Counseling 0394.................. AMA-PCPI.
Regarding Use of
Contraception Prior to
Antiviral Therapy.
183........................ Hepatitis C: Hepatitis A 0399.................. AMA-PCPI.
Vaccination in Patients
with HCV.
184........................ Hepatitis C: Hepatitis B 0400.................. AMA-PCPI.
Vaccination in Patients
with HCV.
----------------------------------------------------------------------------------------------------------------

Table 68--Measures Proposed for 2011 HIV/AIDS Measures Group*
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
159........................ HIV/AIDS: CD4+ Cell Count 0404.................. AMA-PCPI/NCQA.
or CD4+ Percentage.
160........................ HIV/AIDS: Pneumocystis 0405.................. AMA-PCPI/NCQA.
Jiroveci Pneumonia (PCP)
Prophylaxis.
161........................ HIV/AIDS: Adolescent and 0406.................. AMA-PCPI/NCQA.
Adult Patients with HIV/
AIDS Who Are Prescribed
Potent Antiretroviral
Therapy.
162........................ HIV/AIDS: HIV RNA Control 0407.................. AMA-PCPI/NCQA.
After Six Months of Potent
Antiretroviral Therapy.
205........................ HIV/AIDS: Sexually 0409.................. AMA-PCPI/NCQA.
Transmitted Disease
Screening for Chlamydia
and Gonorrhea.
206........................ HIV/AIDS: Screening for 0413.................. AMA-PCPI/NCQA.
High Risk Sexual Behaviors.
207........................ HIV/AIDS: Screening for 0415.................. AMA-PCPI/NCQA.
Injection Drug Use.

[[Page 40197]]

208........................ HIV/AIDS: Sexually 0410.................. AMA-PCPI/NCQA.
Transmitted Disease
Screening for Syphilis.
----------------------------------------------------------------------------------------------------------------
* This measures group is selected to be reportable through registry-based reporting only.

Table 69--Measures Proposed for 2011 CAP Measures Group
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
56......................... Community-Acquired 0232.................. AMA-PCPI/NCQA.
Pneumonia (CAP): Vital
Signs.
57......................... Community-Acquired 0094.................. AMA-PCPI/NCQA.
Pneumonia (CAP):
Assessment of Oxygen
Saturation.
58......................... Community-Acquired 0234.................. AMA-PCPI/NCQA.
Pneumonia (CAP):
Assessment of Mental
Status.
59......................... Community-Acquired 0096.................. AMA-PCPI/NCQA.
Pneumonia (CAP): Empiric
Antibiotic.
----------------------------------------------------------------------------------------------------------------

Table 70--Measures Proposed for 2011 Asthma Measures Group
----------------------------------------------------------------------------------------------------------------
Measure No. Measure title NQF Measure No. Measure developer
----------------------------------------------------------------------------------------------------------------
53......................... Asthma: Pharmacologic 0047.................. AMA-PCPI.
Therapy.
64......................... Asthma: Asthma Assessment.. 0001.................. AMA-PCPI.
TBD........................ Asthma: Assessment of Currently under NQF AMA-PCPI.
Asthma Risk--Emergency review.
Department/Inpatient
Setting.
TBD........................ Asthma: Discharge Plan- Currently under NQF AMA-PCPI.
Emergency/Inpatient review.
Setting.
----------------------------------------------------------------------------------------------------------------

We note that the specifications for measures groups do not
necessarily contain all the specification elements of each individual
measure making up the measures group. This is based on the need for a
common set of denominator specifications for all the measures making up
a measures group in order to define the applicability of the measures
group. Therefore, the specifications and instructions for measures
groups will again be provided separately from the specifications and
instructions for the individual 2011 PQRI measures. We will post the
detailed specifications and specific instructions for reporting
measures groups on the PQRI section of the CMS Web site at http://www.cms.gov/PQRI by no later than December 31, 2010.
Additionally, the detailed measure specifications and instructions
for submitting data on those 2011 measures groups that were also
included as 2010 PQRI measures groups may be updated or modified prior
to 2011. Therefore, the 2011 PQRI measure specifications for any given
measures group could be different from specifications and submission
instructions for the same measures group used for 2010. These measure
specification changes are not expected to materially impact the
intended meaning of the measures or the strength of the measures.
j. Proposed 2011 PQRI Quality Measures for Physician Groups Selected To
Participate in the Group Practice Reporting Option (GPRO I)
As discussed in section VI.F.1.g.(3).(i) of this proposed rule, we
propose that physician groups selected to participate in the 2011 PQRI
GPRO I would be required to report on 26 proposed measures. We are
proposing these measures because they are NQF-endorsed measures
currently collected as part of the PGP and/or MCMP demonstrations and
in the 2010 PQRI GPRO. These proposed measures are listed in Table 71.
To the extent that a measure is an existing PQRI measure available for
reporting by individual EPs, the Measure Title is preceded by the
measure's PQRI Measure Number. If there is no number in the PQRI
Measure Number column of the table, then the measure is not an existing
PQRI measure and will be added to the 2011 PQRI for purposes of the
GPRO I. Measures proposed for GPRO II are discussed in section
VI.F.1.g.(3).(ii) of this proposed rule.
As in the 2010 PQRI, a separate measures specifications manual and
other supporting documents will be available for group practices
participating in the 2011 PQRI GPRO I. We anticipate that the group
practice measures specifications manual will be available by November
15, 2010 on the PQRI section of the CMS Web site at http://www.cms.gov/PQRI.

Table 71--Measures for Physician Groups Participating in the 2011 PQRI Group Practice Reporting Option (GPRO I)
----------------------------------------------------------------------------------------------------------------
PQRI measure No. Measure title Measure developer NQF No.
----------------------------------------------------------------------------------------------------------------
1.......................... Diabetes Mellitus: NCQA.................. 0059
Hemoglobin A1c Poor
Control in Diabetes
Mellitus.
2.......................... Diabetes Mellitus: Low NCQA.................. 0064
Density Lipoprotein (LDL-
C)Control.
3.......................... Diabetes Mellitus: High NCQA.................. 0061
Blood Pressure Control in
Diabetes Mellitus.
5.......................... Heart Failure: Angiotensin- AMA-PCPI.............. 0081
Converting Enzyme (ACE)
Inhibitor or Angiotensin
Receptor Blocker (ARB)
Therapy for Left
Ventricular Systolic
Dysfunction (LVSD).
6.......................... Coronary Artery Disease AMA-PCPI.............. 0067
(CAD): Oral Antiplatelet
Therapy Prescribed for
Patients with CAD.

[[Page 40198]]

7.......................... Coronary Artery Disease AMA-PCPI.............. 0070
(CAD): Beta-Blocker
Therapy for CAD Patients
with Prior Myocardial
Infarction (MI).
8.......................... Heart Failure: Beta-Blocker AMA-PCPI.............. 0083
Therapy for Left
Ventricular Systolic
Dysfunction (LVSD).
110........................ Preventive Care and AMA-PCPI.............. 0041
Screening: Influenza
Immunization for Patients
>= 50 Years Old.
111........................ Preventive Care and NCQA.................. 0043
Screening: Pneumonia
Vaccination for Patients
65 Years and Older.
112........................ Preventive Care and NCQA.................. 0031
Screening: Screening
Mammography.
113........................ Preventive Care and NCQA.................. 0034
Screening: Colorectal
Cancer Screening.
117........................ Diabetes Mellitus: Dilated NCQA.................. 0055
Eye Exam in Diabetic
Patient.
118........................ Coronary Artery Disease AMA-PCPI.............. 0066
(CAD): Angiotensin-
Converting Enzyme (ACE)
Inhibitor or Angiotensin
Receptor Blocker (ARB) for
Patients with CAD and
Diabetes and/or Left
Ventricular Systolic
Dysfunction (LVSD).
119........................ Diabetes Mellitus: Urine NCQA.................. 0062
Screening for Microalbumin
or Medical Attention for
Nephropathy in Diabetic
Patients.
163........................ Diabetes Mellitus: Foot NCQA.................. 0056
Exam.
GPRO DM-1.................. Diabetes Mellitus: NCQA.................. 0057
Hemoglobin A1c Testing.
GPRO DM-9.................. Diabetes Mellitus: Lipid NCQA.................. 0063
Profile.
GPRO HF-2.................. Heart Failure: Left CMS...................
Ventricular Function (LVF)
Testing.
198........................ Heart Failure: Left AMA-PCPI.............. 0079
Ventricular Function (LVF)
Assessment.
GPRO HF-3.................. Heart Failure: Weight CMS AMA-PCPI not 0085
Measurement. maintaining.
199........................ Heart Failure: Patient AMA-PCPI.............. 0082
Education.
200........................ Heart Failure: Warfarin AMA-PCPI.............. 0084
Therapy for Patients with
Atrial Fibrillation.
197........................ Coronary Artery Disease AMA-PCPI.............. 0074
(CAD): Drug Therapy for
Lowering LDL-Cholesterol.
GPRO HTN-1................. Hypertension: Blood AMA-PCPI.............. 0013
Pressure Measurement.
GPRO HTN-2................. Hypertension (HTN): Blood NCQA.................. 0018
Pressure Control.
GPRo HTN-3................. Hypertension (HTN): Plan of AMA-PCPI.............. 0017
Care.
----------------------------------------------------------------------------------------------------------------

k. Public Reporting of PQRI Data
Section 1848(m)(5)(G) of the Act requires the Secretary to post on
the CMS Web site, in an easily understandable format, a list of the
names of EPs (or group practices) who satisfactorily submitted data on
quality measures for the PQRI and the names of the EPs (or group
practices) who are successful electronic prescribers. In addition,
section 10331(a)(1) of the ACA, requires the Secretary to develop a
Physician Compare Internet Web site by January 1, 2011, on which
information on physicians enrolled in the Medicare program and other
EPs who participate in the PQRI program would be posted.
To meet the ACA deadline of January 1, 2011, with respect to
establishing the Physician Compare Web site, we propose, for 2011 PQRI,
to use the current Physician and Other Health Care Professional
Directory as a foundation for the Physician Compare Web site. As in
2010 PQRI, we propose to continue to make public the names of EPs and
group practices that satisfactorily submit quality data for the 2011
PQRI. Previously, this was posted on the Physician and Other Health
Care Professionals Directory. Our intent for the 2011 PQRI is to post
the information on the Physician Compare Web site that must be
developed by January 1, 2011. Specifically, we propose to post the
names of EPs who: (1) Submit data on the 2011 PQRI quality measures
through one of the reporting mechanisms available for the 2011 PQRI;
(2) meet one of the proposed satisfactory reporting criteria of
individual measures or measures groups for the 2011 PQRI as described
above; and (3) qualify to earn a PQRI incentive payment for covered
professional services furnished during the applicable 2011 PQRI
reporting period, for purposes of satisfying the requirements under
section 1848(m)(5)(G)(i) of the Act, on the Physician Compare Web site.
Similarly, for purposes of publicly reporting the names of group
practices, on the Physician Compare Web site, for 2011, we propose to
post the names of group practices that: (1) Submit data on the 2011
PQRI quality measures through one of the proposed group practice
reporting options; (2) meet the proposed criteria for satisfactory
reporting under the respective group practice reporting option; and (3)
qualify to earn a PQRI incentive payment for covered professional
services furnished during the applicable 2011 PQRI reporting period for
purposes of satisfying the requirements under section 1848(m)(5)(G)(i)
of the Act.
We do not propose to require as a condition of participation in the
2011 PQRI that performance information be made publicly available at
either the group practice or individual level for 2011 PQRI. However,
we note that section 10331 of the ACA requires that not later than
January 1, 2013, and with respect to reporting periods that begin no
earlier than January 1, 2012, we implement a plan for making publicly
available through Physician Compare, information on physician
performance, including measures collected under PQRI. Consistent with
section 10331 of the ACA, we expect, in the future, to publicly report
performance information based on PQRI.
We will be working on a plan to expand the information that is
publicly posted on the Physician Compare in future years. This will be
further described in future rulemaking. We solicit comments on our plan
for implementation of a Physician Compare Web site for 2011.

[[Page 40199]]

l. Other Relevant ACA Provisions
(1) Section 3002 (b)--Incentive Payment Adjustment for Quality
Reporting
Beginning 2015, a payment adjustment will apply under the PQRI.
Specifically, under section 1848(a)(8) of the Act, as added by section
3002(b) of the ACA, with respect to covered professional services
furnished by an EP during 2015 or any subsequent year, if the EP does
not satisfactorily submit data on quality measures for covered
professional services for the quality reporting period for the year,
the fee schedule amount for services furnished by such professionals
during the year shall be equal to the applicable percent of the fee
schedule amount that would otherwise apply to such services. The
applicable percent for 2015 is 98.5 percent and for 2016 and each
subsequent year it is 98.0 percent.
We will address this provision of the ACA in future notice and
comment rulemaking.
(2) Section 3002(c)--Maintenance of Certification Programs and Section
10327 Improvements to the Physician Quality Reporting System
Section 3002(c) of the ACA amends section 1848(k)(4) of the Act to
require a mechanism whereby an EP may provide data on quality measures
through an MOCP operated by a specialty body of the American Board of
Medical Specialties (ABMS). In addition, section 1848(m)(7)of the Act
(``Additional Incentive Payment''), as added by section 10327(a) of the
ACA, provides for an additional 0.5 percent incentive payment for years
2011 through 2014 if certain requirements are met. In accordance with
section 1848(m)(7)(B) of the Act, in order to qualify for the
additional incentive payment, an EP must--
Satisfactorily submit data on quality measures under PQRI
for a year and have such data submitted--

++ On their behalf through an MOCP that meets the criteria for a
registry under PQRI (see section VI.F.1.d.(4) of this proposed rule);
or
++ In an alternative form and manner determined appropriate by the
Secretary; and

More frequently than is required to qualify for or
maintain board certification status--

++ Participate in such an MOCP for a year; and
++ Successfully completes a qualified MOCP for such year.

Section 1848(m)(7)(C)(i) of the Act defines ``Maintenance of
Certification Program'' as a continuous assessment program, such as a
qualified ABMS MOCP, or an equivalent program (as determined by the
Secretary), that advances quality and the lifelong learning and self-
assessment of board certified specialty physicians by focusing on the
competencies of patient care, medical knowledge, practice-based
learning, interpersonal and communications skills and professionalism.
Such a program shall require a physician to do the following:
Maintain a valid, unrestricted medical license in the
United States.
Participate in educational and self-assessment programs
that require an assessment of what was learned.
Demonstrate, through a formalized, secure examination,
that the physician has the fundamental diagnostic skills, medical
knowledge, and clinical judgment to provide quality care in their
respective specialty.
Successful completion of a qualified MOCP practice
assessment.
As defined in section 1848(m)(7)(C)(ii) of the Act, a ``qualified
Maintenance of Certification Program practice assessment'' means an
assessment of a physician's practice that--
(1) Includes an initial assessment of an EP's practice that is
designed to demonstrate the physician's use of evidence-based medicine;
(2) Includes a survey of patient experience with care; and
(3) Requires a physician to implement a quality improvement
intervention to address a practice weakness identified in the initial
assessment and then to remeasure to assess performance after such
intervention.
To qualify for the additional incentive payment, section
1848(m)(7)(B)(iii) of the Act also requires the MOCP Program to submit
to CMS, on behalf of the EP, information:
(1) In a form and manner specified by the Secretary, that the EP
has successfully completed a qualified MOCP practice assessment for
such year;
(2) If requested by the Secretary, information on the survey of
patient experience with care; and
(3) As the Secretary may require, on the methods, measures, and
data used under the MOCP and the qualified MOCP practice assessment.
Section 10327(b) of the ACA amends section 3002(c) of the ACA
further to specify that the additional 0.5 percent incentive payment is
available only for years 2011, 2012, 2013, and 2014. For years after
2014, if the Secretary determines it to be appropriate, the Secretary
may incorporate participation in an MOCP and successful completion of a
qualified MOCP practice assessment into the composite of measures of
quality for care furnished pursuant to the physician fee schedule
payment modifier.
To implement the provisions under sections 3002(c) and 10327 of the
ACA, CMS proposes for 2011 to require the following:
An EP wishing to be eligible for the additional PQRI
incentive payment of 0.5 percent must meet the proposed requirements
for satisfactory PQRI reporting, for program year 2011, based on the
12-month reporting period. We propose to require that EPs seeking the
additional PQRI incentive payment satisfactorily report for a 12-month
reporting period rather than only a 6 month reporting period, based on
the statutory language that the EP must satisfactorily report ``for a
year.'' For purposes of satisfactory reporting under PQRI, we propose
that the EP may participate as an individual EP using either individual
PQRI measures or measures groups and submitting the PQRI data via
claims, a registry, or an her or participate under one of the GPRO
options (I or II),. Alternatively, EPs may satisfactorily report under
PQRI based on submission of PQRI data by an MOCP, provided that the
MOCP has qualified as a PQRI registry for 2011. As indicated
previously, an EP would not necessarily have to qualify for PQRI
through an MOCP serving as a registry. Rather, we propose that an EP
may qualify for the additional incentive, without reqard to the method
by which the EP has met the basic requirement of satisfactory reporting
under PQRI.
In addition to meeting the proposed requirements for
satisfactory reporting under PQRI for program year 2011, the EP must
have data submitted on his or her behalf through an MOCP, for the MOCP
in which the EP participates. Although the MOCP need not become a
qualified registry for data submission for PQRI purposes, the MOCP must
meet the criteria for a registry for submission of the MOCP data as
specified below.
An EP must, more frequently than is required to qualify
for or maintain board certification, participate in an MOCP for a year
and successfully complete a qualified MOCP practice assessment for such
year. We believe that the ``more frequently'' requirement applies both
to the elements of the MOCP itself and the requirement to successfully
complete a qualified MOCP practice assessment. With regard to the
elements other than completing a qualified MOCP practice assessment, we
propose to require that the MOCP certify that the EP has ``more
frequently'' than is required to qualify for or maintain

[[Page 40200]]

board certification ``participated in a MOCP for a year'' as required
by section 10327 of the ACA. We do not propose to specify with respect
to participation how an EP must meet the more frequently requirement,
but rather that the MOCP so certify that EP has met this requirement.
We note that we do not believe that the ``more frequently'' requirement
is applicable to the licensure requirement, given that one cannot be
licensed ``more frequently'' than is required. However, we do believe
that the ``more frequently'' requirement applies to the required
elements under sections 1848(m)(7)(C)(i)(II) and 1848(m)(7)(C)(i)(III)
of the Act. In other words, we believe that the EP must ``more
frequently'' than is required to qualify for or maintain board
certification, participate in educational and self-assessment programs
that require an assessment of what was learned; demonstrate, through a
formalized, secure examination, that the physician has the fundamental
diagnostic skills, medical knowledge, and clinical judgment to provide
quality care in their respective specialty; and successfully complete a
qualified MOCP practice assessment.
With respect to the MOCP practice assessment, which is specifically
delineated in section 1848(m)(7)(B)(ii) of the Act as being required
more often than is necessary to qualify for or maintain board
certification, we believe we need to be more specific regarding our
interpretation of the phrase ``more frequently.'' Additionally, we are
aware that some specialty boards have varying MOCP requirements for
physicians to maintain board certification, based on the date of
original certification. Some, we believe, may not be required to
participate in an MOCP program at all in order to maintain board
certifications. Accordingly, we recognize that ``more often'' may vary
among physicians certified by the same specialty board. We interpret
the statutory provisions as requiring participation in and successful
completion of at least one MOCP practice assessment. Therefore, we
propose, as a basic requirement, participation in and successful
completion in at least one MOCP practice assessment. For physicians who
are not required to participate in an MOCP to maintain board
certification, ``more often'' would be more than 0, and therefore only
once. For physicians, however, who are otherwise required by the
specialty board to participate in an MOCP to maintain board
certification status, these physicians would need to complete the MOCP
practice assessment a second time in order to qualify for the
additional incentive payment. If an MOCP practice assessment were
required more than once during a particular cycle, the EP would be
required to complete the MOCP practice assessment a third time in order
to qualify for the additional incentive.
We are also aware that ABMS boards are at various stages in
implementing the practice assessment modules, and some may not have
such assessment modules in place. However, inasmuch as we interpret the
statute to require an MOCP practice assessment at least once as part of
the MOCP, EPs who do not have available, through their boards or
otherwise, an MOCP practice assessment are not eligible for the 0.5
percent incentive.
We believe that the experience of care survey provides
particularly valuable information and propose that a qualified MOCP
practice assessment must include a survey of patient experience with
care. The Secretary may request information on the survey of patient
experience with care, under section 1848(m)(7)(B)(iii) of the Act. In
view of the importance of this information, and the lack of readily
available alternative sources, we propose to require that MOCPs submit
information as to the survey of patient experience with care for the EP
regarding whom information is being submitted by the MOCP.
We propose that MOCPs, who wish to enable their members to be
eligible for an additional PQRI incentive payment for the 2011 PQRI,
will need to go through a self-nomination process by January 31, 2011.
We propose the board will need to include all of the following
information in their self-nomination letter to CMS:
Provide detailed information regarding the MOCP with
reference to the statutory requirements for such program.
Indicate the organization sponsoring the MOCP, and whether
the MOCP is sponsored by an ABMS board. If not an ABMS board, indicate
whether the program is substantially equivalent to the ABMS MOCP
process.
The frequency of a cycle of MOC for the specific MOCP of
the sponsoring organization; including what constitutes ``more
frequently'' for the MOCP practice assessment for the specific MOCP of
the sponsoring organization.
What was, is, or will be the first year of availability of
the MOCP practice assessment for completion by an EP.
What data is collected under the patient experience of
care survey and how this information would be provided to CMS.
How the MOCP monitors that an EP has implemented a quality
improvement process for their practice.
Describe the methods, and data used under the MOCP, and
provide a list of all measures used in the MOCP for 2010 and to be used
for 2011, including the title and descriptions of each measure, the
owner of the measure, whether the measure is NQF endorsed, and a link
to a Web site containing the detailed specifications of the measures,
or an electronic file containing the detailed specifications of the
measures.
We propose that sponsoring organizations who desire to participate
as an MOCP will need to be able to provide CMS the following
information in a CMS-specified file format by no later than the end of
the first quarter of 2012:
The name, NPI and applicable TIN(s) of the EP who would
like to participate in this process;
Attestation from the board that the information provided
to CMS is accurate and complete;
The board has signed documentation from the EP that the EP
wishes to have their information released to CMS; Information from the
experience of care survey;
Information certifying that the EP has participated in an
MOCP for a year, more frequently than is required to qualify for or
maintain board certification status, including the year that the
physician met the board certification requirements for the MOCP, and
the year the EP participated in an MOCP ``more frequently'' than is
required to maintain or qualify for board certification; and
Information certifying that the EP has completed the MOCP
practice assessment one additional time more than is required to
qualify for or maintain board certification, including the year of the
original MOCP practice assessment or that an MOCP practice assessment
is not required for the EP, and the year of the additional MOCP
practice assessment completion.
We propose that specialty boards that also desire to send PQRI
information to CMS on behalf of their EP should be able to meet the
requirements for registry data submission proposed in section
VI.F.1.d.(4) of this rule and should follow the directions for self-
nomination to become a qualified registry. Boards may also participate
as registries for PQRI data provided that they meet the registry
requirements.
As an alternative to requiring boards to either operate a qualified
PQRI registry or to self-nominate to submit MOCP data to CMS on behalf
of their members, we also considered having the

[[Page 40201]]

various boards submit the MOCP data to the ABMS and having ABMS channel
the information from the various boards to CMS. We invite comments on
the proposed mechanism for receiving MOCP data from the specialty
boards as well as on the alternative mechanism that we considered.
(3) Section 3002(d)--Integration of PQRI and EHR Reporting
Section 1848(m)(7) of the Act (``Integration of Physician Quality
Reporting and EHR Reporting), as added by section 3002(d) of the ACA
requires us to move towards the integration of EHR measures with
respect to the PQRI program. Section 1848(m)(7) of the Act specifies
that by no later than January 1, 2012, the Secretary shall develop a
plan to integrate reporting on quality measures under PQRI with
reporting requirements under subsection (o) relating to the meaningful
use of EHRs. Such integration shall consist of the following:
(A) The selection of measures, the reporting of which would both
demonstrate--
(i) Meaningful use of an EHR for purposes of the EHR incentive
program; and
(ii) Quality of care furnished to an individual; and
(B) Such other activities as specified by the Secretary.
In an effort to align PQRI with the EHR incentive program, we
propose to include many ARRA core clinical quality measures in the PQRI
program, to demonstrate meaningful use of EHR and quality of care
furnished to individuals. We propose the selection of these measures to
meet the requirements of planning the integration of PQRI and EHR
reporting. We are working towards a plan to integrate reporting on
quality measures to make available by January 1, 2012.
We solicit comments on this approach to integrate PQRI EHR measures
with the clinical quality measures adopted for the EHR incentive
program. Specifically, we encourage comments on how CMS plans to align
the measures, and how the plan for integration will optimally improve
quality of care for individuals and provide meaningful use of EHRs.
(4) Section 3002(e)--Feedback
Section 3002 (e) of the ACA amends section 1848(m)(5) of the Act by
adding subparagraph (H), which requires the Secretary to provide timely
feedback to EPs on the performance of the EP with respect to
satisfactorily submitting data on quality measures. Since the inception
of the program in 2007, the PQRI program has provided EPs who have
reported PQRI data on quality measures feedback reports at the TIN/NPI
level detailing participation in PQRI, including reporting rate and
performance rate information. For 2008, we improved the format and
content of feedback reports based on stakeholder input. We also
developed an alternate report distribution method whereby each EP can
directly request and receive a feedback report. We will continue to
provide feedback reports to individuals and group practices that
satisfactorily submit PQRI quality measure and thus qualify to earn a
PQRI incentive.
We believe that the requirements under section 1848(m)(5)(H) of the
Act, as added by section 3002(e) of the ACA, for ``timely'' feedback
reports with respect to satisfactorily submitting data on quality
measures is met by providing the feedback reports on or about the time
of issuance of the incentive payments. Thus, we propose to provide 2011
feedback reports on or about the time of issuance of the 2011 incentive
payments, consistent with our current practice.
In addition, we also propose to provide interim feedback reports
for EPs reporting 2011 measures groups through the claims-based
reporting mechanism. Specifically, we propose to develop interim
feedback reports that are similar in content and format to the reports
that we currently provide for such EPs using claims for dates of
service between January 1, 2011 and February 28, 2011. We expect that
we would be able to make these interim feedback reports available to
EPs in June 2011. We believe interim feedback reports would be
particularly valuable to EPs reporting measures group because, unlike
with individual measures reporting, EPs would not be required to report
on a certain percentage of eligible cases to satisfactorily report the
2011 PQRI measures groups. EPs could just report on 30 eligible cases
to satisfactorily report using measures groups. Interim feedback
regarding the number of cases reported as of February 28, 2011 would be
valuable since an EP would know how many more cases he or she needs to
report to satisfy the criteria for satisfactory reporting for claims-
based reporting of measures groups.
We also intend to continue to explore methods to facilitate PQRI
feedback report distribution. Additionally, based on feedback from the
2011 PQRI Listening Session that was held on February 2, 2010, we are
considering a process by which we could respond to interim feedback
report requests at the individual level for claims-based submission,
based upon first quarter claims data for the applicable program year.
The goal of this would be to provide information to EPs as to errors in
claims-based QDC submission while the reporting period is ongoing and
prior to the start of the 6-month reporting period. We welcome comments
with respect to our proposal to provide timely feedback reports for
PQRI.
(5) Section 3002(f)--Appeals
Section 1848(m)(5)(I) of the Act, as amended and added by section
3002(f)(2) of the ACA, requires an informal review process.
Specifically, the statute requires that the Secretary establish and
have in place, no later than January 1, 2011, an informal process for
EPs to seek a review of the determination that an EP did not
satisfactorily submit data on quality measures under the PQRI.
We note that except as provided under the informal process under
section 1848(m)(5)(I) of the Act, section 1848(m)(5)(E) of the Act, as
amended by section 3002(f) of the ACA, specifies that, with respect to
the PQRI, there shall be no administrative or judicial review under
section 1869, section 1878, or otherwise, of:
(1) The determination of measures applicable to services furnished
by EPs under PQRI;
(2) The determination of satisfactory reporting under PQRI; and
(3) The determination of any PQRI incentive payment and PQRI
payment adjustment.
We propose to base the informal process on our current inquiry
process whereby an EP can contact the Quality Net Help Desk (via phone
or e-mail) for general PQRI and eRx Incentive Program information,
information on PQRI feedback report availability and access, and/or
information on PQRI Portal password issues. We believe that the current
inquiry process provides a good basis for an informal review process
because EPs currently can utilize the inquiry process if they have
questions on whether they qualified for an incentive. However, the
current inquiry process does not have timelines nor is it restricted to
questions solely on whether the EP qualified for an incentive. Thus,
for purposes of the informal process required under section
1848(m)(5)(E) of the Act, we propose the following process:
An EP electing to utilize the informal process must
request an informal review within 90 days of the release of his or her
feedback report.
An EP can request the informal review by notifying the
Quality Net Help Desk via e-mail at

[[Page 40202]]

[email protected]. The e-mail requesting the initiation of the
informal review process should summarize the concern(s) of the EP and
the reason(s) for requesting an informal review.
We propose to provide the EP with a response to his or her
request for an informal review within 60 days of receiving the original
request.
As this process is informal and the statute does not
require a formal appeals process, we will not include a hearing or
evidence submission process, although the EP may submit information to
assist in the review.
Based on our informal review, we will provide a written
response. Where we find that the EP did satisfactorily report, we
propose to provide the applicable incentive payment.
Given that this is an informal review process and given
the limitations on review under section 1848(m)(5)(E) of the Act,
decisions based on the informal review will be final, and there will be
no further review or appeal.
By December 31, 2011, we propose to post on the CMS PQRI
Web site, further information regarding the operational aspects of the
informal review process for 2011 PQRI. We invite public comment on this
proposed process.
2. Section 132: Incentives for Electronic Prescribing (eRx)-- The
Electronic Prescribing Incentive Program
a. Program Background and Statutory Authority
As defined in Sec. 423.159(a), eRx is the transmission using
electronic media, of prescription or prescription-related information
between prescriber, dispenser, pharmacy benefit manager (PBM), or
health plan, either directly or through an intermediary, including an
eRx network. Included in eRx, but not limited to, are two-way
transmissions between the point of care and the dispenser.
Section 1848(m)(2) of the Act promotes the use of electronic
prescribing by authorizing incentive payments to EPs or group practices
who are ``successful electronic prescribers.'' The intention of the
2011 eRx Incentive Program, which is separate from, and in addition to,
any incentive payment that EPs may earn through the PQRI program, is to
continue to encourage significant expansion of the use of electronic
prescribing by authorizing a combination of financial incentives and
payment adjustments. Individual EPs do not have to participate in PQRI
in order to participate in the eRx Incentive Program (and vice versa).
We propose to add Sec. 414.92 to title 42 of the Code of Federal
Regulations to implement the provisions of the eRx Incentive Program
discussed in this section of the proposed rule.
For 2011, which is the third year of the eRx Incentive Program, the
Secretary is authorized to provide successful electronic prescribers,
as defined in section 1848(m)(3)(B) of the Act and further discussed
below in this section, an incentive payment equal to 1.0 percent of the
total estimated Medicare Part B PFS allowed charges (based on claims
submitted not later than 2 months after the end of the reporting
period) for all covered professional services furnished during the 2011
reporting period. Covered professional services are defined under the
statute to be services for which payment is made under, or is based on,
the PFS and which are furnished by an EP. The applicable electronic
prescribing percent (1.0 percent) authorized for the 2011 eRx Incentive
Program is different from that authorized for the 2009 and 2010 eRx
Incentive Program.
Under section 1848(m)(2)(C) of the Act, the incentive payments for
successful electronic prescribers for future years are authorized as
follows:
1.0 percent for 2012.
0.5 percent for 2013.
However, section 1848(m)(2)(D) of the Act, as added by section
4101(f)(2)(B) of Title IV of Division B of the American Recovery and
Reinvestment Act of 2009 (Pub.L. 111-5) (ARRA-HITECH), specifies that
the eRx incentive does not apply to an EP (or group practice), if, for
the EHR reporting period, the EP (or group practice) earns an incentive
payment under the Medicare EHR incentive program. The Medicare EHR
incentive program begins in 2011. Therefore, EPs who earn an incentive
under the Medicare EHR Incentive Program, with respect to certified EHR
technology that has eRx capabilities, will not be eligible to earn a
separate incentive payment for being a successful electronic prescriber
under the eRx Incentive Program.
For eRx, when reporting any of the G-codes for purposes of
qualifying for the incentive payment for electronic prescribing in
2011, we propose that the professional must have and regularly use a
``qualified'' electronic prescribing system, as defined in the
electronic prescribing measure specifications. If the professional does
not have general access to an eRx system in the practice setting, as
cited in the hardship exception as stated by the secretary, there is
nothing to report.
In addition, under section 1848(a)(5)(A) of the Act, a PFS payment
adjustment applies beginning in 2012 to those who are not successful
electronic prescribers. Specifically, for 2012, 2013, and 2014, if the
EP is not a successful electronic prescriber for the reporting period
for the year, the PFS amount for covered professional services
furnished by such professionals during the year as referenced above
shall be less than the PFS amount that would otherwise apply over the
next several years by:
1.0 percent for 2012.
1.5 percent for 2013.
2.0 percent for 2014.
We believe that the criteria for determination of successful
electronic prescriber proposed herein for the eRx incentive payment are
not required to be identical to the criteria that will be used to
determine the applicability of the payment adjustment that begins in
2012. Policy considerations underlying the application of the incentive
payment are not necessarily the same as those in applying a payment
adjustment. In general, we believe that an incentive should be broadly
available to encourage the widest possible adoption of eRx, even for
low volume prescribers. On the other hand, we believe that a payment
adjustment should be applied primarily to assure that those who have a
large volume of prescribing do so electronically, without penalizing
those for whom the adoption and use of an electronic prescribing system
may be impractical given the low volume of prescribing. The 2011 eRx
incentive and the application of the payment adjustment for 2012 will
be addressed separately below.
Under section 1848(m)(6)(A) of the Act, the definition of ``EP''
for purposes of eligibility for the eRx Incentive Program is identical
to the definition of ``EP'' for the PQRI under section 1848(k)(3)(B) of
the Act. In other words, EPs include physicians, other practitioners as
described in section 1842(b)(18)(C) of the Act, physical and
occupational therapists, qualified speech-language pathologists, and
qualified audiologists. However, as we have noted in prior years, for
purposes of the eRx Incentive Program, eligibility is further
restricted by scope of practice to those professionals who have
prescribing authority. Detailed information about the types of
professionals that are eligible to participate in the eRx Incentive
Program is available on the Electronic Prescribing Incentive Program
section of the CMS Web site at http://www.cms.gov/ERXIncentive.
As in the 2010 eRx Incentive Program, we propose in 2011 that the
eRx Incentive Program continue to be an incentive program in which
determination of whether an EP is a

[[Page 40203]]

successful electronic prescriber will be made at the individual
professional level, based on the NPI. Inasmuch as some individuals
(identified by NPIs) may be associated with more than one practice or
TIN, the determination of whether an EP is a successful electronic
prescriber will be made to the holder of each unique TIN/NPI
combination. Then, as in previous years, payment will be made to the
applicable holder of the TIN. For 2011, the determination of whether an
EP is a successful electronic prescriber will continue to be made for
each unique TIN/NPI combination. However, section 1848(m)(3)(C) of the
Act required the Secretary by January 1, 2010 to establish and have in
place a process under which EPs in a group practice (as defined by the
Secretary) would be treated as meeting the requirements for submitting
data on electronic prescribing quality measures for covered
professional services for a reporting period (or, for purposes of the
payment adjustment under section 1848(a)(5) of the Act, for a reporting
period for a year) if, in lieu of reporting the electronic prescribing
measure, the group practice reports measures determined appropriate by
the Secretary, such as measures that target high-cost chronic
conditions and preventive care, in a form and manner, and at a time
specified by the Secretary. Therefore, in addition to making incentive
payments for 2011 to individual EPs based on separately analyzing
whether the individual EPs are successful electronic prescribers, we
propose to also make incentive payments to group practices based on the
determination that the group practice, as a whole, is a successful
electronic prescriber in accordance with section 1848(m)(3)(C) of the
Act.
b. The 2011 eRx Incentive
(1) The 2011 Reporting Period for the eRx Incentive Program
Section 1848(m)(6)(C)(i)(II) of the Act defines ``reporting
period'' for the 2011 eRx Incentive Program to be the entire year.
Section 1848(m)(6)(C)(ii) of the Act, however, authorizes the Secretary
to revise the reporting period if the Secretary determines such
revision is appropriate, produces valid results on measures reported,
and is consistent with the goals of maximizing scientific validity and
reducing administrative burden. We propose the 2011 eRx Incentive
Program reporting period to be the entire calendar year (January 1,
2011 through December 31, 2011) based on the definition of ``reporting
period'' specified under section 1848(m)(6)(C)(i)(II) of the Act. We
believe that keeping the 2011 eRx Incentive Program reporting period
consistent with 2009 and 2010 eRx Incentive Program reporting periods
will help to further maintain program stability and be less confusing
for EPs.
Accordingly, we propose that successful electronic prescribers
would be eligible to receive an incentive payment equal to 1.0 percent
of the total estimated allowed Medicare Part B charges (based on claims
submitted by no later than February 28, 2012) for all covered
professional services furnished January 1, 2011 through December 31,
2011.
(2) Proposed Criteria for Determination of Successful Electronic
Prescriber for EPs
Under section 1848(m)(3)(B) of the Act, in order to qualify for the
incentive payment, an EP must be a ``successful electronic
prescriber,'' which the Secretary is authorized to identify using 1 of
2 possible criteria. One criterion, under section 1848(m)(3)(B)(ii) of
the Act, is based on the EP's reporting, in at least 50 percent of the
reportable cases, on any electronic prescribing quality measures that
have been established under the physician reporting system, under
subsection 1848(k) of the Act (which, as noted previously, we have
named ``PQRI'' for ease of reference) and are applicable to services
furnished by the EP during a reporting period. We applied this
criterion in 2009. However, for years after 2009, section 1848(m)(3)(D)
of the Act permits the Secretary in consultation with stakeholders and
experts to revise the criteria for submitting data on electronic
prescribing measures under section 1848(m)(3)(B)(ii) of the Act.
The second criterion, under section 1848(m)(3)(B)(iii) of the Act,
is based on the electronic submission by the EP of a sufficient number
(as determined by the Secretary) of prescriptions under Part D during
the reporting period. If the Secretary decides to use the latter
standard, then, in accordance with section 1848(m)(3)(B)(iv) of the
Act, the Secretary is authorized to use Part D drug claims data to
assess whether a ``sufficient'' number of prescriptions have been
submitted by EPs. However, under section 1848(m)(3)(B)(i) of the Act,
if the standard based on a sufficient number (as determined by the
Secretary) of electronic Part D prescriptions is applied for a
particular reporting period, then the standard based on the reporting
on electronic prescribing measures would no longer apply.
For 2011, we propose to continue to require EPs to report on the
electronic prescribing measure used in the 2009 and 2010 eRx Incentive
Program to determine whether an EP is a successful electronic
prescriber, but we are proposing to again use modified measure
specifications and to use modified reporting criteria based on the
authority provided under section 1848(m)(3)(D) of Act, as discussed
below.
As we stated in prior years, we are still considering the use of a
certain number of Part D prescribing events as the basis for the
incentive payment. We propose to continue to require EPs to report on
the electronic prescribing measure used in the 2009 and 2010 eRx
Incentive Program because we believe that the accuracy and completeness
of the Part D data with respect to whether a prescription was submitted
electronically is unknown. In 2010, information on whether a
prescription was submitted electronically by an individual EP began to
be collected on the Part D claims and/or Prescription Drug Event (PDE)
data. Also, since April 1, 2009, prescription drug plan sponsors are
required to send PDE data with an individual prescriber's NPI. We
currently have limited information on the accuracy and completeness of
NPI data that is submitted with the PDE data. The NPI is needed in
order for CMS to be able to link an EP's PDE data to his or her
Medicare Part B claims to calculate the incentive payment amount.
During 2010, we continue to evaluate the adequacy of Part D data to
determine the feasibility of its use for determining whether an EP
qualifies as a successful electronic prescriber. The use of Part D data
for correlation has not yet shown to be possible due to NPI and other
issues. Part D data is supplied by the pharmacy and not the EP. We are
in the process of writing and will publish an evaluation of the PQRI
reporting experience. The experience report will include an evaluation
of the eRx Incentive Program.
(i) Reporting the Electronic Prescribing Measure
For 2011, we propose to retain the 3 reporting mechanisms available
to individual EPs to report the electronic prescribing measure in 2010
to maintain program stability. First, we propose to again retain the
claims-based reporting mechanism that is used in the 2009 and 2010 eRx
Incentive Program. In addition, similar to the PQRI, for the eRx
Incentive Program, we propose to continue the registry-based reporting
mechanism and, we also propose that the EHR-based reporting mechanism
be available for the electronic prescribing measure for 2011.

[[Page 40204]]

We propose that only registries qualified to submit quality measure
results and numerator and denominator data on quality measures on
behalf of EPs for the 2011 PQRI would be qualified to submit measure
results and numerator and denominator data on the electronic
prescribing measure on behalf of EPs for the 2011 eRx Incentive
Program. As in 2010, not all registries qualified to submit quality
measures on behalf of EPs for the 2011 PQRI would be qualified to
submit quality measures results and numerator and denominator data on
the eRx measure. The electronic prescribing measure is reportable by an
EP any time he or she bills for one of the procedure codes for Part B
services included in the measure's denominator. Some registries who
self-nominate to become a qualified registry for PQRI may not choose to
self-nominate to become a qualified registry for submitting measures
that require reporting at each eligible visit. Registries need to
indicate their desire to qualify to submit measure results and
numerator and denominator data on the electronic prescribing measure
for the 2011 eRx Incentive program at the time that they submit their
self-nomination letter for the 2011 PQRI. In addition, we propose that
registries that want to be qualified to submit measure results and
numerator and denominator data on the electronic prescribing measure
for the 2011 eRx Incentive Program would be required to transmit 2011
eRx measure results and numerator and denominator data on the
electronic prescribing measure to CMS in two separate transmissions. In
addition to submitting 2011 measure results and numerator data on the
electronic prescribing measure in 2012 as described in section VI.F.1.
above, such registries would need to submit 2011 measure results and
numerator and denominator data on the electronic prescribing measure
between July 1, 2011 and August 19, 2011 for purposes of the eRx
penalty described in section VI.F.2.c. below. The self-nomination
process and requirements for registries for the PQRI, which also would
apply to the registries for the 2011 eRx Incentive Program, are
discussed previously in section VI.F.1. of this proposed rule. We will
post a final list of qualified registries for the 2011 eRx Incentive
Program on the Electronic Prescribing Incentive Program section of the
CMS Web site at http://www.cms.gov/ERXIncentive when we post the final
list of qualified registries for the 2011 PQRI on the PQRI section of
the CMS Web site.
Similarly, we continue to propose that only EHR products
``qualified'' to potentially be able to submit clinical quality data
extracted from the EHR to CMS for the 2011 PQRI would be considered
``qualified'' for the purpose of an EP potentially being able to submit
data on the electronic prescribing measure for the 2011 eRx Incentive
Program. The self-nomination process and requirements for EHR vendors
for the PQRI, which would apply to the EHR vendors for the 2011 eRx
Incentive Program were discussed in the CY 2010 PFS final rule with
comment period (74 FR 61801 through 61802). EHR vendors were required
to indicate their desire to have one or more of their EHR products
qualified for the purpose of an EP potentially being able to submit
data on the electronic prescribing measure for the 2011 eRx Incentive
Program at the time that they submitted their self-nomination letter
for the 2011 PQRI. A list of qualified EHR vendors and their products
(including the version that is qualified) for the 2011 eRx Incentive
Program will be posted on the eRx Incentive Program section of the CMS
Web site at http://www.cms.gov/ERXIncentive when we post the list of
qualified EHR products for the 2011 PQRI on the PQRI section of the CMS
Web site. We propose that EPs who want to use a qualified EHR to submit
the electronic prescribing measure for the 2011 eRx Incentive Program
would be required to transmit 2011 eRx data to CMS in two separate
transmissions. In addition to submitting 2011 data on the electronic
prescribing measure in 2012, as described in section VI.F.1. above,
such EPs would need to submit 2011 data on the electronic prescribing
measure between July 1, 2011 and August 19, 2011 for purposes of the
eRx penalty described in section VI.F.2.c. below.
(ii) The Reporting Denominator for the Electronic Prescribing Measure
The electronic prescribing measure, similar to the PQRI measures,
has 2 basic elements, which include: (1) A reporting denominator that
defines the circumstances when the measure is reportable; and (2) a
reporting numerator.
The denominator for the electronic prescribing measure consists of
specific billing codes for covered professional services. The measure
becomes reportable when any one of these procedure codes is billed by
an EP for Part B covered professional services. As initially required
under section 1848(k)(2)(A)(ii) of the Act, and further established
through rulemaking and under section 1848(m)(2)(B) of the Act, we may
modify the codes making up the denominator of the electronic
prescribing measure. As such, we expanded the scope of the denominator
codes for 2010 to covered professional services outside the
professional office and outpatient setting, such as professional
services furnished in skilled nursing facilities or the home care
setting.
We propose to retain the following CPT codes in the denominator of
the electronic prescribing measure for 2011: 90801, 90802, 90804,
90805, 90806, 90807, 90808, 90809, 90862, 92002, 92004, 92012, 92014,
96150, 96151, 96152, 99201, 99202, 99203, 99204, 99205, 99211, 99212,
99213, 99214, 99215, 99304, 99305, 99306, 99307, 99308, 99309, 99310,
99315, 99316, 99324, 99325, 99326, 99327, 99328, 99334, 99335, 99336,
99337, 99341, 99342, 99343, 99344, 99345, 99347, 99348, 99349, 99350,
G0101, G0108, G0109. In 2010, the expansion of the electronic
prescribing measure denominator was expected to provide more EPs the
opportunity to report the measure, and thus, provide more opportunities
for EPs to participate in the eRx Incentive Program. Thus far, our
experience in the 2010 eRx Incentive Program has been positive and we
do not see a need to change the denominator codes for 2011. We invite
comments on our proposal to retain the denominator codes from the 2010
electronic prescribing measure denominator.
There are no diagnosis codes in the measure's denominator and there
are no age/gender requirements in order for a patient to be included in
the measure's denominator (that is, reporting of the electronic
prescribing measure is not further limited to certain ages or a
specific gender). EPs are not required to report this measure in all
cases in which the measure is reportable. EPs who do not bill for one
of the procedure codes for Part B covered professional services
included in the measure's denominator will have no occasion to report
the electronic prescribing measure.
We further propose that by December 31, 2010, we will post the
final specifications of the measure on the ``eRx Measure'' page of the
eRx Incentive Program section of the CMS Web site at http://www.cms.gov/ERXIncentive.
(iii) Qualified Electronic Prescribing System--Required Functionalities
and Part D eRx Standards
To report the electronic prescribing measure in 2011, we again
propose that the EP must report one of the measure's numerator ``G''
codes, as will be discussed below. However, when reporting any of the
G-codes for purposes of qualifying for the incentive

[[Page 40205]]

payment for electronic prescribing in 2011, we propose that the
professional must have and regularly use a ``qualified'' electronic
prescribing system, as defined in the electronic prescribing measure
specifications. If the professional does not have general access to an
eRx system in the practice setting, the EP does not have any data to
report for purposes of the incentive payment.
Required Functionalities for a ``Qualified'' Electronic Prescriber
System.
For 2011, we propose to retain what constitutes a ``qualified''
electronic prescribing system as a system based upon certain required
functionalities that the system can perform. We propose that for 2011,
a ``qualified'' electronic prescribing system would be one that can--
Generate a complete active medication list incorporating
electronic data received from applicable pharmacies and PBMs, if
available.
Allow EPs to select medications, print prescriptions,
electronically transmit prescriptions, and conduct alerts (written or
acoustic signals to warn the prescriber of possible undesirable or
unsafe situations including potentially inappropriate dose or route of
administration of a drug, drug-drug interactions, allergy concerns, or
warnings and cautions). This functionality must be enabled.
Provide information related to lower cost, therapeutically
appropriate alternatives (if any). The ability of an electronic
prescribing system to receive tiered formulary information, if
available, would again suffice for this requirement for 2011 and until
this function is more widely available in the marketplace.
Provide information on formulary or tiered formulary
medications, patient eligibility, and authorization requirements
received electronically from the patient's drug plan (if available).
Part D Electronic Prescribing Standards. Section 1848(m)(3)(B)(v)
of the Act specifies that to the extent practicable, in determining
whether an EP is a successful electronic prescriber, ``the Secretary
shall ensure that EPs utilize electronic prescribing systems in
compliance with standards established for such systems pursuant to the
Part D Electronic Prescribing Program under section 1860D-4(e)'' of the
Act. The Part D standards for electronic prescribing systems establish
which electronic standards Part D sponsors, providers, and dispensers
must use when they electronically transmit prescriptions and certain
prescription related information for Part D covered drugs that are
prescribed for Part D eligible individuals. To be a qualified
electronic prescribing system under the current eRx Incentive Program,
electronic systems must convey the information listed above under (a)
through (d) using the standards currently in effect for the Part D
electronic prescribing program. Additional Part D electronic
prescribing standards were implemented April 1, 2009. These latest Part
D electronic prescribing standards, and those that had previously been
adopted, can be found on the CMS Web site at http://www.cms.gov/eprescribing.
To ensure that EPs utilize electronic prescribing systems that meet
these requirements, the electronic prescribing measure requires that
those functionalities required for a ``qualified'' electronic
prescribing system utilize the adopted Part D electronic prescribing
standards. The Part D electronic prescribing standards relevant to the
four functionalities for a ``qualified'' system in the electronic
prescribing measure described above and listed as (a), (b), (c), and
(d), currently are as follows:
(a) Generate medication list--Use the National Council for
Prescription Drug Programs (NCPDP) Prescriber/Pharmacist Interface
SCRIPT Standard, Implementation Guide, Version 8, Release 1, October
2005 (hereinafter ``NCPDP SCRIPT 8.1'') Medication History Standard.
(b) Transmit prescriptions electronically--Use the NCPDP SCRIPT 8.1
for the transactions listed at Sec. 423.160(b)(2).
(c) Provide information on lower cost alternatives--Use the NCPDP
Formulary and Benefits Standard, Implementation Guide, Version 1,
Release 0 (Version 1.0), October 2005 (hereinafter ``NCPDP Formulary
and Benefits 1.0'').
(d) Provide information on formulary or tiered formulary
medications, patient eligibility, and authorization requirements
received electronically from the patient's drug plan--use--
(1) NCPDP Formulary and Benefits 1.0 for communicating formulary
and benefits information between prescribers and plans;
(2) Accredited Standards Committee (ASC) X12N 270/271-Health Care
Eligibility Benefit Inquiry and Response, Version 4010, May 2000,
Washington Publishing Company, 004010X092 and Addenda to Health Care
Eligibility Benefit Inquiry and Response, Version 4010A1, October 2002,
Washington Publishing Company, 004010X092A1 for communicating
eligibility information between the plan and prescribers; and
(3) NCPDP Telecommunication Standard Specification, Version 5,
Release 1 (Version 5.1), September 1999, and equivalent NCPDP Batch
Standard Batch Implementation Guide, Version 1, Release 1 (Version
1.1), January 2000 for communicating eligibility information between
the plan and dispensers.
However, there are Part D electronic prescribing standards that are
in effect for functionalities that are not commonly utilized at this
time. Such functionalities are not currently required for a
``qualified'' system under the eRx Incentive Program. One example is Rx
Fill Notification, which is discussed in the Part D electronic
prescribing final rule (73 FR 18918, 18926). For purposes of the 2011
Electronic Prescribing Program, we again are not proposing to require
that an electronic prescribing system contain all functionalities for
which there are available Part D electronic prescribing standards. For
those required functionalities described above, we propose that a
``qualified'' system must use the adopted Part D electronic prescribing
standards for electronic messaging.
There are other aspects of the functionalities for a ``qualified''
system that are not dependent on electronic messaging and are part of
the software of the electronic prescribing system, for which Part D
standards for electronic prescribing do not pertain and are not
required for purposes of the eRx Incentive Program. For example, the
requirements in qualification (b) listed above that require the system
to allow professionals to select medications, print prescriptions, and
conduct alerts are functions included in the particular software, for
which Part D standards for electronic messaging do not apply.
We are aware that there are significant numbers of EPs who are
interested in participating in the eRx Incentive Program, but currently
do not have an electronic prescribing system. The electronic
prescribing measure does not require the use of any particular system
or transmission network; only that the system be a ``qualified'' system
having the functionalities described above based on Part D electronic
prescribing standards. As in 2010, if the professional does not have
general access to an electronic prescribing system in the practice
setting, the EP does not have any data to report for purposes of the
incentive payment and would not be able to participate in the 2011 eRx
Incentive Program. If an EP does not participate in the 2011 eRx
Incentive Program he or she may be subject to the 2012 eRx penalty

[[Page 40206]]

discussed in section VI.F.2.c. of this proposed rule.
(iv) The Reporting Numerator for the Electronic Prescribing Measure
The proposed criteria for reporting for purposes of being a 2011
successful electronic prescriber are designed to reward those EPs who
demonstrate that they have adopted a qualified electronic prescribing
system and actually used the system in a substantial way to
electronically prescribe. In this context, the reporting of information
in circumstances where a professional did not electronically prescribe
is not pertinent. Additionally, although it may be of interest to
measure the proportion of prescribing events that are electronic, we do
not believe such detail at the individual or group practice level is of
sufficient value to warrant the high burden of reporting such
information. We do note that in the future the use of Part D claims
data may allow this information to be collected without the necessity
for professionals to specifically report such details.
Accordingly, for the 2011 electronic prescribing measure, we
propose to retain the following numerator G-code from the 2010
electronic prescribing measure's numerator: G8553 (At least 1
prescription created during the encounter was generated and transmitted
electronically using a qualified electronic prescribing system.)
We propose to post the final 2011 electronic prescribing measure
specifications on the ``eRx Measure'' page of the eRx Incentive Program
section of the CMS Web site at http://www.cms.gov/ERXIncentive. We
propose to post the final 2011 electronic prescribing measure
specifications by no later than December 31, 2010.
Because the electronic prescribing quality measure will apply only
when an EP furnishes services indicated by one of the codes included in
the measure's denominator, for claims-based reporting, for example, it
will not be necessary for an EP to report G-codes for the electronic
prescribing measure on claims not containing one of the denominator
codes. However, if reporting a G-code, the G-code data submission will
only be considered valid if it appears on the same Medicare Part B
claim containing one of the electronic prescribing quality measure's
denominator codes.
In addition, if the EP submits a Medicare Part B claim containing
one of the electronic prescribing measure's denominator codes, he or
she can report the numerator G-code only when the EP furnishes services
indicated by the G-code included in the measure's numerator. That is,
only when at least 1 prescription created during the encounter is
generated and transmitted electronically using a qualified electronic
prescribing system.
(v) Criteria for Successful Reporting of the Electronic Prescribing
Measure
As discussed above, section 1848(m)(3)(D) of the Act authorizes the
Secretary to revise the criteria for submitting data on the electronic
prescribing measure from the criteria specified under section
1848(m)(3)(B)(ii) of the Act, which requires the measure to be reported
in at least 50 percent of the cases in which the measure is reportable.
In 2010, we revised the criteria for successful electronic prescriber
such that an EP shall be treated as a successful electronic prescriber
for a reporting period based on the EP's reporting of the electronic
prescribing measure by generating and reporting one or more
prescriptions associated with a patient visit electronically, a minimum
of 25 unique visits per year in 2010 of applicable cases in the
denominator of the eRx measure. For 2011, we again propose to make the
determination of whether an EP is a successful electronic prescriber
based on a count of the number of times (minimum threshold of 25) an EP
reports that at least one prescription created during the encounter is
generated using a qualified electronic prescribing system (that is,
reports the G8553 code).
As in 2010, we believe these criteria will bring us closer to our
intention to transition to using a certain number of electronic Part D
prescribing events as the basis for the incentive payment in future
years. In proposing these criteria again for 2011 eRx, we continue to
assume that once an EP has invested in an eRx system, integrated the
use of the eRx system into the practice's work flows, and has used the
system to some extent, he or she is likely to continue to use the eRx
system for most of the prescriptions he or she generates.
For structural measures such as the electronic prescribing measure,
once an EP has demonstrated that he or she has integrated use of an eRx
system into his or her practice's work flow, we believe that requiring
the EP to continue to report the measure represents an administrative
burden with little added benefit to the reliability and validity of the
data being reporting. In contrast, for clinical quality measures, we
believe that the reliability and validity of the performance rates
depends on the adequacy of the sample. Therefore, we propose that an EP
would be required to report that at least 1 prescription for a Medicare
Part B FFS patient created during an encounter that is represented by 1
of the codes in the denominator of the electronic prescribing measure
was generated and transmitted electronically using a qualified eRx
system for at least 25 times during the 2011 reporting period.
The reporting threshold of 25 also takes into consideration that
prescriptions are not generated with every Medicare Part B FFS patient
encounter, some prescriptions, such as narcotics, cannot be prescribed
electronically, and that not all Medicare Part B FFS encounters are
represented by the electronic prescribing measure's denominator codes.
As stated previously, we propose that by December 31, 2010, we will
post the final specifications of the measure on the ``eRx Measure''
page of the eRx Incentive Program section of the CMS Web site at http://www.cms.gov/ERXIncentive.
(3) Determination of the 2011 Incentive Payment Amount for Individual
EPs Who Are Successful Electronic Prescribers
Section 1848(m)(2)(B) of the Act imposes a limitation on the
electronic prescribing incentive payment. The Secretary is authorized
to choose 1 of 2 possible criteria for determining whether or not the
limitation applies to a successful electronic prescriber. The first
criterion, under section 1848(m)(2)(B)(i) of the Act, is based upon
whether the Medicare Part B allowed charges for covered professional
services to which the electronic prescribing quality measure applies
are less than 10 percent of the total Medicare Part B PFS allowed
charges for all covered professional services furnished by the EP
during the reporting period. The second criterion, under section
1848(m)(2)(B)(ii) of the Act, is based on whether the EP submits (both
electronically and non-electronically) a sufficient number (as
determined by the Secretary) of prescriptions under Part D (which can,
again, be assessed using Part D drug claims data). If the Secretary
decides to use the latter criterion, then, in accordance with section
1848(m)(2)(B) of the Act, the criterion based on the reporting on
electronic prescribing measures would no longer apply. The statutory
limitation also applies with regard to the application of the payment
adjustment.
Based on our proposal to make the determination of whether an EP is
a ``successful electronic prescriber'' based on submission of the
electronic prescribing measure, we propose to

[[Page 40207]]

again apply the criterion under section 1848(m)(2)(B)(i) of the Act for
the limitation for the 2011 eRx Incentive Program.
Since, as discussed above, we are retaining for 2011 our proposal
to make the determination of whether an EP is a ``successful electronic
prescriber'' based on submission of the electronic prescribing measure,
we also are proposing to retain the requirement to analyze the claims
submitted by the EP at the TIN/NPI level to determine whether the 10
percent threshold is met in determining the receipt of an electronic
prescribing incentive payment for 2011 by an EP. This calculation is
expected to take place in the first quarter of 2012 and will be
performed by dividing the EP's total 2011 Medicare Part B PFS allowed
charges for all such covered professional services submitted for the
measure's denominator codes by the EP's total Medicare Part B PFS
allowed charges for all covered professional services (as assessed at
the TIN/NPI level). If the result is 10 percent or more, then the
statutory limitation will not apply and a successful electronic
prescriber will qualify to earn the electronic prescribing incentive
payment. If the result is less than 10 percent, then the statutory
limitation will apply and the EP will not earn an electronic
prescribing incentive payment even if he or she electronically
prescribes and reports a G-code indicating that he or she generated and
transmitted a prescription electronically at least 25 times for those
eligible cases that occur during the 2011 reporting period. Although an
individual EP may decide to conduct his or her own assessment of how
likely this statutory limitation is expected to apply to him or her
before deciding whether or not to report the electronic prescribing
measure, an individual EP may report the electronic prescribing measure
without regard to the statutory limitation for the incentive payment.
(4) Proposed Reporting Option for Satisfactory Reporting of the
Electronic Prescribing Measure by Group Practices
In 2010 eRx Incentive Program, we were required by section
1848(m)(3)(C) of the Act to establish a process under which EPs in a
group practice shall be treated as a successful electronic prescriber.
In addition, section 1848(m)(3)(C)(iii) of the Act requires that
payments to a group practice by reason of the process established under
section 1848(m)(3)(C)(i) of the Act shall be in lieu of the payments
that would otherwise be made under this subsection to EPs in the group
practice for being a successful electronic prescriber. In 2011, we
propose to retain the requirements from 2010 eRx Incentive Program with
respect to making incentive payments to group practices based on the
determination that the group practice, as a whole, is a successful
electronic prescriber for 2011. An individual EP who is affiliated with
a group practice participating in the group practice reporting option
that successfully meets the proposed requirements for group practices
would not be eligible to earn a separate eRx incentive payment for 2011
on the basis of his or her successfully reporting the electronic
prescribing measure at the individual level.
(i) Definition of ``Group Practice''
Section 1848(m)(3)(C)(i) of the Act authorizes the Secretary to
define ``group practice.'' For purposes of determining whether a group
practice is a successful electronic prescriber for 2011, we propose
that consistent with the definition of group practice proposed for the
PQRI group practice reporting option (GPRO) discussed in section
VI.F.1. of this proposed rule, a ``group practice'' would be defined as
a single Taxpayer Identification Number (TIN) with 2 or more EPs, as
identified by their individual National Provider Identifier (NPI), who
have reassigned their Medicare billing rights to the TIN. ``Group
practice'' would also include group practices participating in Medicare
demonstration projects approved by the Secretary, as described in
section VI.F.1.g.(2) of this proposed rule.
In addition, we propose to restrict participation in the 2011 eRx
GPRO to group practices participating in the 2011 PQRI GPRO (either
through GPRO I or GPRO II) or group practices that are deemed to be
participating in the 2011 PQRI GPRO (that is, group practices
participating in a CMS-approved Medicare demonstration) that have
indicated their desire to participate in the 2011 eRx GPRO.
Therefore, unlike individual EPs who are not required to
participate in the PQRI, to be eligible to earn an electronic
prescribing incentive in 2011, group practices that wish to participate
in the electronic prescribing group practice reporting option will be
required to participate in the PQRI group practice reporting option or
be deemed to be participating in the PQRI group practice reporting
option based on the practice's participation in an approved Medicare
demonstration project. Participation in the eRx Incentive Program,
including participation in the electronic prescribing group practice
reporting option is, however, optional for group practices that are
participating in PQRI under the group practice reporting option. If a
group practice wishes to participate in the 2011 eRx Incentive Program
under the group practice reporting option, it must indicate its desire
to do so at the time that the group practice self-nominates to
participate in the 2011 PQRI group practice reporting option. There is
no need for group practices to indicate their intent to participate in
the 2011 eRx Incentive Program as individual EPs when the group
practice self-nominates to participate in the 2011 PQRI group practice
reporting option.
Group practices interested in participating in the 2011 PQRI
through the group practice reporting option will be required to submit
a self-nomination letter to CMS, requesting to participate in the 2011
PQRI group practice reporting option. Instructions for submitting the
self-nomination letter will be posted on the PQRI section of the CMS
Web site by November 15, 2010. A group practice that wishes to
participate in the eRx Incentive Program group practice reporting
option will be notified of the selection decision to participate in the
eRx Incentive Program at the same time that it is notified of the
selection decision for the PQRI group practice reporting option.
In addition to meeting the proposed eligibility requirements
discussed in section VI.F.1.g. of this proposed rule, we propose that a
group practice that wishes to participate in the 2011 eRx Incentive
Program under the group practice reporting option will also have to
indicate how it intends to report the electronic prescribing measure.
That is, the group practice will need to indicate in its self-
nomination letter which reporting mechanism the group practice intends
to use for purposes of participating in the 2011 eRx Incentive Program
group practice reporting option.
(2) Process for Group Practices to Participate as Group Practices and
Criteria for Successful Reporting of the Electronic Prescribing Measure
by Group Practices
For group practices selected to participate in the electronic
prescribing group practice reporting option for 2011, we propose the
reporting period would be January 1, 2011, to December 31, 2011.
We propose that physician groups selected to participate in the
2011 eRx Incentive Program through the group practice reporting option
would be able to choose to report the electronic prescribing measure
through the claims-

[[Page 40208]]

based, the registry-based, or, the EHR-based reporting mechanism.
In order for a group practice participating in the PQRI GPRO I to
be considered a successful electronic prescriber, we propose that the
group practice would have to report that at least 1 prescription during
an encounter was generated and transmitted electronically using a
qualified electronic prescribing system in at least 2,500 instances
during the reporting period. In order for a group practice
participating in the PQRI GPRO II to be considered a successful
electronic prescriber, we propose that the group practice would have to
report that at least 1 prescription during an encounter was generated
and transmitted electronically using a qualified electronic prescribing
system for the number of instances specified in Table 50 (see section
VI.F.1.g.(3).(ii). of this proposed rule). In other words, a group of
2-10 NPIs would need to report the 2011 electronic prescribing measure
for at least 75 denominator eligible patient encounters during 2011,
225 instances for groups of 11-25 NPIs, 475 instances for groups of 26-
50 NPIs, 925 instances for groups of 51-100, and 1,875 instances for
groups of 101-199.
Section 1848(m)(2)(B) of the Act specifies that the limitation on
the applicability of the electronic prescribing incentive applies to
group practices as well as individual EPs. Therefore, in determining
whether a group practice will receive an electronic prescribing
incentive payment for 2011 by meeting the proposed reporting criteria
described above, we would determine whether the 10 percent threshold is
met based on the claims submitted by the group practice.
This calculation is expected to take place in the first quarter of
2012 and will be determined by dividing the group practice's total 2011
Medicare Part B PFS allowed charges for all covered professional
services submitted for the measure's denominator codes by the group
practice's total Medicare Part B PFS allowed charges for all covered
professional services. If the result is 10 percent or more, then the
statutory limitation would not apply and a group practice that is
determined to be a successful electronic prescriber would qualify to
earn the electronic prescribing incentive payment. If the result is
less than 10 percent, then the statutory limitation would apply and the
group practice would not qualify to earn the electronic prescribing
incentive payment.
c. The 2012 eRx Penalty
As stated previously, section 1848(a)(5) of the Act requires that
beginning with respect to covered professional services furnished by an
EP in 2012, if the EP is not a successful electronic prescriber for the
reporting period for the year, the fee schedule amount for such
services furnished by such professional during 2012 shall be equal to
99 percent of the fee schedule amount that would otherwise apply to
such PFS services. As noted previously, we do not believe that the
criteria that will be used to determine the applicability of the
payment adjustment, or penalty, for 2012 need to be identical to the
criteria for determination of successful electronic prescriber.
We note also that although earning an incentive payment under the
EHR incentive payment program precludes an EP from earning an eRx
incentive payment, it does not preclude the EP from being subject to
the eRx penalty. In order to avoid the eRx penalty, an EP participating
in the Medicare EHR incentive program still must meet the relevant eRx
penalty criteria for being a successful electronic prescriber.
(1) The eRx Penalty Reporting Period
For purposes of the 2012 eRx penalty, we propose to make a
determination of whether an EP or a group practice is a successful
electronic prescriber based on the reporting period that begins January
1, 2011 through June 30, 2011. We are proposing a 6-month reporting
period for the 2012 penalty rather than a 12-month reporting period so
that we may be able to complete the analysis of 2011 data to determine
whether an EP or group practice is a successful electronic prescriber
prior to January 1, 2012. In order to apply the penalty in 2012
concurrently with claims submission, we will need to make a
determination of whether the penalty applies sufficiently in advance of
2012. We believe that establishing a 6-month reporting period for the
first year of the penalty will provide administrative efficiencies and
avoid the need to apply a retroactive penalty or to make retroactive
payments based on application of a penalty.
For EPs and group practices using the claims-based reporting
mechanism, we propose that all claims for services furnished between
January 1, 2011 and June 30, 2011 must be processed by no later than
July 31, 2011 for the claim to be included in our data analysis. This
is in contrast to the incentive, where we allow 2 months for claims to
be processed. In order to be able to make a determination of whether
the penalty applies sufficiently in advance of 2012, we will need to
begin our analysis of the claims shortly after June 30, 2011. We invite
comments on the proposed reporting period for the 2012 penalty and our
proposal to require claims to be submitted by no later than 1 month
after the reporting period.
(2) Criteria for Determining Applicability of the 2012 eRx Penalty to
Individual EPs
Based on the authority under section 1848(m)(3)(D) of the Act, we
propose that the 2012 eRx penalty would apply to an individual EP
unless one of the following conditions is met:
The EP is not a physician (includes MDs, DOs, and
podiatrists), nurse practitioner, or physician assistant as of June 30,
2011. We believe that it is appropriate to limit the application of the
penalty to those professionals who generally have prescribing
privileges nationwide. Other EPs not listed above may have prescribing
privileges in some states but not others. Therefore, we propose to
exempt EPs who do not generally have prescribing privileges from being
subject to the penalty.
The EP does not have at least 100 cases (that is, claims
for patient services) containing an encounter code that falls within
the denominator of the eRx measure for dates of service between January
1, 2011 through June 30, 2011. We seek to apply the penalty only to EPs
who have a sufficient number of cases between January 1, 2011 and June
30, 2011 to meet the criteria for successful electronic prescribing for
purposes of the penalty. We believe that, on average, for every 10
eligible cases, there will be at least one electronic prescribing
opportunity, which provides a sufficient number of cases to allow EPs
to meet the criteria for being a successful electronic prescriber. In
addition, we seek to prevent EPs who are new to Medicare from being
subject to the eRx penalty.
The EP is a successful electronic prescriber for the
January 1, 2011 through June 30, 2011 reporting period. Specifically,
we propose that the EP must report that at least 1 prescription for
Medicare Part B FFS patients created during an encounter that is
represented by 1 of the codes in the denominator of the 2011 electronic
prescribing measure was generated and transmitted electronically using
a qualified eRx system at least 10 times during the 2012 eRx penalty
reporting period (that is, January 1, 2011 through June 30, 2011). We
propose reporting criteria that are lower for the 2012 eRx penalty than
for the 2011 eRx incentive because EPs will only have 6 months to
satisfy the

[[Page 40209]]

criteria for the 2012 penalty but have a full year to satisfy the
criteria for the 2011 incentive.
The limitation with respect to the electronic prescribing measures
required under section 1848(m)(2)(B)(i) of the Act also applies to the
penalty. Therefore, we propose that if less than 10 percent of the EP's
estimated total allowed charges for the January 1, 2011 through June
30,2011 reporting period are comprised of services which appear in the
denominator of the 2011 electronic prescribing measure, then the EP
would not be subject to the eRx penalty.
We invite comments on the proposed conditions under which we would
prospectively apply the 1.0 percent reduction in PFS charges for
services furnished January 1, 2012 through December 31, 2012. We
specifically invite comments on our proposals to exempt certain types
of EPs and EPs who do not have a certain number of cases from the
penalty as well as the proposed criteria for successful reporting of
the electronic prescribing measure for individual EPs with respect to
the penalty.
As with the 2011 incentive payment, we propose that the
determination of whether an EP is subject to the penalty will be made
at the individual professional level, based on the NPI and for each
unique TIN/NPI combination.
(3) Criteria for Determining Applicability of the 2012 eRx Penalty to
Group Practices
As required by section 1848(m)(3)(C) of the Act, we are also
required to establish and have in place a process under which EPs in a
group practice shall be treated as a successful electronic prescriber
for purposes of the eRx penalty. Thus, we propose that for purposes of
the 2012 eRx penalty, a payment adjustment would not be applied to a a
group practice participating in the 2011 eRx GPRO if the group practice
is participating in either the 2011 PQRI GPRO I or the 2011 PQRI GPRO
II and meets the proposed 2011 criteria for successful electronic
prescribing described in sections VI.F.2.b.(4).(ii). (with respect to
the eRx requirements for GPRO I participants who wish to participate in
the 2011 eRx GPRO) and VI.F.1.g.(3).(ii). of the preamble to this
proposed rule (with respect to the eRx requirements for GPRO II
participants who wish to participate in the 2011 eRx GPRO) for the 2011
eRx incentive.
For purposes of the 2012 eRx penalty, we propose that the proposed
2011 criteria for successful electronic prescribing would need to be
satisfied during the 2012 eRx penalty reporting period of January 1,
2011 through June 30, 2011 for the same operational reasons that we are
proposing a 6-month reporting period for the penalty for individual
EPs. Furthermore, we do not believe that group practices would be
disadvantaged by having to satisfy the proposed criteria for being a
successful electronic prescriber for the 2011 incentive in 6 months
rather than 12 months to avoid the penalty. When compared to the
criteria for individual EPs, the proposed criteria for being a
successful electronic prescriber for the 2011 eRx incentive payment for
group practices enable group practices, on average, to earn the
incentive by electronically prescribing a fewer number of prescriptions
per EP than what individual EPs are required to do.
For purposes of determining whether the eRx penalty applies to a
group practice, we propose to conduct our analysis for each unique TIN/
NPI combination so as not to disadvantage EPs who may have joined the
group practice after January 1, 2011.
In addition, in accordance with section 1848(m)(2)(B)(i) of the
Act, we also propose that the 2012 eRx penalty would not apply to an
eRx GPRO in which less than 10 percent of the group practice's
estimated total allowed charges for the January 1, 2011 through June
30, 2011 reporting period are comprised of services which appear in the
denominator of the 2011 electronic prescribing measure. To be
consistent with how this limitation is applied to group practices for
purposes of the incentive, we propose to determine whether this
limitation applies to a group practice for the penalty at the TIN
level.
For the same reasons that we are proposing a 6-month reporting
period for the 2012 eRx penalty for group practices, we also propose
that we will use only claims processed by July 31, 2011 in our
analysis. This is consistent with our proposed approach for analyzing
individual EP claims. Similarly, we propose that registries would need
to submit eRx data for services furnished January 1, 2011 through June
30, 2011 to CMS between July 1, 2011 and August 19, 2011 so that we may
include registry data in our analysis. We propose also that group
practices participating in the eRx group practice reporting option via
EHR-based reporting would be required to submit eRx data for services
furnished January 1, 2011 through June 30, 2011 to CMS between July 1,
2011 and August 19, 2011.
We invite comments on the proposed criteria for determining
applicability of the 2012 eRx penalty to group practices, including the
proposed criteria for successful reporting of the electronic
prescribing measure for group practices, and our proposed analytical
approach.
(4) Significant Hardship Exemption
Section 1848(a)(5)(B) of the Act provides that the Secretary may,
on a case-by-case basis, exempt an EP from the application of the
payment adjustment, or penalty, if the Secretary determines, subject to
annual renewal, that compliance with the requirement for being a
successful electronic prescriber would result in a significant
hardship, such in the case of an EP who practices in a rural area
without sufficient Internet access. Therefore, we propose that in
addition to meeting the criteria for successful electronic prescriber
described in sections VI.F.2.(c).(2) and VI.F.2.(c).(3) of the preamble
to this proposed rule, an EP or group practice may also be exempt from
application of the 2012 eRx penalty, if during the 2012 eRx penalty
reporting period (that is, January 1, 2011 through June 30, 2011), one
of the following circumstances applies to the EP or group practice:
The EP or group practice practices in a rural area with
limited high speed Internet access.
The EP or group practice practices in an area with limited
available pharmacies for electronic prescribing.
We propose to add two additional ``G'' codes to the 2011 electronic
prescribing measure's specifications describing these 2 circumstances.
EPs or group practices to whom one or more of these circumstances apply
would be required to report the appropriate G-code at least once
between January 1, 2011 and June 30, 2011 using their selected 2011 eRx
reporting mechanism. Reporting of one of these two G-codes prior to
June 30, 2011 will indicate to us that the EP or group practice would
like to be considered for an exemption from the 2012 penalty under the
significant hardship exception. We invite comments on the proposed
process for the significant hardship exception as well as comments
regarding other circumstances that should be considered a significant
hardship.
d. The 2013 eRx Penalty
Section 1848(a)(5) of the Act also requires that with respect to
covered professional services furnished by an EP in 2013, if the EP is
not a successful electronic prescriber for the reporting period for the
year, the fee schedule amount for such services furnished by such
professional during 2013 shall be equal to 98.5 percent of the fee
schedule

[[Page 40210]]

amount that would otherwise apply to such PFS services. Under section
1848(m)(3)(C) of the Act, we are also required to establish and have in
place a process under which EPs in a group practice shall be treated as
a successful electronic prescriber for purposes of the eRx penalty.
For purposes of the 2013 eRx penalty, we propose to use the
proposed 2011 criteria for successful electronic prescriber to
determine whether an EP or a group practice is a successful electronic
prescriber for purposes of the 2013 eRx penalty. In addition, we
propose that the reporting period for the 2013 eRx penalty would be the
2011 eRx incentive reporting period of January 1, 2011 through December
31, 2011. We believe that matching the criteria that will be applied
for the 2013 penalty with the criteria that will be applied for the
incentive in an earlier year would be the most effective means of
encouraging EPs and group practices to adopt and use electronic
prescribing systems since anyone who does not qualify for an incentive
in 2011 would be subject to a payment adjustment in 2013. We invite
comments on this proposal.
e. Public Reporting of Names of Successful Electronic Prescribers
Section 1848(m)(5)(G) of the Act requires the Secretary to post on
the CMS Web site, in an easily understandable format, a list of the
names of EPs (or group practices) who satisfactorily submit data on
quality measures for the PQRI and the names of the EPs (or group
practices) who are successful electronic prescribers. As required by
section 1848(m)(5)(G) of the Act, we are proposing to make public the
names of EPs and group practices who are successful electronic
prescribers for the 2011 eRx Incentive Program on the Physician Compare
Web site that we are required to establish by January 1, 2011 under
section 10331 of the ACA. As stated under section VI.F.1.k. of this
proposed rule, we plan to use the existing Physician and Other Health
Care Professionals directory as the foundation for the Physician
Compare Web site.
We anticipate that the names of individual EPs and group practices
who are successful electronic prescribers for the 2011 eRx Incentive
Program will be available in 2012 after the 2011 incentive payments are
paid.
To comply with section 1848(m)(5)(G) of the Act, we specifically
propose to post the names of individual EPs who report the electronic
prescribing measure at least 25 times during the 2011 reporting period
for patient encounters included in the measure's denominator, without
regard to whether the limitation under section 1848(m)(2)(B) of the Act
applies to the EP and without regard to whether the EP actually
qualifies to earn an incentive payment. In addition, since the PQRI and
the eRx Incentive Program are two separate incentive programs and
individual EPs are not required to participate in both programs to earn
an incentive under either program, we point out that it is possible for
an EP who participates in both incentive programs to be listed both as
an individual EP who satisfactorily submits data on quality measures
for the PQRI and is a successful electronic prescriber under the eRx
Incentive Program. Likewise, an individual EP may be listed as an
individual EP who satisfactorily submits data on quality measures for
the PQRI but not as a successful electronic prescriber under the eRx
Incentive Program (or vice versa) even if he or she participated in
both incentive programs.
Similarly, for purposes of publicly reporting the names of group
practices, on the Physician Compare Web site, we intend to post the
names of group practices that report the electronic prescribing measure
the required number of times during the 2011 reporting period for
patient encounters included in the measure's denominator without regard
to whether the limitation under section 1848(m)(2)(B) of the Act
applies to the group practice or whether the group practice actually
qualifies to earn an incentive payment. Although any group practice
participating in the eRx Incentive Program under the group practice
reporting option would also have to participate in a PQRI group
practice reporting option, the criteria for satisfactory reporting of
PQRI measures for group practices are different from the criteria for
successful reporting of the electronic prescribing measure by group
practices. Therefore, it is possible for a group practice to be listed
as a group practice that satisfactorily submits data on quality
measures for the PQRI but not as a successful electronic prescriber
under the eRx Incentive Program, or vice versa.

G. DMEPOS Provisions

1. Medicare Durable Medical Equipment, Prosthetics, Orthotics, and
Supplies (DMEPOS) Competitive Bidding Program (CBP)
a. Legislative and Regulatory History of DMEPOS CBP
Medicare pays for most DMEPOS furnished after January 1, 1989
pursuant to fee schedule methodologies set forth in section 1834 of the
Act, as added by section 4062 of the Omnibus Budget Reconciliation Act
of 1987 (OBRA '87) (Pub. L. 100-203). Specifically, sections
1834(a)(1)(A) and (B), and 1834 (h)(1)(A) of the Act provide that
Medicare payment for these items is equal to 80 percent of the lesser
of the actual charge for the item or the fee schedule amount for the
item. We implemented this payment methodology at 42 CFR part 414,
subpart D of our regulations. Sections 1834(a)(2) through (a)(5) and
1834(a)(7) of the Act, and implementing regulations at Sec. 414.200
through Sec. 414.232 (with the exception of Sec. 414.228), set forth
separate payment categories of durable medical equipment (DME) and
describe how the fee schedule for each of the following categories is
established:
Inexpensive or other routinely purchased items (section
1834(a)(2) of the Act and Sec. 414.220 of the regulations);
Items requiring frequent and substantial servicing
(sections 1834(a)(3) of the Act and Sec. 414.222 of the regulations);
Customized items (section 1834(a)(4) of the Act and Sec.
414.224 of the regulations);
Oxygen and oxygen equipment (section 1834(a)(5) of the Act
and Sec. 414.226 of the regulations);
Other items of DME (section 1834(a)(7) of the Act and
Sec. 414.229 of the regulations).
For a detailed discussion of payment for DMEPOS under fee
schedules, see the final rule published in the April 10, 2007 Federal
Register (72 FR 17992).
Blood glucose testing strips or diabetic testing strips are covered
under the Medicare DME benefit in accordance with section 1861(n) of
the Act. Other supplies that are necessary for the effective use of DME
are also covered under the Medicare DME benefit in accordance with
longstanding program instructions at section 110.3 of chapter 15 of the
Medicare Benefit Policy Manual.
Section 1847 of the Act, as amended by section 302(b)(1) of the
MMA, requires the Secretary to establish and implement a DMEPOS CBP.
Under the DMEPOS CBP, Medicare sets payment amounts for selected DMEPOS
items and services furnished to beneficiaries in competitive bidding
areas (CBAs) based on bids submitted by qualified suppliers and
accepted by Medicare. For competitively bid items, these new payment
amounts, referred to as ``single payment amounts (SPA),'' replace the
fee schedule payment methodology. Section 1847(b)(5) of the Act
provides that Medicare payment for these

[[Page 40211]]

competitively bid items and services is made on an assignment-related
basis equal to 80 percent of the applicable SPA, unless any unmet Part
B deductible described in section 1833(b) of the Act. Section
1847(b)(2)(A)(iii) of the Act prohibits the awarding of contracts to
any entity unless the total amounts to be paid to contractors in a CBA
are expected to be less than the total amounts that would otherwise be
paid under the fee schedule methodologies set forth in section 1834(a)
of the Act. This requirement guarantees savings to both the Medicare
program and beneficiaries under the program. The fee schedule
methodologies will continue to set payment amounts for noncompetitively
bid DMEPOS items and services. The program also includes provisions to
ensure beneficiary access to quality DMEPOS items and services. Section
1847 of the Act limits participation in the program to suppliers who
have met applicable quality and financial standards and requires the
Secretary to maintain beneficiary access to multiple suppliers.
When first enacted by the Congress, section 1847(a)(1)(B) of the
Act required the Secretary to phase in the DMEPOS CBP in a manner so
that the competition under the program occurred in 10 of the largest
metropolitan statistical areas (MSAs) in 2007. The program was to be
expanded into 70 additional MSAs in 2009, and then into additional
areas after 2009.
In the May 1, 2006 Federal Register (72 FR 25654), we issued a
proposed rule that would implement the DMEPOS CBP for certain DMEPOS
items and services and solicited public comment on our proposals. In
the April 10, 2007 Federal Register (72 FR 17992), we issued a final
rule addressing the comments on the proposed rule and establishing the
regulatory framework for the DMEPOS CBP in accordance with section 1847
of the Act.
Consistent with the requirements of section 1847 of the Act and the
competitive bidding regulations, we began implementation of the program
by conducting the first round of competition in 10 of the largest MSAs
in 2007. We limited competition during this first round of the program
to DMEPOS items and services included in 10 selected product
categories, including mail order diabetic supplies. The bidding window
opened on May 15, 2007 and was extended to allow bidders adequate time
to prepare and submit their bids. We then evaluated each submission and
awarded contracts consistent with the requirements of section
1847(b)(2) of the Act and Sec. 414.414. Following the bid evaluation
process, we awarded over 329 contracts to qualified suppliers.
The DMEPOS CBP was effective on July 1, 2008. Beginning on that
date, Medicare coverage for competitively bid DMEPOS items and services
furnished in the first 10 CBAs was limited to items and services
furnished by contract and grandfathered suppliers of oxygen and oxygen
equipment and rented DME, and payment to these suppliers was based on
the SPA, as determined under the competitive bidding regulations. For
further discussion of the DMEPOS CBP and the bid evaluation process,
see the final rule published in the April 10, 2007 Federal Register (72
FR 17992).
On July 15, 2008, the MIPPA was enacted. Section 154 of the MIPPA
amended section 1847 of the Act to make certain limited changes to the
DMEPOS CBP. Section 154(a) of the MIPPA delayed competition under the
program and amended section 1847(a)(1)(D)(i) of the Act to terminate
the competitive bidding contracts effective June 30, 2008 and prohibit
payment based on the contracts.
Section 154(a) of the MIPPA required the Secretary to conduct a
second competition to select suppliers for Round 1 in 2009 (``Round 1
Rebid''). The Round 1 Rebid includes the ``same items and services''
and is to be conducted in the ``same areas'' as the 2007 Round 1
competition, with certain limited exceptions. Specifically, we were
required to exclude the product category of negative pressure wound
therapy (NPWT) items and services and the San Juan, Puerto Rico CBA
from the Round 1 Rebid. In addition, section 154(a) of the MIPPA
permanently excluded group 3 complex rehabilitative wheelchairs from
the DMEPOS CBP by amending the definition of ``items and services'' in
section 1847(a)(2) of the Act. Section 154(a) of the MIPPA delayed
competition for Round 2 of the DMEPOS CBP from 2009 to 2011, and
subsequent competitions under the program to after 2011. Finally,
section 154(a) of the MIPPA specifically addresses the phase in of a
competition for national mail order items and services by specifying
that such competitions may be phased in after 2010.
b. Implementation of a National Mail Order DMEPOS Competitive Bidding
Program (CBP) for Diabetic Testing Supplies
We conducted competitions for mail order diabetic testing supplies
in the 10 CBAs selected for Round 1. In the Round 1 rebid we conducted
competition for mail order diabetic testing supplies in 9 of the 10
CBAs selected in Round 1. These competitions were limited to diabetic
testing supplies furnished by mail order contract suppliers, as defined
in the April 10, 2007 DMEPOS Competitive Bidding final rule (72 FR
17992) to individuals located in those CBAs. As defined in the final
rule, a mail order contract supplier is ``a contract supplier that
furnishes items through the mail to beneficiaries who maintain a
permanent residence in a CBA''. We clarified in program instructions
that ``mail order'' means items ordered remotely (that is, by phone, e-
mail, Internet, or mail) and delivered to a beneficiary's residence by
common carriers (for example, U.S. Postal Service, Federal Express,
United Parcel Service, or other shipping or courier service companies)
but not items obtained by beneficiaries from local retail storefronts.
Due to the inclusion of mail order diabetic supplies as a product
category in Round 1 of the program, Medicare beneficiaries in a CBA who
obtain diabetic testing supplies through mail order must purchase these
supplies from a mail order contract supplier in order for Medicare to
pay for these items. Payment for these items will be at the SPA
determined consistent with the program's regulations. Beneficiaries who
do not obtain their testing supplies through mail order may purchase
these products from any enrolled Medicare supplier and Medicare payment
for these items will be at the fee schedule amount. The home blood
glucose monitor (diabetic testing equipment) itself is not included in
the Round 1 DMEPOS CBP for mail order diabetic supplies. This allows
the beneficiary to go to any enrolled supplier to obtain the glucose
monitor that the beneficiary and their clinician believes best meets
their medical needs. The supplier of the glucose monitor is responsible
for training the beneficiary on how to use the monitor and for
answering all follow up questions and providing all services required
by the DMEPOS quality standards and supplier standards, found in Sec.
424.57, related to the glucose monitoring system selected by the
beneficiary and their clinician. The beneficiary then has the choice of
obtaining the replacement diabetic testing supplies that work with
their purchased monitoring system from any local, non-mail order
supplier (typically a pharmacy) or from a mail order supplier whose
contract requires them to ship the replacement diabetic supplies
directly to the beneficiary's home. If the beneficiary wants to
continue receiving their replacement

[[Page 40212]]

supplies from a local pharmacy because that is their preference or
because they want to have face-to-face access to a local pharmacist
who, in addition to the supplier of the glucose monitoring system, can
answer questions about the use of their system in testing their blood
glucose levels, this choice is preserved. However, if they choose the
convenience and savings associated with having their replacement
supplies shipped directly to their home, the beneficiary can decide to
obtain their supplies from a mail order contract supplier.
The SPA was on average 43 percent lower than the fee schedule
amount for diabetic testing supplies during the Round 1 of DMEPOS CBP.
This reduction in payment would have resulted in a reduction of the
beneficiary's co-insurance payment. The contracts and SPAs for the
Round 1 Rebid for mail order diabetic testing supplies are scheduled to
be effective for diabetic supplies furnished on a mail order basis to
beneficiaries in the 9 CBAs from January 1, 2011, through December 31,
2012.
(1) National Mail Order DMEPOS CBP
As part of our rulemaking implementing the DMEPOS CBP, we
established regulations to implement competitions on a regional or
national level for certain items such as diabetic testing supplies that
are furnished on a mail order basis. We explained our rationale for
establishing a national DMEPOS CBP for items furnished on a mail order
basis in the Federal Register in the May 1, 2006 proposed rule (71 FR
25669) and April 10, 2007 final rule (72 FR 18018). A national mail
order program would generate immediate national savings at a magnitude
that may not be possible with local competitions among suppliers that
are not able to obtain the type of volume purchasing discounts from
manufacturers that are available to large, national mail order
suppliers. In a September 2004 report (GAO-04-765), the Government
Accountability Office (GAO) recommended that we consider using mail
delivery for items that can be provided directly to beneficiaries in
the home as a way to implement a DMEPOS competitive bidding strategy.
In the case of diabetic supplies and other items furnished by local
neighborhood pharmacies, establishing a competition for items furnished
on a mail order basis would exempt local pharmacies from competing with
national mail order suppliers while preserving the choice of the
beneficiary to go to any local pharmacy to pick up their diabetic
supplies. Manufacturers and suppliers have stated to CMS at different
meetings on numerous occasions that the choice for beneficiaries to
obtain diabetic supplies from local pharmacies with licensed
pharmacists in house who can provide instructions and guidance to
beneficiaries related to their testing needs is important and needs to
be preserved.
(2) DMEPOS CBP for National Mail Order Diabetic Supplies
In the January 16, 2009 Federal Register, we published an interim
final rule (IFC) (74 FR 2873) implementing certain changes to the
DMEPOS CBP. Specifically, the rule implemented certain MIPPA provisions
that delayed implementation of Round 1 of the program; required CMS to
conduct a second Round 1 competition in 2009, and mandated certain
changes for both the Round 1 Rebid and subsequent rounds of the
program. In the January 16, 2009 IFC preamble, we indicated that we
would be considering alternatives for competition of diabetic testing
supplies in future notice and comment rulemaking. We explained that we
believed it was consistent with section 1847(a) to employ competitive
bidding for diabetic suppliers in both the mail order and traditional
retail markets, in part due to concerns raised about the bifurcation of
the method of delivery of diabetic supplies and the difficulty in
defining what constitutes ``mail order'' for purposes of competition.
(3) Overview of Proposed Rule
As part of the phase in of the DMEPOS CBP, we are proposing to
implement a national mail order DMEPOS CBP for diabetic testing
supplies. Under the proposed mail order DMEPOS CBP, we would award
contracts to suppliers to furnish these items across the nation to
beneficiaries who elect to have replacement diabetic testing supplies
delivered to their residence. Suppliers wishing to furnish these items
through mail order to Medicare beneficiaries would be required to
submit bids to participate in any DMEPOS CBP implemented for the
furnishing of mail order items. In accordance with the DMEPOS CBP final
rule, payment for mail order diabetic supplies would be based on the
SPA determined from the bids submitted and accepted for the furnishing
of diabetic testing supplies by mail order throughout the national CBA.
As part of our proposal to implement the national mail order DMEPOS
CBP, we are also proposing a revised definition in regulation of ``mail
order'' so that there would be a clear distinction between mail order
items and non-mail order items. This revised definition would apply to
all future competitions for mail order items and services. We are also
proposing to implement the special rule mandated by section
1847(b)(10)(A) of the Act for competitions for diabetic testing strips
following the Round 1 Rebid. Section 1847(b)(10)(A) requires suppliers
bidding in competitions to furnish diabetic testing strips after the
Round 1 Rebid to demonstrate that their bid covers at least 50 percent
of all types of diabetic testing strips furnished by suppliers. If the
supplier is not able to satisfy this requirement, the Secretary must
reject that bid. Finally, we are proposing to include an additional
term in contracts of mail order suppliers of diabetic testing supplies
following the Round 1 Rebid. The proposed term would prohibit suppliers
from influencing or incentivizing beneficiaries to change their brand
of glucose monitor and test strips.
(4) Future Competitions for Diabetic Testing Supplies
Section 1847(a)(1)(A) of the Act mandates the establishment of
DMEPOS CBP for items described in section 1847(a)(2)(A) of the Act,
including diabetic testing supplies. Section 1847(a)(1)(B)(ii) of the
Act authorizes the phase in of items and services under these programs
beginning with the highest cost and highest volume items and services
or those items and services that are determined to have the largest
savings potential. Current Medicare claims data from fiscal year 2009
shows that over 62 percent of beneficiaries currently receive their
replacement diabetic testing supplies from mail order suppliers. Mail
order diabetic testing supplies account for approximately one billion
dollars in allowed charges per year and are therefore high volume
items. We believe that a national mail order CBP for diabetic testing
supplies would result in large savings as a result of competition
between entities that would factor into their bids savings from volume
discount purchasing of quantities of supplies needed on a national
rather than local basis. Therefore, we believe that implementing a
national mail order DMEPOS CBP for diabetic testing supplies is the
best option for meeting the requirements of the statute referenced
above as long as certain refinements discussed below are made to the
program to address concerns about the mail order/non-mail order
bifurcation.
We have heard from industry groups and suppliers that furnish
diabetic testing supplies on a national mail order

[[Page 40213]]

basis of their concerns that national chain pharmacies that furnish
diabetic testing supplies through both a national mail order business
and local retail pharmacies will encourage beneficiaries to obtain
these items from local retail locations by inappropriately offering
certain incentives to Medicare beneficiaries such as coupons for other
store items. Based on our experience from Round 1, we believe DMEPOS
CBP for mail order diabetic testing supplies would be subject to
manipulation without a clearer definition of what we mean by mail
order. We agree with the industry groups and suppliers that have
indicated that this practice will harm businesses that only furnish
diabetic testing supplies on a mail order basis. In order to address
these concerns, we are proposing to add to Sec. 414.402 a definition
of ``National mail order DMEPOS CBP.'' We propose to define that term
as a program whereby contracts are awarded to suppliers for the
furnishing of mail order items across the nation. We believe that
implementing a national competitive bidding program for diabetic
supplies would preserve beneficiary choice to purchase testing supplies
in person from any local pharmacy that is an enrolled Medicare supplier
that furnishes diabetic supplies, while clarifying the definition of
mail order will provide significant savings potential for beneficiaries
and the program. Savings would be generated in the near future from
national SPAs for supplies furnished on a mail order or home delivery
basis and on a long term basis for all diabetic supplies as a result of
the requirement of section 1834(a)(1)(F) of the Act to either
competitively bid in all areas or adjust prices in all areas by January
1, 2016. We believe that more beneficiaries will elect to choose the
mail order/home delivery option, thereby further increasing short term
savings under the program. Even if this is not the case, and the
percentage of beneficiaries choosing the mail order/home delivery
option remains at the current rate of 62 percent, savings for the
remaining 38 percent must be achieved by no later than January 1, 2016,
as a result of the requirements of section 1834(a)(1)(F) of the Act.
We considered other alternatives for establishing DMEPOS CBP for
diabetic testing supplies that would eliminate the mail order/non-mail
order bifurcation and associated concerns. These alternatives include:
A national competition among all types of suppliers for
all replacement diabetic supplies. Under this alternative, all
beneficiaries would receive their replacement diabetic supplies from
contract suppliers responsible for furnishing diabetic supplies
throughout the nation using any method of delivery as long as the
supplies are delivered on a timely basis.
Competitions in regional CBAs among all types of suppliers
for all replacement diabetic supplies. Under this alternative, all
beneficiaries would receive their replacement diabetic supplies from
contract suppliers responsible for furnishing diabetic supplies
throughout a designated region of the country using any method of
delivery to a beneficiary home as long as the supplies are delivered on
a timely basis.
Competitions in local CBAs among all types of suppliers
for all replacement diabetic supplies. Under this alternative, all
beneficiaries would receive their replacement diabetic supplies from
contract suppliers responsible for furnishing diabetic supplies
throughout the local area using any method of delivery to a beneficiary
as long as the supplies are delivered on a timely basis.
We believe that the first option to bid on a national basis for all
diabetic supplies, would result in most beneficiaries using mail order
and might generate more savings than a national competition for
diabetic supplies furnished on a mail order basis only. However, this
first option would likely eliminate the beneficiary choice to obtain
replacement diabetic supplies on a non-mail order basis from any
enrolled supplier that is a pharmacy or other local supplier storefront
where a licensed pharmacist is on hand to offer guidance and
consultation to the beneficiary. We believe the other two options would
also diminish this choice. In addition, the alternatives of regional or
local competitions are not likely to result in savings at or above the
level that can be generated from a national competition for mail order
supplies. Suppliers participating in a national program may be able to
obtain volume purchasing discounts for the quantities of supplies
needed nationwide. Therefore, we are not proposing any of these
alternatives at this time. However, we are specifically requesting
public comments on these and other alternatives for establishing DMEPOS
CBP for diabetic supplies.
In Sec. 414.411, we are proposing to establish a national mail
order DMEPOS CBP with competitions taking place after 2010 for the
purpose of awarding contracts to suppliers to furnish replacement
diabetic testing supplies across the nation, with additional program
refinements described below. We note that the decision to proceed with
a national mail order competition after 2010 does not prevent us from
phasing in competitions for non-mail order diabetic supplies or from
conducting competitions for diabetic supplies in general in the future
consistent with section 1847(a)(1) of the Act.
(5) Definition of Mail Order Item
We are proposing to define ``mail order item'' in 42 CFR 414.402 to
mean any item (for example, diabetic testing supplies) shipped or
delivered to the beneficiary's home, regardless of the method of
delivery. We are also proposing to define ``non-mail order item'' as
any item (for example, diabetic testing supplies) that a beneficiary or
caregiver picks up in person at a local pharmacy or supplier
storefront. Therefore, the only items excluded from the mail order
definition and mail order competition would be those that a beneficiary
or caregiver picks up in person at a local pharmacy or other local
supplier storefront. These revised definitions of mail order item and
non-mail order item are intended to clearly identify which items are
truly mail order. In addition, we believe this definition will preserve
the choice of the beneficiary to obtain replacement diabetic supplies
in person from a local pharmacy and eliminate the circumvention of the
mail order program.
As discussed above, for Round 1 and the Round 1 Rebid of the DMEPOS
CBP, we defined mail order contract supplier in our regulations at
Sec. 414.402 to mean a contract supplier that furnishes items through
the mail. We further defined mail order in program instructions to mean
``items ordered remotely (that is, by telephone, e-mail, Internet or
mail) and delivered to beneficiary's residence by common carriers (for
example, U.S. Postal Service, Federal Express, United Parcel Service)
and does not include items obtained by beneficiaries from local
storefronts.'' The intent of the Round 1 definition was to distinguish
between mail order supplies (supplies furnished directly to the
beneficiary's home) and non-mail order supplies (supplies picked up at
a local pharmacy). Manufacturers and suppliers of blood glucose
monitors and test strips have expressed on numerous occasions the
importance of maintaining the patient option of obtaining diabetic
testing supplies from a local pharmacy that provides full time access
to a licensed pharmacist who can provide instructions and guidance to
the beneficiary or caregiver related to the use of the diabetic
supplies (the

[[Page 40214]]

pharmacy pickup option). This is the ``non-mail order'' option we
attempted to separate from the mail order option with the Round 1
definition of mail order.
During implementation of Round 1 of the program, we discovered that
suppliers that did not successfully compete and win a contract under
the program tried to adopt certain approaches to circumvent the mail
order definition. In the first round of competitive bidding, suppliers
that lost their bid to be a contract supplier for mail order diabetic
testing supplies considered ways to change their delivery methods to
circumvent the mail order DMEPOS CBP. For example, some mail order
suppliers considered purchasing a fleet of cars to deliver these items
to the beneficiary's home so as not to be considered a mail order
supplier. Other suppliers attempted to enter into special ``private''
arrangements with well known delivery services and claimed that because
of such arrangements they should not be considered mail order
suppliers. These alternative home delivery methods do not provide any
benefits to the patient beyond what the traditional mail order home
delivery method offers. They are simply ways to continue furnishing
diabetic supplies on a home delivery basis after submitting a bid for
mail order that does not result in the award of a contract under the
DMEPOS CBP. Without a clear distinction between mail order (home
delivery option) and non-mail order (pharmacy pickup option), suppliers
could continue to attempt to make arrangements as they did in the
initial Round 1 competition to circumvent the DMEPOS CBP. We consider
these practices to be inconsistent with the DMEPOS CBP statute and
regulations currently in effect, and our proposal is intended to
further clarify the existing definition of mail order. Such
arrangements prevent beneficiaries and the Medicare program from
realizing savings afforded by the mail order DMEPOS CBP and is unfair
to winning suppliers who bid in good faith for a contract for
furnishing supplies to the home delivery market.
This proposed definition of mail order item would not apply to the
Round 1 competition because of the specific requirement of MIPPA to
rebid Round 1 in 2009 for the same items and services included in the
initial Round 1 competition. However, for a national competition, it is
imperative that the new definition of mail order item be in place
because of the implications such a program would have on the entire
mail order delivery market in the United States. In these future
competitions, we would continue to emphasize in our educational efforts
the basic distinction between mail order (home delivery) and non-mail
order (pharmacy pickup). In addition, we will continue to take
appropriate and necessary action against suppliers that do not comply
with the revised definition.
As mentioned above, an alternative DMEPOS CBP for replacement
diabetic supplies would be to hold a national competition among all
types of suppliers for all replacement diabetic supplies. One benefit
to this approach is that it would eliminate the need to differentiate
between mail order and non-mail order supplies; however, it would
likely eliminate the pharmacy pickup choice since most local pharmacies
would not be able to service the entire CBA if they did not also
operate a national mail order service.
We invite comments on our proposed definition of ``mail order'' and
its impact on future rounds of bidding.
(6) Special Rule in Case of Competition for Diabetic Testing Strips
Following Round 1 of the program, any competition for diabetic
testing strips, such as the national mail order program for diabetic
testing supplies proposed in this rule, must include the special rule
set forth in section 1847(b)(10)(A) of the Act. Under that section, a
supplier must demonstrate that their bid to furnish diabetic testing
strips covers the furnishing of a sufficient number of different types
of diabetic testing strip products that, in the aggregate and taking
into account volume for the different products, to account for at least
50 percent of all such types of products on the market. Section
1847(a)(10)(A) also specifies that the volume for the different
products may be determined in accordance with data (which may include
market based data) recognized by the Secretary. When a beneficiary
needs to obtain replacement test strips, they must obtain the specific
brand of test strips products that work with their brand and model of
blood glucose monitor. The test strips are not manufactured in a way
that allows use of different brands of test strips in different brands
of monitors. Therefore, when replacement test strips are furnished, the
supplier must ensure that the specific brand and model of test strips
that the patient requires for use with their purchased monitor is
furnished.
Section 1847(b)(10)(B) of the Act mandates the Office of Inspector
General (OIG) of the Department to conduct a study before 2011 to
generate volume data for the various products that could be used for
this purpose.
Under the DMEPOS CBP, bidding suppliers are required to provide
information on the products they plan to furnish if awarded a contract.
We propose to use this information and information on the market share
(volume) of the various diabetic testing strip products to educate
suppliers on meeting the requirements of this special rule. In
addition, it may be necessary to obtain additional information from
suppliers such as invoices or purchase orders to verify that the
requirements in the statute have been met.
We are proposing that suppliers be required to demonstrate that its
bid covers the minimum 50 percent threshold provided in the statute,
but we invite comments on whether a higher threshold should be used. We
have proposed the 50 percent threshold in part because we believe that
all suppliers have an inherent incentive to furnish a wide variety of
types of diabetic testing products to generate a wider customer
referral base. The 50 percent threshold would ensure that beneficiaries
have access to mail order delivery of the top-selling diabetic test
strip products. In addition, as explained below, we are proposing an
``anti-switching provision'' that we believe should obviate the need to
establish a threshold of greater than 50 percent for the purpose of
implementing this special rule because the contract suppliers would not
be able to carry a limited variety of products and switch beneficiaries
to those products.
For purposes of implementing the special rule in section
1847(b)(10)(A), we are proposing to define ``diabetic testing strip
product'' as a specific brand and model of test strip, as that is the
best way to distinguish among different products. Therefore, we plan to
use market based data for specific brands and models of diabetic test
strips to determine the relative market share or volume of the various
products on the market that are available to Medicare beneficiaries. We
plan to review a variety of data, including but not limited to data
furnished in the OIG report, to determine the market share of the
various products. The special rule mandated by section 1847(b)(10)(A)
of the Act applies to all competitions for diabetic testing strips
after the first round of the DMEPOS CBP. Therefore, we would apply this
rule to non-mail order competitions and/or local competitions conducted
for diabetic testing strips after Round 1 of the DMEPOS CBP.

[[Page 40215]]

(7) Anti-Switching Rule in Case of Competition for Diabetic Test Strips
We do not believe that we can effectively apply the 50 percent
rule, as required by section 1847(b)(10)(A) of the Act, if we do not
establish an anti-switching rule to prevent suppliers from influencing
beneficiaries to switch monitors. We have heard concerns from
beneficiary advocacy groups, as well as industry representatives, that
contract suppliers furnishing diabetic testing supplies in the first
round encouraged beneficiaries to switch to a different brand of blood
glucose monitor and testing supplies than they and/or their physician
or clinician previously selected. Suppliers attempted to switch
beneficiaries to the less expensive monitor or the monitor that
provided them with the most profit rather than the monitor that was
most suitable for them. Without the anti-switching rule, suppliers may
offer 50 percent of the brands on the market but continue to switch
beneficiaries to the least expensive brands so that the requirement to
offer at least 50 percent of the brands on the market rather than a few
specific brands becomes meaningless.
We are proposing to prohibit suppliers awarded contracts for
diabetic testing supplies from influencing or incentivizing the
beneficiary in any way to switch the brand of glucose monitor and
testing supplies they are currently using. We would propose that
contract suppliers continue to furnish the brand of testing supplies
that work with the monitor currently in use by the beneficiary. In the
case where the beneficiary is receiving a monitor for the first time or
a replacement monitor, the contract supplier would be subject to the
requirements of Sec. 414.420 in order to protect beneficiaries from
feeling forced or incentivized to use a particular type or brand of
monitor We continue to believe the proper role of the contract supplier
is to furnish diabetic testing strips and other supplies to
beneficiaries, not to interfere with the beneficiary's selection of the
type of monitor and supplies. This requires the supplier to furnish the
brand of testing supplies that work with the blood glucose monitor
product that the beneficiary and/or clinician, and not the supplier of
the testing supplies, selects. If the beneficiary needs a blood glucose
monitor for the first time, or needs to replace their existing blood
glucose monitor, and neither the beneficiary nor their physician has
determined which brand or type of monitor to obtain, the beneficiary
may continue to ask for assistance from the supplier to select a
monitor and the supplier should show them the full range of products.
However, if the beneficiary has already selected a monitor and simply
needs replacement diabetic testing supplies, the supplier must furnish
the brands of testing supplies that work with the brand monitor that
the beneficiary has selected. We believe this proposal would preserve
the integrity of the clinical decision regarding choice of glucose
monitoring system and would result in contract suppliers offering a
wide variety of diabetic testing supply products.
We are proposing to amend Sec. 414.422 to add the anti-switching
requirement to the terms of the contract for a supplier of diabetic
testing supplies. A supplier would be in breach of their contract and
subject to the sanctions set forth under Sec. 414.423(g), including
termination, if they violate this term. We welcome comments on this
proposal.
c. Off-the-Shelf (OTS) Orthotics Exemption
In the April 10, 2007 final rule (72 FR 17992), we established
Sec. 414.404(b)(1), which sets forth several exemptions to the DMEPOS
CBP. These exceptions are applicable to providers, physicians, and
treating practitioners that furnish certain DMEPOS items under Medicare
Part B. The exempted items are limited to crutches, canes, walkers,
folding manual wheelchairs, blood glucose monitors, and infusion pumps
that are DME. For an explanation as to why these items were exempt see
the DMEPOS Competitive Bidding final rule (CMS-1270-F) published April
10, 2007, (72 FR 17992). For the exemptions to apply, the items must be
furnished by a physician or treating practitioner to his or her own
patients as part of his or her professional service. The items are to
be billed under a billing number assigned to the physician, the
treating practitioner (if possible), or a group practice to which the
physician or treating practitioner has reassigned the right to receive
Medicare payment.
The April 10, 2007 final rule also established an exemption for a
physical therapist in private practice (as defined in Sec. 410.60(c))
or an occupational therapist in private practice (as defined in Sec.
410.59(c)) to furnish competitively bid OTS orthotics without
submitting a bid and being awarded a contract under the DMEPOS CBP,
provided that the items are furnished only to the therapist's own
patients as part of a physical or occupational therapy service.
Section 154(d) of MIPPA amended section 1847(a) of the Act by
adding paragraph (7), which expands the exemptions from the DMEPOS CBP
for certain OTS orthotics to physicians or other practitioners (as
defined by the Secretary) if furnished to their own patients as part of
their professional service. Section 1847(a)(7) of the Act, as added by
MIPPA, also expanded the exemption from the program to hospitals for
certain OTS orthotics, crutches, canes, walkers, folding manual
wheelchairs, blood glucose monitors, and infusion pumps if these items
are furnished to the hospital's own patients during an admission or on
the date of discharge.
The DMEPOS CBP Round 1 Rebid interim final rule with comment period
(IFC) included the expanded exemption for certain DMEPOS items as
provided by MIPPA for hospitals. We noted in the IFC that we would
address the expanded exemption of OTS orthotics for hospitals,
physicians and other practitioners in future rulemaking.
In this proposed rule, we are proposing to revise current
provisions at Sec. 414.404(b)(1)(i) to incorporate the provision of
section 1847(a)(7)(A)(i) and (ii) of the Act that exempts from the
program OTS orthotics furnished by physicians and other practitioners
to their own patients as part of their professional service or by
hospitals to the hospital's own patients during an admission or on the
date of discharge.
d. Grandfathering Rules Resulting in Additional Payments To Contract
Suppliers Under the DMEPOS Competitive Bidding Program (CBP)
Section 1847(a)(4) of the Act requires that in the case of rented
DME and oxygen and oxygen equipment, the Secretary shall establish a
``grandfathering'' process. This requirement was implemented through
regulations at Sec. 414.408(j) that were published in the April 10,
2007 Federal Register (72 FR 17992). The grandfathering process allows
beneficiaries who were renting DME items or receiving oxygen and oxygen
equipment prior to the start of a DMEPOS CBP from a supplier who did
not win a contract to continue to rent the equipment from that
noncontract supplier if that supplier chooses to become a grandfathered
supplier. Under Sec. 414.408(i)(2), when the beneficiary decides to
use a contract supplier instead of a grandfathered supplier to receive
their oxygen equipment and supplies, the contract supplier receives a
minimum of 10 monthly payments for taking over the furnishing of oxygen
and oxygen equipment. When a beneficiary decides to use a contract
supplier to furnish capped rental DME, section Sec. 414.408(h)(2)
restarts the 13-month

[[Page 40216]]

capped rental period. These rules were established, in part, based on
advice from the Program Advisory and Oversight Committee (PAOC) and are
intended to give bidding suppliers an assurance that they would be
compensated in these situations and would not have to factor into their
bids the cost of receiving as few as one monthly payment for
beneficiaries near the end of the 13-month cap for capped rental items
and 36-month cap for oxygen equipment.
At the time these rules were developed, the supplier was mandated
by the statute to transfer title to the equipment to the beneficiary
after the both the 13-month cap for capped rental items and the 36-
month cap for oxygen equipment. Section 144(b) of the MIPPA repealed
the transfer of title requirement for oxygen equipment, as established
by Deficit Reduction Act of 2005, replacing that requirement with the
36-month rental cap. Under the revised oxygen payment provisions,
suppliers now get the equipment back when the beneficiary no longer
needs it. Also, at the time these rules were developed, the beneficiary
had the option to acquire standard power wheelchairs on a lump sum
purchase basis, an option which greater than 95% of the beneficiaries
selected, based upon historic claims data. Therefore, those items
generally would not be affected by the grandfathering rules. However,
as discussed in section 3136 of this proposed rule, section 3136 of the
ACA eliminates the lump sum purchase option for standard power
wheelchairs. This new policy applies to items furnished under the
DMEPOS CBP beginning with Round 2 of the program. Over 200,000
beneficiaries received standard power wheelchairs nationwide in 2009,
and the Medicare allowed charges for these wheelchairs was over $650
million, including both rental and purchase options. Therefore, this
large volume of capped rental items will be subject to the
grandfathering rules effective with Round 2 of the DMEPOS CBP, thus
increasing the overall magnitude of the effect these rules have on the
program and beneficiaries.
In some cases, the grandfathering rules described above place a
financial burden on beneficiaries who are near the end of the 13 or 36-
month rental cap periods. If a beneficiary's existing supplier chooses
not to be a grandfathered supplier, the beneficiary will be required to
switch to a contract supplier in order for Medicare to continue to pay
for the furnishing of the rental equipment. In such cases, the
beneficiary will be responsible for additional co-insurance amounts.
Based on experience from the initial Round 1 competition in 2008, we
believe that most suppliers will choose to grandfather and therefore
these rules will have no impact on these situations. However, in those
limited situations in which the beneficiary does not use a
grandfathered supplier and the beneficiary is near the end of the 13 or
36-month rental cap period, the impact on the beneficiary could be
significant. As mentioned above, our current grandfathering rules will
result in a limited number of beneficiaries facing additional co-
insurance payments. To illustrate the impact some beneficiaries may
face as a result of these rules, a beneficiary who has already made 12
coinsurance payments for a capped rental item could make as many as 12
additional copayments as a result of restarting the capped rental
period when they transition from a noncontract supplier to a contract
supplier at the beginning of a DMEPOS CBP. In another example, a
beneficiary who has already made 35 coinsurance payments for oxygen and
oxygen equipment could make as many as 9 additional copayments as a
result of the rule that provides a minimum of 10 monthly payments when
they transition from a noncontract supplier to a contract supplier at
the beginning of a DMEPOS CBP. As stated above, we expect that most
noncontract suppliers will choose to become grandfathered suppliers,
therefore limiting the number of instances where these rules would
apply. However, in light of the beneficiary impact in the those extreme
cases illustrated above, and in light of the recent legislative changes
by the MIPPA and the ACA as explained above, we are reevaluating
whether or not changes to these grandfathering rules are necessary. As
discussed above, as a result of the MIPPA, suppliers of oxygen
equipment no longer lose title to the equipment after receiving the
36th payment and this may warrant reconsideration of the minimum number
of payments they should receive as contract suppliers when a
beneficiary transitions to them from a noncontract supplier at the
beginning of a DMEPOS CBP. In addition, we believe it is important to
reevaluate the policy that restarts the 13-month capped rental period
in situations where a beneficiary transitions from a noncontract
supplier to a contract supplier at the beginning of a DMEPOS CBP.
Therefore, we are soliciting public comments on whether or not the
current rules should be changed to reduce the number of payments the
contract supplier would receive in these situations above the 13 and
36-month limits set forth under the standard payment rules in section
1834(a) of the Act. We also plan to solicit advice from the PAOC on
this subject at a future committee meeting.
e. Appeals Process
The DMEPOS CBP final rule issued on April 10, 2007 includes Sec.
414.422(g)(1), which states that ``any deviation from contract
requirements, including a failure to comply with governmental agency or
licensing organization requirements, constitutes a breach of
contract.'' In the event we determine that a contract supplier's
actions constitute a breach of contract, Sec. 414.422(g)(2) authorizes
us to take one or more of the following actions:
Require the contract supplier to submit a corrective
action plan;
Suspend the contract supplier's contract;
Terminate the contract;
Preclude the contract supplier from participating in the
DMEPOS CBP;
Revoke the supplier number of the contract supplier; or
Avail itself of other remedies allowed by the statute.
Proposed Appeals Process
We are proposing to add a new Sec. 414.423 to establish an appeals
process for contracts terminated under section 1847(a) and (b) of the
Act. Section Sec. 414.423, as proposed in this rule, would set forth
policies and procedures relating to our determinations of a breach of
contract and the appeals process for contract suppliers that are
considered to be in breach of contract. In addition, we are proposing
to add new definitions to Sec. 414.402 that are used in the proposed
Sec. 414.423.
Given the impact that termination has on a contract supplier, we
believe it is appropriate for contract suppliers whose contract(s) may
be terminated due to a breach of contract to have access to an appeal
process that will reconsider that termination. In establishing this
process we reviewed other appeals processes, such as the appeals
process under Part D located at 42 CFR 423.641 through 423.668, Subpart
N--Medicare Contract Determinations and Appeals, to consider essential
steps to ensure suppliers have access to an appropriate review of
certain CMS decisions. We chose to propose a simplified process that
would not result in disruption to the program by having suppliers going
in and out of the program. For this reason, we propose a process for
review and reconsideration before the contract is actually terminated.
This proposal would avoid the necessity to reinstate

[[Page 40217]]

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

[[Page 40218]]

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

[[Page 40219]]

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

[[Page 40220]]

product categories because there is only one contract that encompasses
all CBAs and product categories for which the supplier was awarded a
contract. We would not make payment and would reject claims for DMEPOS
competitive bid items and services furnished by a supplier whose
contract has been terminated after the effective date of the
termination for the remainder of the contract period.
We recognize that a supplier's termination would impact
beneficiaries within the CBA. Therefore, we therefore propose that
terminated suppliers must notify all beneficiaries within the CBA who
are receiving rented competitively bid items of the termination of
their contract status so that the beneficiaries can make arrangements
to receive equipment and suppliers through other contract suppliers.
After we have made our final determination and sent notification to the
supplier, the supplier must notify beneficiaries within 5 days of
receipt of the contract supplier's final notice of termination. This
notice must inform beneficiaries that they would have to select a new
contract supplier to furnish their DMEPOS items in order for Medicare
to pay for these items. For beneficiary protection, we also propose
that contract suppliers who fail to give proper notification to
beneficiaries may be prevented from participating in future rounds of
DMEPOS CBP. We also propose that rental items may not be picked up from
the beneficiary's home until after the last day of the rental month for
which the supplier has already received payment. We are proposing both
of these policies to protect the beneficiary and to ensure that
suppliers do not pick up equipment from a beneficiary for a time period
for which they have already been paid to provide the service.
2. Changes to Payment Rules for Oxygen and Oxygen Equipment
a. Background
The general Medicare payment rules for DME are set forth in section
1834(a) of the Act and 42 CFR part 414, subpart D of our regulations.
Section 1834(a)(1) of the Act and Sec. 414.210(a) of our regulations
establish the Medicare payment for a DME item as equal to 80 percent of
either the lower of the actual charge or the fee schedule amount for
the item. The beneficiary coinsurance is equal to 20 percent of either
the lower of the actual charge or the fee schedule amount for the item
once the deductible is met.
The specific payment rules for oxygen and oxygen equipment under
the existing fee schedules are set forth in section 1834(a)(5) of the
Act and Sec. 414.226 of our regulations. Suppliers are paid a monthly
payment amount for furnishing medically necessary oxygen contents (for
both stationary and portable) and stationary oxygen equipment described
under the class described in Sec. 414.226(c)(1)(i). Equipment in the
stationary class includes stationary oxygen concentrators, which
concentrate oxygen from room air; stationary liquid oxygen systems,
which use oxygen stored as a very cold liquid in cylinders and tanks;
and gaseous oxygen systems, which administer compressed oxygen directly
from cylinders.
A monthly add-on payment is also made to suppliers furnishing
medically necessary portable oxygen equipment falling under one of two
classes described in Sec. 414.226(c)(1)(ii) and (iii). Equipment in
these classes includes traditional portable equipment, that is,
portable liquid oxygen systems and portable gaseous oxygen systems, and
oxygen generating portable equipment (OGPE), that is, portable oxygen
concentrators and oxygen transfilling equipment used to fill portable
tanks or cylinders in the home. Both the liquid and gaseous oxygen
systems (for stationary and traditional portable systems) require on-
going delivery of oxygen contents.
Section 1834(a)(5)(F) of the Act, as amended by section 144(b) of
MIPPA, limits the monthly rental payments to suppliers for oxygen
equipment to 36 months of continuous use, although monthly payments for
furnishing gaseous or liquid oxygen contents continue after the 36-
month equipment rental cap is reached for gaseous or liquid systems. In
the CY 2009 PFS final rule with comment period (73 FR 69875 through
69876), we discussed section 144(b) of MIPPA and included a detailed
discussion of how section 5101(b) of the Deficit Reduction Act of 2005
(DRA) previously required suppliers to transfer title to oxygen
equipment to the beneficiary at the end of the 36-month rental period.
Section 144(b) of the MIPPA repealed this requirement to transfer title
to the oxygen equipment to the beneficiary and allows suppliers to
retain title to the oxygen equipment after 36 monthly rental payments
are made for the equipment.
Section 414.210 establishes the requirements for the replacement of
DME, including oxygen equipment. Section 414.210(f)(1) states that if
an item of DME, which includes oxygen equipment, has been in continuous
use by the patient for the equipment's reasonable useful lifetime or if
the original equipment is lost, stolen, or irreparably damaged, the
patient may elect to obtain a new piece of equipment. In such
circumstances, Sec. 414.420(f)(2) authorizes payment for the new
oxygen equipment in accordance with Sec. 414.226(a). Section
414.210(f)(1) states that the reasonable useful lifetime for DME, which
includes oxygen equipment, is determined through program instructions.
In the absence of CMS program instructions, the carrier may determine
the reasonable useful lifetime for equipment, but in no case can it be
less than 5 years. Computation is based on when the equipment is
delivered to the beneficiary, not the age of the equipment. If the
beneficiary elects to obtain new oxygen equipment after the reasonable
useful lifetime, the payment is made for a new 36-month rental period
in accordance with Sec. 414.226(a).
We are proposing to revise the payment rule for oxygen and oxygen
equipment at Sec. 414.226(g)(1) to address situations where
beneficiaries relocate outside the service area of a supplier during
the 36-month rental payment cap period for the oxygen equipment.
Beneficiaries are experiencing great difficulties in finding suppliers
willing to furnish oxygen equipment in situations where only a few
months are left in the 36-month rental payment period at the time they
relocate. For example, if a beneficiary is in the 30th rental month,
the new supplier would be entitled to only 6 months of rental payments
and then would have to continue to furnish the oxygen and oxygen
equipment during any period of medical need for the remainder of the
reasonable useful lifetime of the equipment. This creates a financial
disincentive for oxygen suppliers to furnish oxygen and oxygen
equipment to beneficiaries in these situations.
The proposed changes to the payment rules for oxygen and oxygen
equipment would apply to oxygen and oxygen equipment furnished under
Part B and would also apply to oxygen and oxygen equipment furnished
under programs implemented in accordance with section 1847(a) of the
Act.
b. Furnishing Oxygen Equipment after the 36-Month Rental Period (Cap)
In the CY 2010 PFS final rule with comment period (74 FR 61887
through 61890), we finalized Sec. 414.226(g)(1) which, in accordance
with section 1834(a)(5)(F)(ii)(I) of the Act, requires the supplier
that furnishes oxygen equipment during the 36-month rental period to
continue furnishing the oxygen equipment after the 36-month rental
period. The supplier is required

[[Page 40221]]

to continue to furnish the equipment during any period of medical need
for the remainder of the reasonable useful lifetime of the equipment.
As we noted when finalizing this rule, section 1834(a)(5)(F)(ii)(I)
does not provide any exceptions to this requirement. If the beneficiary
relocates outside the supplier's normal service area at some time after
the 36-month rental period but before the end of the reasonable useful
lifetime of the equipment, the supplier must make arrangements for the
beneficiary to continue receiving the equipment at his or her new place
of residence. This responsibility for furnishing the equipment does not
transfer to another supplier.
We revised Sec. 414.226(f) to conform our regulations to this new
MIPPA requirement. We deleted the transfer of ownership requirement and
added the new requirement that the supplier must continue furnishing
the oxygen equipment after the 36-month rental period during any period
of medical need for the remainder of the reasonable useful lifetime of
the equipment. It is important to note that Sec. 414.226(g)(1)(ii)
does not apply this same requirement in situations where the
beneficiary relocates outside of the supplier's normal service area
during the 36-month rental period.
c. Furnishing Oxygen Equipment during the 36-Month Rental Period (Cap)
Section Sec. 414.226(g)(1) contains the requirement that the
supplier that furnishes oxygen and oxygen equipment for the first month
of the 36th month of the rental cap period must continue to furnish the
equipment for the entire 36-month period of continuous use, with
limited exceptions. One exception at Sec. 414.226(g)(1)(ii) applies
when a beneficiary permanently relocates his or her residence during
the 36-month rental period outside of the current supplier's normal
service area. This exception was proposed in the ``Home Health
Prospective Payment System Rate Update for Calendar Year 2007 and
Deficit Reduction Act of 2005 Changes to Medicare Payment for Oxygen
Equipment and Capped Rental Durable Medical Equipment; Proposed Rule''
published in the August 3, 2006 Federal Register (71 FR 44094) and was
intended to reduce the burden on the supplier in these situations. This
approach is also consistent with the regulations addressing capped
rental items described in Sec. 414.229. We addressed this issue in the
capped rental context in the July 10, 1995 Federal Register (60 FR
35494) in response to comments. The discussion states that since the
implementation of the capped rental payment methodology on January 1,
1989, we received no reports of beneficiaries having difficulty
obtaining access to capped rental DME after relocating outside the
supplier's service area. Since enactment of the capped rental DME
payment category in section 4062 of the Omnibus Budget Reconciliation
Act of 1987 (Pub. L. 100-203), representatives of the DME industry
indicated that suppliers would be able to accommodate beneficiaries in
these situations, and this has proven to be true for capped rental
items. In fact, we have found this to be the case to this day.
For this reason, we believed that beneficiaries would not encounter
problems obtaining access to oxygen and oxygen equipment in similar
situations, that is, following the 36-month cap imposed by section
144(b) of MIPPA. However, since the changes to the payment rules for
oxygen and oxygen equipment mandated by the DRA became effective in
2006 and the 36-month rental cap imposed by MIPPA was reached for the
first time in January 2009, we have received many reports of
beneficiaries relocating prior to the end of the 36-month rental
payment cap period and having difficulty finding an oxygen supplier in
the new location. We have learned that many suppliers are unwilling to
provide services in situations where there are a few number of months
left in the 36-month rental payment period.
We do not believe that beneficiaries have encountered similar
issues following the 36-month rental cap, which most likely is the
result of different statutory requirements for these two periods (that
is, during and after the 36-month rental period). Section
1834(a)(5)(F)(ii) of the Act requires the supplier that furnishes the
oxygen equipment during the 36-month rental payment period to continue
furnishing the equipment after the 36-month rental payment period.
Consistent with this requirement, we established regulations at Sec.
414.226(f)(1) that require the supplier to furnish the equipment or
make arrangements for furnishing the equipment in situations where the
beneficiary relocates outside the supplier's normal service area. Since
no such requirement currently applies in situations where the
beneficiary relocates prior to the end of the 36-month rental payment
period, and in fact current regulations at Sec. 414.226(g)(1)(ii)
absolve the supplier of the obligation to continue furnishing oxygen
equipment in these situations, beneficiaries are experiencing
difficulties finding suppliers of oxygen equipment in their new
locations that are willing to accommodate them. As noted above, we have
not seen this problem in the capped rental DME context. The requirement
at Sec. 414.226(g)(1) to furnish oxygen equipment for the entire 36
month rental cap period was established in the course of implementing
section 5101(b) of the DRA in order to safeguard the beneficiary from
situations where suppliers might discontinue service and pick up oxygen
equipment prior to the end of the 36-month rental cap in order to avoid
losing title to the equipment. As mentioned earlier, the transfer of
title of oxygen and oxygen equipment after the 36th paid rental month
was repealed. The exception to this rule at Sec. 414.226(g)(1)(ii) was
established based on our experience that suppliers of capped rental DME
have accommodated beneficiaries in these situations, which,
unfortunately, has not been our experience in the context of oxygen
equipment.
In order to address this vulnerability facing beneficiaries as a
result of regulations currently in effect, we are proposing to revise
the exception at Sec. 414.226(g)(1)(ii) to apply only to situations
where the beneficiary relocates before the 18th paid rental month to an
area that is outside the normal service area of the supplier that
initially furnished the equipment. We are proposing to revise the
regulation to require the supplier that furnishes the oxygen equipment
and receives payment for month 18 or later to either furnish the
equipment for the remainder of the 36-month rental payment period or,
in the case where the beneficiary has relocated outside the service
area of the supplier, make arrangements for furnishing the oxygen
equipment with another supplier for the remainder of the 36-month
rental payment period. The supplier that is required to furnish the
equipment on the basis of this requirement must also furnish the
equipment after the 36-month rental payment period in accordance with
the requirements of section 1834(a)(5)(F)(ii) and Sec. 414.226(f).
The proposed revision would mean that a supplier does not have to
continue to furnish the oxygen equipment if the beneficiary relocates
outside the normal service area before the 18th paid rental month
during a period of continuous use. Under the current rule, a supplier
does not have to furnish the oxygen equipment if the beneficiary
relocated before the 36th paid rental month during a period of
continuous use. The current rule was established based on the long
term, demonstrated ability of suppliers of capped rental DME to
accommodate

[[Page 40222]]

beneficiaries in situations where they relocate near the end of a
capped rental payment period. With regard to oxygen equipment,
suppliers in general have not demonstrated a willingness to accommodate
beneficiaries in similar situations. Therefore, it is necessary to
revisit this rule in order to protect beneficiaries in these
situations. This proposal would allow either a new supplier in the
beneficiary's new service area or a supplier in the old service area to
receive at least half of the 36 monthly payments allowed for under the
current statutory payment rule for oxygen equipment. We believe this
approach would be fair to suppliers in either scenario since the same
minimum number of payments applies. Based on current 2010 Medicare
allowed fee schedule amounts for stationary oxygen equipment, total
payments for 18 months is $3,117.06. We believe this new rule would
provide greater financial incentive to suppliers in areas where
beneficiaries relocate to furnish oxygen equipment in these situations.
We also believe that this proposal would not disadvantage suppliers
required to continue furnishing oxygen equipment or make arrangements
for furnishing oxygen equipment to beneficiaries that relocate outside
their normal service area since these suppliers would receive 18 or
more monthly payments. Most of the cases that have been reported
regarding problems encountered by beneficiaries in obtaining access to
oxygen equipment after relocating during the 36-month rental cap period
have been situations where the beneficiary has relocated during the
second half of the 36-month rental cap period. Therefore, we believe
that this rule would largely address access problems associated with
relocations during the 36-month rental cap period because the supplier
that received payments during the first half of the 36-month rental cap
period would be obligated to continuing furnishing the equipment during
the second half of the 36-month rental cap period.

H. Provider and Supplier Enrollment Issue: Air Ambulance Provision

The National Transportation Safety Board (NTSB) is an independent
Federal agency charged by the Congress with investigating
transportation accidents, determining their probable cause and making
recommendations to prevent similar accidents from occurring. Based on
information derived from testimony provided at the NSTB public hearing
and investigations into recent Helicopter Emergency Medical Services
(HEMS) accidents, the NTSB made several specific recommendations to the
Secretary of Health and Human Services on September 24, 2009.
Specifically, the NTSB recommended that the Secretary develop
minimum safety accreditation standards for HEMS operators that augment
the operating standards of 14 CFR part 135 by including for all fights
with medical personnel on board: (a) Scenario-based pilot training; (b)
implementation of preflight risk evaluation programs; and (c) the
installation of FAA-approved terrain awareness warning systems, night
vision imaging systems, flight data recording systems for monitoring
and autopilots if a second pilot is not used.
In response to the NTSB concerns, the Secretary noted that the
recommendations to CMS were similar to those being made to the Federal
Aviation Administration (FAA). While we have expertise to regulate
health and safety requirements that suppliers and providers of
healthcare should meet, we do not have the expertise to determine
aircraft safety requirements. The Secretary stated that, ``we believe
the FAA should determine the minimum level of safety that HEMS
operators should meet and CMS should adopt regulations that require any
HEMS operator that enrolls in Medicare to meet those requirements.''
The Secretary also added that, ``while we do not believe CMS should
augment FAA regulations, we do believe that CMS' regulations should
ensure that only those HEMS operators that maintain the minimum level
of requirements established by the FAA through its regulations are
enrolled or maintain enrollment in the Medicare program.''
In the April 21, 2006 Federal Register, we published the
``Requirements for Providers and Suppliers to Establish and Maintain
Medicare Enrollment'' final rule. This final rule implemented section
1866(j)(1)(A) of the Act. In this final rule, we required that all
providers and suppliers (other than physicians or practitioners who
have elected to ``opt-out'' of the Medicare program) must complete an
enrollment form and submit specific information to CMS in order to
obtain Medicare billing privileges. Section 424.515 required that
ambulance service providers continue to resubmit enrollment information
in accordance with Sec. 410.41(c)(2), which states, ``Upon a carrier's
request, complete and return the ambulance supplier form designated by
CMS and provide Medicare carrier with documentation of compliance with
emergency vehicle and staff licensure and certification requirements in
accordance with State and local laws.'' This final rule also
established Sec. 424.510(d)(2)(iii) which states, ``Submission of all
documentation, including all applicable Federal and State licensure and
regulatory requirements that apply to the specific provider or supplier
type that related to providing health care services, required by CMS
under this or other statutory or regulatory authority, or under the
Paperwork Reduction Act of 1995, to establish the provider or
supplier's eligibility to furnish Medicare covered items or services to
beneficiaries in the Medicare program.''
While the Airline Deregulation Act (Pub. L. 95-504) preempts a
State, political subdivision of a State, or political authority of at
least 2 States from enacting or enforcing a law, regulation, or other
provision having the force and effect of law related to a price, route,
or service of an air carrier that may provide air transportation, air
ambulances remain subject to Federal laws and regulations. In
accordance with Sec. 424.516(a)(2), providers and suppliers must
adhere to all Federal regulations and State laws and regulations, as
required, based on the type of services or supplies the provider or
supplier type will furnish and bill Medicare.
In Sec. 424.510(d)(iii), we are proposing to clarify that
ambulance suppliers and other providers and suppliers include
documentation regarding all applicable Federal and State
certifications. Accordingly we are propsing to revise Sec.
424.510(d)(iii) from ``Submission of all documentation, including all
applicable Federal and State licenses and regulatory requirements that
apply to the specific provider or supplier type that relate to
providing health care service, required by CMS under this or other
statutory or regulatory authority, or under the Paperwork Reduction Act
of 1995, to establish the provider or supplier's eligibility to furnish
Medicare covered items or services to beneficiaries in the Medicare
program,'' to ``Submission of all documentation, including all
applicable Federal and State licenses, certifications (including, but
not limited to Federal Aviation Administration and Clinical Laboratory
Improvement Act certifications), and regulatory requirements that apply
to the specific provider or supplier type that relate to providing
health care service, required by CMS under this or other statutory or
regulatory authority, or under the Paperwork Reduction Act of 1995, to
establish the provider or supplier's eligibility to furnish Medicare
covered items or services to beneficiaries in the Medicare program.''
We are also proposing to revise Sec. 424.516(e)(2) and add new
paragraph

[[Page 40223]]

(e)(3) to clarify that Medicare enrolled providers and suppliers must
report a revocation or suspension of a Federal or State license or
certification, including but not limited to FAA and Clinical Laboratory
Improvement Act (CLIA) certifications. This revision will clarify that
fixed-wing ambulance operators and HEMS operators are responsible for
notifying the designated Medicare contractor for their State when FAA
revokes or suspends any license or certification. Moreover, fixed-wing
ambulance operators and HEMS operators must maintain all requirements
as specified in 14 CFR part 135.
We believe that requiring fixed-wing ambulance and HEMS operators
to notify their Medicare contractor of a suspension or revocation of a
license or certification will ensure that any action taken by the FAA
or other regulating authority will have a direct linkage to the
operator's ability to maintain their Medicare enrollment. We believe
that such a policy will help improve aircraft safety for operators that
are enrolled in Medicare and providing services to Medicare
beneficiaries. In addition, since the FAA is responsible for the
issuance and enforcement of regulations and minimum standards covering
manufacturing, operating, and maintaining aircraft, we will work with
the FAA to confirm that fixed-wing ambulance operators and HEMS
operators remain in compliance with FAA safety regulations (including,
but not limited to Federal Aviation Administration and certifications)
to the Medicare contractor within 30 days of the revocation or
suspension of the license or certification, the provider or supplier is
making the decision to voluntarily terminate its Medicare billing
privileges because the provider or supplier is no longer in compliance
with the applicable licensing or certification requirements for their
provider or supplier type. We believe that allowing providers and
suppliers to self-report licensure or certification revocations and
suspensions within a 30 day period via the Medicare enrollment
application (such as, the Internet-based Provider Enrollment Chain and
Ownership System (PECOS) or the paper CMS-855) promotes compliance with
the Medciare reporting requirements found in Sec. 424.516. In
addition, by reporting a licensure or certification revocation or
suspension within 30 days, the provider or supplier avoids the Medicare
contractor bringing an action to revoke its Medicare billing privileges
and establishing and Medicare enrollment bar, see Sec. 424.535(c).
Thus, by complying with the reporting responsibilities found in Sec.
424.516 and voluntarily terminating from the Medicare program, the air
ambulance supplier can submit an initial application to enroll in the
Medicare program as soon as the licensure or certification revocation
or suspension action is resolved with the applicable licensing or
certification organization.
In Sec. 424.502, we are proposing to define the term, ``voluntary
termination'' as it is currently used in the Medicare program and
throughout this regulation in the context of the provider enrollment
requirements: We are proposing that the term, ``voluntary termination''
to mean an air ambulance supplier, that submits written confirmation to
CMS of its decision to discontinue enrollment in the Medicare program.
Futhermore, we belive that an air ambulance supplier, can make the
decision to voluntary terminate their business relationship with the
Medicare program at any time, including when the provider or supplier
makes the decision that they will no longer furnish services to
Medicare beneficiaries.
In those situations, where an air ambulance supplier does not meet
their reporting responsibilities and notify the Medicare program of a
Federal or State licensure or certification revocation or suspension
within 30 days of the reportable event, we believe that it is
appropriate to that CMS or the Medicare contractor revoke the
supplier's Medicare billing privileges using Sec. 424.535(a)(1). We
believe that this change will clarify that CMS or our Medicare
contractor may revoke Medicare billing privileges when these types of
suppliers do not report a revocation or suspension of a Federal or
State license or certification.

I. Technical Corrections

1. Physical Therapy, Occupational Therapy and Speech-language Pathology
We are proposing to revise Sec. 409.23(c) by making a minor
technical correction to remove an extraneous cross-reference which was
initially proposed in the CY 2008 PFS proposed rule (72 FR 38122, 72 FR
38193, and 72 FR 38221). This cross-reference refers the reader to
``paragraph (c)(1)(ii) of this section,'' a paragraph also proposed in
the CY 2008 PFS proposed rule, but never finalized. In the CY 2008 PFS
final rule with comment period, we inadvertently neglected to remove
the associated cross-reference from the regulations text. Accordingly,
we now propose to rectify that oversight by making an appropriate
correction in the regulations text, along with other minor formatting
revisions. We are also proposing to make a minor clarification to the
section heading and introductory text of Sec. 409.23 (along with a
conforming revision to the corresponding regulations text at Sec.
409.20(a)(3)) by revising the existing phrase ``speech therapy'' to
read ``speech-language pathology services,'' so that it more accurately
reflects the currently used terminology for this type of therapeutic
treatment.
In addition, we are also proposing to make a minor wording change
in the provision at Sec. 409.17(d) (which is incorporated by reference
in Sec. 409.23(c)(2)), in order to clarify that the former provision's
reference to ``hospital'' policies and procedures can alternatively
refer, depending on the particular context, to SNF policies and
procedures.
2. Scope of Benefits
In Sec. 410.3, we are proposing a technical correction to
paragraph (b)(2). Currently, Sec. 410.3(b)(2) states that the specific
rules on payment are set forth in subpart E of part 410. However, the
specific payment rules are actually listed in subpart I of part 410.
Therefore, we are proposing to correct Sec. 410.3(b)(2) in this
proposed rule.

VII. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements (ICRs):

[[Page 40224]]

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

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

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

Proposed Sec. 411.355(b)(7)(i) states that with respect to
magnetic resonance imaging, computed tomography, and positron emission
tomography, the referring physician shall provide written notice to the
patient at the time of the referral that the patient may receive the
same services from a person other than one described in Sec.
411.355(b)(1). The written notice shall include a list of other
suppliers (as defined in Sec. 400.202 of this title) that provide the
services for which the individual is being referred. The list shall
include a minimum of 10 suppliers within a 25-mile radius of the
referring physician's office location at the time of the referral. The
notice should be written in a manner sufficient to be reasonably
understood by all patients and should include for each supplier on the
list, at a minimum, the supplier's name, address, telephone number, and
distance from the referring physician's office. A record of the
disclosure notification, signed by the patient, shall be maintained as
a part of the patient's medical record.
Section 411.355(b)(7)(ii) proposes that if the referring physician
makes a referral within an area with fewer than 10 other suppliers
within the 25-mile radius of the physician's office location at the
time of the referral, the physician shall list all of the other
suppliers of the imaging service that are present within a 25-mile
radius of the referring physician's office location, including up to 10
suppliers. Provision of the written list of alternate suppliers will
not be required if no other suppliers provide the services for which
the individual is being referred within the 25-mile radius. These
physicians must still disclose to the patient that the patient may
receive these services from a person other than one described in Sec.
411.355(b)(1) in a manner sufficient to reasonably be understood by all
patients. A record of the disclosure notification, signed by the
patient and the referring physician, shall be maintained as a part of
the patient's medical record.
The burden associated with the requirements contained in this
section would be the time and effort necessary for a physician to
develop a standard disclosure. There would also be burden associated
with the time and effort necessary for a physician to provide the
disclosure to the patient, to obtain the patient's signature, and to
record the paper as part of the patient's medical record. We estimate
that it would take 1 hour for a physician's office to develop a
standard disclosure. We further estimate that 71,000 physicians will be
required to comply with these requirements. The total burden associated
with the development of the standard disclosure is 71,000 hours at a
cost of $1,042,280. Similarly, we estimate that it will take each
physician 1 minute to provide the disclosure to the patient, to obtain
the patient's signature, and to record the paper as part of the
patient's medical record. We believe that each provider will make
approximately 106 disclosures. The total estimated annual for this
requirement is 125,433 hours at a cost of $10,536,400.

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

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

[[Page 40225]]

hearing by a CBIC Hearing Officer is 40 hours at a cost of $3,000.
Proposed Sec. 414.423 would require a contract suppliers whose
contract has been terminated to notify all beneficiaries who are
receiving rented competitive bid items or competitive bid items
received on a recurring basis, of the termination of their contract.
The notice to the beneficiary from the supplier whose contract was
terminated must be provided within 5 days of receipt of the notice of
termination. The notification to the beneficiaries must inform the
beneficiaries that they are going to have to select a new contract
supplier for these items.
The burden associated with this section is the time and effort
necessary for a supplier to develop and distribute notification of its
termination to all beneficiaries receiving rented competitive bid items
or competitive bid items received on a recurring basis. We estimate
that it will take a supplier 3 hours to develop and distribute a notice
announcing its termination to all of its beneficiaries receiving rented
competitive bid items or competitive bid items received on a recurring
basis. We believe 2 suppliers will be subject to this requirement on an
annual basis. The total estimated annual burden associated with this
requirement is 6 hours at a cost of $450.

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

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

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

Table 72--Estimated Annual Recordkeeping and Reporting Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hourly Total
Burden per Total labor cost Total labor capital/
Regulation section(s) OMB Control No. Respondents Responses response annual of cost of maintenance Total cost
(hours) burden reporting reporting costs (in (in $)
(hours) (in $) (in $) $)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 411.355................ 0938-New....... 71,000 71,000 1 71,000 14.68 1,042,280 0 1,042,280
71,000 7,454,760 0.0167 125,433 83.79 10,536,400* 0 10,536,400
Sec. 414.423................ 0938-New....... 10 10 3 30 75.00 2,250 0 2,250
5 5 8 40 75.00 3000 ........... 3000
2 2 3 6 75.00 450 ........... 450

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

If you comment on these information collection and recordkeeping
requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this proposed rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Attention: CMS Desk Officer,
[CMS-1503-P] Fax: (202) 395-6974; or E-mail: [email protected].

F. Additional Information Collection Requirements

This proposed rule imposes collection of information requirements
as outlined in the regulation text and specified above. However, this
proposed rule also makes reference to several associated information
collections that are not discussed in the regulation text contained in
this document. The following is a discussion of these information
collections, some of which have already received OMB approval.
1. Part B Drug Payment
The discussion of average sales price (ASP) issues in section
VI.A.1 of this proposed rule does not contain any new information
collection requirements with respect to payment for Medicare Part B
drugs and biologicals under the ASP methodology. Drug manufacturers are
required to submit ASP data to us on a quarterly basis. The ASP
reporting requirements are set forth in section 1927(b) of the Act. The
burden associated with this requirement is the time and effort required
by manufacturers of Medicare Part B drugs and biologicals to calculate,
record, and submit the required data to CMS. While the burden
associated with this requirement is subject to the PRA, it is currently
approved under OMB control number 0938-0921.
3. Physician Quality Reporting Initiative (PQRI)
Section VI.F.1. of this proposed rule discusses the background of
the PQRI, provides information about the proposed measures and
reporting mechanisms to be available to eligible professionals (EPs)
and group practices who choose to participate in the 2011 PQRI, and the
proposed criteria for satisfactory reporting in 2011.

[[Page 40226]]

With respect to satisfactory submission of data on quality measures
by EPs, EPs include physicians, other practitioners as described in
section 1842(b)(18)(c) of the Act, physical and occupational
therapists, qualified speech-language pathologists, and qualified
audiologists. EPs may choose whether to participate and, to the extent
they satisfactorily submit data on quality measures for covered
professional services, they can qualify to receive an incentive
payment. To qualify to receive an incentive payment for 2011, the EP
(or group practice) must meet one of the proposed criteria for
satisfactory reporting described in sections VI.F.1.e. or VI.F.1.f. of
this proposed rule (or section VI.F.1.g. for group practices).
Because this is a voluntary program, it is difficult to accurately
estimate how many EPs will opt to participate in the PQRI in CY 2011.
Information from the ``PQRI 2007 Reporting Experience Report,'' which
is available on the PQRI section of the CMS Web site at http://www.cms.hhs.gov/PQRI, indicates that nearly 110,000 unique TIN/NPI
combinations attempted to submit PQRI quality measures data via claims
for the 2007 PQRI. Therefore, for purposes of conducting a burden
analysis for the 2011 PQRI, we will assume that all EPs who attempted
to participate in the 2007 PQRI will also attempt to participate in the
2011 PQRI. Furthermore, we believe that the burden for EPs who are
participating in the PQRI for the first time in 2011 will be
considerably higher than the burden for EPs who have participated in
PQRI in prior years.
For individual EPs, the burden associated with the requirements of
this reporting initiative is the time and effort associated with EPs
identifying applicable PQRI quality measures for which they can report
the necessary information, collecting the necessary information, and
reporting the information needed to report the EP's or group practice's
measures. We believe it is difficult to accurately quantify the burden
because EPs may have different processes for integrating the PQRI into
their practice's work flows. Moreover, the time needed for an EP to
review the quality measures and other information, select measures
applicable to his or her patients and the services he or she furnishes
to them, and incorporate the use of quality data codes into the office
work flows is expected to vary along with the number of measures that
are potentially applicable to a given professional's practice. Since
EPs are generally required to report on at least 3 measures to earn a
PQRI incentive, we will assume that each EP who attempts to submit PQRI
quality measures data is attempting to earn a PQRI incentive payment
and reports on an average of 3 measures for this burden analysis.
Because we anticipate even greater participation in the 2011 PQRI
than in previous years, including participation by EPs who are
participating in PQRI for the first time in 2011, we will assign 5
hours as the amount of time needed for EPs to review the 2011 PQRI
Measures List, review the various reporting options, select the most
appropriate reporting option, identify the applicable measures or
measures groups for which they can report the necessary information,
review the measure specifications for the selected measures or measures
groups, and incorporate reporting of the selected measures or measures
groups into the office work flows. This estimate is based on our
assumption that an EP will need up to 2 hours to review the 2011 PQRI
Measures List, review the reporting options, and select a reporting
option and measures on which to report and 3 hours to review the
measure specifications for up to 3 selected measures or up to 1
selected measures group and to develop a mechanism for incorporating
reporting of the selected measures or measures group into the office
work flows.
Information from the Physician Voluntary Reporting Program (PVRP),
which was a predecessor to the PQRI, indicated an average labor cost of
$50 per hour. To account for salary increases over time, we will use an
average practice labor cost of $58 per hour in our estimates based on
an assumption of an average annual increase of approximately 3 percent.
Thus, we estimate the cost for EP associated with preparing to report
PQRI quality measures would be approximately $290 per EP ($58 per hour
x 5 hours).
We continue to expect the ongoing costs associated with PQRI
participation to decline based on an EP's familiarity with and
understanding of the PQRI, experience with participating in the PQRI,
and increased efforts by CMS and stakeholders to disseminate useful
educational resources and best practices.
We believe the burden associated with actually reporting the PQRI
quality measures will vary depending on the reporting mechanism
selected by the EP. For claims-based reporting, EPs must gather the
required information, select the appropriate quality data codes (QDCs),
and include the appropriate QDCs on the claims they submit for payment.
The PQRI will collect QDCs as additional (optional) line items on the
existing HIPAA transaction 837-P and/or CMS Form 1500 (OCN: 0938-0999).
We do not anticipate any new forms and no modifications to the existing
transaction or form. We also do not anticipate changes to the 837-P or
CMS Form 1500 for CY 2011.
Based on our experience with the PVRP, we continue to estimate that
the time needed to perform all the steps necessary to report each
measure (that is, reporting the relevant quality data code(s) for a
measure) on claims ranges from 15 seconds (0.25 minutes) to over 12
minutes for complicated cases and/or measures, with the median time
being 1.75 minutes. At an average labor cost of $58 per hour per
practice, the cost associated with this burden ranges from $0.24 in
labor to about $11.60 in labor time for more complicated cases and/or
measures, with the cost for the median practice being $1.69.
The total estimated annual burden for this requirement will also
vary along with the volume of claims on which quality data is reported.
In previous years, when we required reporting on 80 percent of eligible
cases for claims-based reporting, we found that on average, the median
number of reporting instances for each of the PQRI measures was 9.
Since we propose to reduce the required reporting rate by over one-
third to 50 percent, then for purposes of this burden analysis we will
assume that an EP will need to report each selected measure for 6
reporting instances. The actual number of cases on which an eligible
professional would be required to report quality measures data will
vary, however, with the EP's patient population and the types of
measures on which the EP chooses to report (each measure's
specifications includes a required reporting frequency).
Based on the assumptions discussed above, we estimate the total
annual reporting burden per EP associated with claims-based reporting
to range from 4.5 minutes (0.25 minutes per measure x 3 measures x 6
cases per measure) to 180 minutes (12 minutes per measure x 3 measures
x 6 cases per measure), with the burden to the median practice being
31.5 minutes (1.75 minutes per measure x 3 measures x 6 cases). We
estimate the total annual reporting cost per EP associated with claims-
based reporting to range from $4.32 ($0.24 per measure x 3 measures x 6
cases per measure) to $208.80 ($11.60 per measure x 3 measures x 6
cases per measure), with the cost to the median practice being $30.42
per EP ($1.69 per measure x 3 measures x 6 cases per measure).
For registry-based reporting, there would be no additional time
burden for EP to report data to a registry as EP

[[Page 40227]]

opting for registry-based reporting would more than likely already be
reporting data to the registry for other purposes. Little, if any,
additional data would need to be reported to the registry for purposes
of participation in the 2011 PQRI. However, EPs would need to authorize
or instruct the registry to submit quality measures results and
numerator and denominator data on quality measures to CMS on their
behalf. We estimate that the time and effort associated with this would
be approximately 5 minutes per EP.
Registries interested in submitting quality measures results and
numerator and denominator data on quality measures to CMS on their
participants' behalf in 2011 would need to complete a self-nomination
process in order to be considered ``qualified'' to submit on behalf of
EPs unless the registry was qualified to submit on behalf of EPs for
prior years and did so successfully. We estimate that the self-
nomination process for qualifying additional registries to submit on
behalf of EPs for the 2011 PQRI involves approximately 1 hour per
registry to draft the letter of intent for self-nomination. It is
estimated that each self-nominated entity will also spend 2 hours for
the interview with CMS officials and 2 hours calculating numerators,
denominators, and measure results for each measure the registry wishes
to report using a CMS-provided measure flow. However, the time it takes
to complete the measure flow could vary depending on the registry's
experience and the number and type of measures for which the registry
wishes to submit on behalf of EPs. Additionally, part of the self-
nomination process involves the completion of an XML submission by the
registry, which is estimated to take approximately 5 hours, but may
vary depending on the registry's experience. We estimate that the
registry staff involved in the registry self-nomination process have an
average labor cost of $50 per hour. Therefore, assuming the total
burden hours per registry associated with the registry self-nomination
process is 10 hours, we estimate the total cost to a registry
associated with the registry self-nomination process to be
approximately $500 ($50 per hour x 10 hours per registry).
The burden associated with the registry-based reporting
requirements of this voluntary reporting initiative is the time and
effort associated with the registry calculating quality measure results
from the data submitted to the registry by its participants and
submitting the quality measures results and numerator and denominator
data on quality measures to CMS on behalf of their participants. The
time needed for a registry to review the quality measures and other
information, calculate the measures results, and submit the measures
results and numerator and denominator data on the quality measures on
their participants behalf is expected to vary along with the number of
EPs reporting data to the registry and the number of applicable
measures. However, we believe that registries already perform many of
these activities for their participants. The number of measures that
the registry intends to report to CMS and how similar the registry's
measures are to CMS' PQRI measures will determine the time burden to
the registry.
For EHR-based reporting, the EP must have an IACS account, which we
believe takes less than 1 hour to obtain. Once an EP has an IACS
account, he or she must extract the necessary clinical data from his or
her EHR, and submit the necessary data to the CMS-designated clinical
data warehouse. With respect to our proposal to require an EP to submit
a test file, we believe that doing so would take less than 1 hour. With
respect to submitting the actual 2011 data file in 2012, we believe
that this would take an EP no more than 2 hours, depending on the
number of patients on which the EP is submitting. We believe that once
the EHR is programmed by the vendor to allow data submission to CMS,
the burden to the EP associated with submission of data on PQRI quality
measures should be minimal. Because this manner of reporting quality
data to CMS was new to PQRI for 2010 and no EHR data submissions have
taken place yet, it is difficult to estimate how many EPs will opt to
participate in the PQRI through the EHR mechanism in CY 2011.
An EHR vendor interested in having their product(s) be used by EPs
to submit PQRI quality measures data to CMS were required to complete a
self-nomination process in order for the vendor's product(s) to be
considered ``qualified'' for 2011. It is difficult to accurately
quantify the burden associated with the EHR self-nomination process as
there is variation regarding the technical capabilities and experience
among vendors. For purposes of this burden analysis, however, we
estimate that the time required for an EHR vendor to complete the self-
nomination process will be similar to the time required for registries
to self-nominate that is approximately 10 hours at $50 per hour for a
total of $500 per EHR vendor ($50 per hour x 10 hours per EHR vendor).
The burden associated with the EHR vendor programming its EHR
product(s) to extract the clinical data that the EP needs to submit to
CMS for purposes of reporting 2010 PQRI quality measures will be
dependent on the EHR vendor's familiarity with PQRI, the vendor's
system capabilities, as well as the vendor's programming capabilities.
Some vendors already have these necessary capabilities and for such
vendors, we estimate the total burden hours to be 40 hours at a rate of
$50 per hour for a total burden estimate of $2,000 ($50 per hour x 40
hours per vendor). However, given the variability in the capabilities
of the vendors, those vendors with minimal experience would have a
burden of approximately 200 hours at $50 per hour, for a total estimate
of $10,000 per vendor ($50 per hour x 200 hours per EHR vendor).
With respect to the process for group practices to be treated as
satisfactorily submitting quality measures data under the 2011 PQRI
discussed in section VI.F.1. of this proposed rule, group practices
interested in participating in the 2011 PQRI through one of the
proposed group practice reporting options would need to complete a
self-nomination process similar to the self-nomination process required
of registries and EHR vendors. Therefore, assuming 2 hours for a group
practice to decide whether to participate as a group or individually,
approximately 2 hours per group practice to draft the letter of intent
for self-nomination, gather the requested information, and provide this
requested information, and an additional 2 hours undergoing the vetting
process with CMS officials, we estimate a total of 6 hours associated
with the self-nomination process. Assuming that the group practice
staff involved in the group practice self-nomination process have the
same average practice labor cost as the average practice labor cost
estimates we used for individual EPs of $58 per hour, we estimate the
total cost to a group practice associated with the group practice self-
nomination process to be approximately $348 ($58 per hour x 6 hours per
group practice).
The burden associated with the group practice reporting
requirements of this voluntary reporting initiative is the time and
effort associated with the group practice submitting the quality
measures data. For practices participating under the proposed GPRO I
process, this would be the time associated with the physician group
completing the data collection tool. The information collection
components of this data collection tool have been reviewed by OMB and
are currently approved under

[[Page 40228]]

OMB control number 0938-0941, with an expiration date of December 31,
2011, for use in the Physician Group Practice, Medicare Care Management
Performance (MCMP), and EHR demonstrations. Based on burden estimates
for the PGP demonstration, which uses the same data submission methods,
we estimate the burden associated with a physician group completing the
data collection tool would be approximately 79 hours per physician
group. Based on an average labor cost of $58 per physician group, we
estimate the cost of data submission per physician group associated
with participating in the proposed PQRI GPRO I would be $4,582 ($58 per
hour x 79 hours per group practice).
For group practices participating under the proposed GPRO II
process, the burden associated with submitting the PQRI quality
measures data would be the time associated with the group practice
submitting the required data to CMS via claims or a registry. We would
expect that data submission under GPRO II would take no more time than
the time it would take an individual EP to submit via claims or
registry. We believe it would be appropriate to multiply the
appropriate burden estimates for each reporting mechanism for
individual EPs by the number of EPs in a group to obtain the burden
estimates for data submission under GPRO II. For example, based on our
estimate of 15.75 minutes per EP under claims-based reporting, we would
expect that a 2-person group would have a burden of 31.50 minutes for
claims-based submission under GPRO II.
We invite comments on this burden analysis, including the
underlying assumptions used in developing our burden estimates.
3. Electronic Prescribing (eRx) Incentive Program
We believe it is difficult to accurately estimate how many EPs will
opt to participate in the eRx Incentive Program in CY 2011. Final
participation numbers from the first year of the eRx Incentive Program
(2009) are not available. Information from the ``PQRI 2007 Reporting
Experience Report,'' which is available on the PQRI section of the CMS
Web site at http://www.cms.hhs.gov/PQRI, however, indicates that nearly
110,000 unique TIN/NPI combinations attempted to submit PQRI quality
measures data via claims for the 2007 PQRI. Therefore, for purposes of
conducting a burden analysis for the 2011 eRx Incentive Program, we
will assume that as many EPs who attempted to participate in the 2007
PQRI will attempt to participate in the 2011 eRx Incentive Program. As
such, we can estimate that nearly 110,000 unique TIN/NPI combinations
will participate in the 2011 eRx Incentive Program.
Section VI.F.2 of this proposed rule discusses the background of
the eRx Incentive Program. Section VI.F.2.b.(2) of this proposed rule
provides information on how we propose EPs and group practices can
qualify to be considered a successful electronic prescriber in 2011 in
order to earn an incentive payment. For 2011, EPs and group practices
may choose whether to participate and, to the extent they meet-- (1)
certain thresholds with respect to the volume of covered professional
services furnished; and (2) the criteria to be considered a successful
electronic prescriber described in section VI.F.2.b.(2) of this
proposed rule, they can qualify to receive an incentive payment for
2011 and/or avoid being subject to a penalty that goes into effect in
2012.
For the 2011 eRx Incentive Program, as discussed in section VI.F.2.
of this proposed rule, we propose that each EP would need to report the
G-code indicating that at least one prescription generated during an
encounter was electronically submitted at least 25 instances during the
reporting period. We expect the ongoing costs associated with
participation in the eRx Incentive Program to decline based on an EP's
familiarity with and understanding of the eRx Incentive Program,
experience with participating in the eRx Incentive Program, and
increased efforts by CMS and stakeholders to disseminate useful
educational resources and best practices.
Similar to PQRI, one factor in the burden to individual EPs would
be the time and effort associated with individual EPs reviewing the
electronic prescribing measure to determine whether it is applicable to
them, reviewing the available reporting options (we propose this
measure would be reportable through claims-based reporting, registry-
based reporting, or through EHRs) and selecting one, gathering the
required information, and incorporating reporting of the measure into
their office work flows. Since the eRx Incentive Program consists of
only 1 measure to report, we estimate 2 hours as the amount of time
needed for individual EPs to prepare for participation in the eRx
Incentive Program. At an average cost of approximately $58 per hour per
practice, we estimate the total preparation costs to individual EPs to
be approximately $116 (2 hours x $58 per hour).
Another factor that influences the burden to EPs is how they choose
to report the electronic prescribing measure. For EPs who choose to do
so via claims, we estimate that the burden associated with the
requirements of this incentive program is the time and effort
associated with gathering the required information, selecting the
appropriate quality data codes (QDCs), and including the appropriate
QDCs on the claims they submit for payment. For claims-based reporting,
the QDCs will be collected as additional (optional) line items on the
existing HIPAA transaction 837-P and/or CMS Form 1500. We do not
anticipate any new forms and no modifications to the existing
transaction or form. We also do not anticipate changes to the 837-P or
CMS Form 1500 for CY 201.
Based on the information from the PVRP described above for the
amount of time it takes a median practice to report one measure one
time on claims (1.75 minutes) and our proposal to require EPs to report
the measure 25 times, we estimate the burden associated with claims-
based data submission to be 43.75 minutes (1.75 minutes per case x 1
measure x 25 cases per measure). This equates to a cost of
approximately $42.29 (1.75 minutes per case x 1 measure x 25 cases per
measure x $58 per hour) per individual EP.
Because registry-based reporting of the electronic prescribing
measure to CMS was added to the eRx Incentive Program for 2010 and EPs
are not required to indicate to us how they plan to report the
electronic prescribing measure each year, it is difficult to accurately
estimate how many EPs will opt to participate in the eRx Incentive
Program through the registry-based reporting mechanism in CY 2011. We
do not anticipate, however, any additional burden for EPs to report
data to a registry as EPs opting for registry-based reporting would
more than likely already be reporting data to the registry for other
purposes. Little, if any, additional data would need to be reported to
the registry for purposes of participation in the 2011 eRx Incentive
Program. However, EPs would need to authorize or instruct the registry
to submit quality measures results and numerator and denominator data
on the electronic prescribing measure to CMS on their behalf. We
estimate that the time and effort associated with this would be
approximately 5 minutes for each EP that wishes to authorize or
instruct the registry to submit quality measures results and numerator
and denominator data on the electronic

[[Page 40229]]

prescribing measure to CMS on their behalf.
Based on our proposal to consider only registries qualified to
submit PQRI quality measures results and numerator and denominator data
on quality measures to CMS on their participants' behalf for the 2010
PQRI to be qualified to submit results and numerator and denominator
data on the electronic prescribing measure for the 2010 eRx Incentive
Program, there would be no need for a registry to undergo a separate
self-nomination process for the eRx Incentive Program and therefore, no
additional burden associated with the registry self-nomination process.
There would also be a burden to the registry associated with the
registry calculating results for the electronic prescribing measure
from the data submitted to the registry by its participants and
submitting the quality measures results and numerator and denominator
data on the electronic prescribing quality measure to CMS on behalf of
their participants. The time needed for a registry to review the
electronic prescribing measure and other information, calculate the
measure's results, and submit the measure's results and numerator and
denominator data on the measure on their participants behalf is
expected to vary along with the number of EPs reporting data to whom
the measure applies. However, we believe that registries already
perform many of these activities for their participants. Since the E-
Prescribing Incentive Program consists of only one measure, we believe
that the burden associated with the registry reporting the measure's
results and numerator and denominator to CMS on behalf of their
participants would be minimal.
For EHR-based reporting, the EP must extract the necessary clinical
data from his or her EHR and submit the necessary data to the CMS-
designated clinical data warehouse. Because this manner of reporting
quality data to CMS was first added to the eRx Incentive Program in
2010 and EPs are not required to indicate to us how they intend to
report the electronic prescribing measure, it is difficult to estimate
how many EPs will opt to participate in the eRx Incentive Program
through the EHR-based reporting mechanism in CY 2011. We believe that
once an EP's EHR is programmed by the vendor to allow data submission
to CMS, the burden to the EP associated with submission of data on the
electronic prescribing measure should be minimal.
Since we are considering only EHR products qualified for the 2010
PQRI to be qualified for the 2011 eRx Incentive Program, there would be
no need for EHR vendors to undergo a separate self-nomination process
for the 2011 eRx Incentive Program and therefore, no additional burden
associated with the self-nomination process.
There would also be a burden to the EHR vendor associated with the
EHR vendor programming its EHR product(s) to extract the clinical data
that the EP needs to submit to CMS for purposes of reporting the
proposed 2011 electronic prescribing measure. The time needed for an
EHR vendor to review the measure and other information and program each
qualified EHR product to enable EPs to submit data on the measure to
the CMS-designated clinical data warehouse will be dependent on the EHR
vendor's familiarity with the electronic prescribing measure, the
vendor's system capabilities, as well as the vendor's programming
capabilities. Since only EHR products qualified for the 2011 PQRI would
be qualified for the 2011 eRx Incentive Program and the eRx Incentive
Program consists of only one measure, we believe that any burden
associated with the EHR vendor to program its product(s) to enable EPs
to submit data on the electronic prescribing measure to the CMS-
designated clinical data warehouse would be minimal.
Finally, with respect to the process for group practices to be
treated as successful electronic prescribers under the 2011 eRx
Incentive Program discussed in section VI.F.2. of this proposed rule,
we propose that group practices would have the same options as
individual EPs in terms of the form and manner for reporting the
electronic prescribing measure (that is, group practices would have the
option of reporting the measure through claims, a qualified registry,
or a qualified EHR product). There are only 2 differences between the
proposed requirements for an individual EP and a group practice: (1)
The fact that a group practice would have to self-nominate; and(2) the
number of times that a group practice would be required to report the
electronic prescribing measure.
We do not anticipate any additional burden associated with the
group practice self-nomination practice since we propose to limit the
group practices to those selected to participate in the 2011 PQRI GPRO
I or PQRI GPRO II. The practice only would need to indicate their
desire to participate in the eRx GPRO at the same time they self-
nominate for either PQRI GPRO I or PQRI GPRO II and indicate how they
intend to report the electronic prescribing measure.
In terms of the burden to group practices associated with
submission of the electronic prescribing measure, we believe that this
would be similar to the burden to individual EPs for submitting the
electronic prescribing measure. In fact, overall, there could be less
burden associated with a practice participating as a group rather than
as individual EPs because the total number of reporting instances
required by the group could be less than the total number of reporting
instances that would be required if each member of the group separately
reported the electronic prescribing measure. Thus, we believe that the
burden to a group practice associated with reporting the electronic
prescribing measure could range from almost no burden (for groups who
choose to do so through a qualified EHR or registry) to 72.92 hours
(1.75 minutes per measure x 1 measure x 2,500 cases per measure) for a
GPRO I group who chooses to report the electronic prescribing measures
through claims submission. Consequently, the total estimated cost per
group practice to report the electronic prescribing measure could be as
high as $4,225 ($1.69 per measure x 1 measure x 2,500 cases per
measure).
As with individual EPs, we believe that group practices that choose
to participate in the 2011 eRx GPRO through registry-based reporting of
the electronic prescribing measure would more than likely already be
reporting data to the registry. Little, if any, additional data would
need to be reported to the registry for purposes of participation in
the 2011 eRx Incentive Program beyond authorizing or instructing the
registry to submit quality measures results and numerator and
denominator data on the electronic prescribing measure to CMS on their
behalf. We estimate that the time and effort associated with this would
be approximately 5 minutes for each group practice that wishes to
authorize or instruct the registry to submit quality measures results
and numerator and denominator data on the electronic prescribing
measure to CMS on their behalf.
For group practices that choose to participate in the 2011 eRx
Incentive Program through EHR-based reporting of the electronic
prescribing measure, once the EHR is programmed by the vendor to allow
data submission to CMS, the burden to the group practice associated
with submission of data on the electronic prescribing measure should be
minimal.
We invite comments on this burden analysis, including the
underlying

[[Page 40230]]

assumptions used in developing our burden estimates.

VIII. Response to Comments

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

IX. Regulatory Impact Analysis

We have examined the impacts of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C.
804(2)).
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more in any 1 year). We estimate,
as discussed below in this section, that the PFS provisions included in
this proposed rule will redistribute more than $100 million in 1 year.
Therefore, we estimate that this rulemaking is ``economically
significant'' as measured by the $100 million threshold, and hence also
a major rule under the Congressional Review Act. Accordingly, we have
prepared a Regulatory Impact Analysis that to the best of our ability
presents the costs and benefits of the rulemaking.
The RFA requires agencies to analyze options for regulatory relief
of small businesses, if a rule has a significant impact on a
substantial number of small entities. For purposes of the RFA, we
estimate that most hospitals and most other providers are small
entities as that term is used in the RFA (including small businesses,
nonprofit organizations, and small governmental jurisdictions). The
great majority of hospitals and most other health care providers and
suppliers are small entities, either by being nonprofit organizations
or by meeting the SBA definition of a small business (having revenues
of less than $34.5 million in any 1 year) (for details see the SBA's
Web site at http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (refer to the 620000 series). Individuals and
States are not included in the definition of a small entity. The RFA
requires that we analyze regulatory options for small businesses and
other entities. We prepare a regulatory flexibility analysis unless we
certify that a rule would not have a significant economic impact on a
substantial number of small entities. The analysis must include a
justification concerning the reason action is being taken, the kinds
and number of small entities the rule affects, and an explanation of
any meaningful options that achieve the objectives with less
significant adverse economic impact on the small entities.
For purposes of the RFA, physicians, NPPs, and suppliers including
IDTFs are considered small businesses if they generate revenues of $10
million or less based on SBA size standards. Approximately 95 percent
of physicians are considered to be small entities. There are over 1
million physicians, other practitioners, and medical suppliers that
receive Medicare payment under the PFS.
For purposes of the RFA approximately 85 percent of suppliers of
durable medical equipment, prosthetics, orthotics, and supplies
(DMEPOS) are considered small businesses according to the SBA size
standards. Our most recent claims information includes 47,000 entities
billing Medicare for DMEPOS each year. Total annual estimated Medicare
expenditures for DMEPOS suppliers are approximately $10.1 billion in CY
2009, for which $8.1 billion was fee-for-service (FFS) and $2 billion
was for managed care.
For purposes of the RFA, approximately 80 percent of clinical
diagnostic laboratories are considered small businesses according to
the SBA size standards.
Ambulance providers and suppliers for purposes of the RFA are also
considered to be small entities.
In addition, most ESRD facilities are considered small entities for
purposes of the RFA, either based on nonprofit status or by having
revenues of $34.5 million or less in any year. We note that a
considerable number of ESRD facilities are owned and operated by large
dialysis organizations (LDOs) or regional chains, which would have
total revenues more than $34.5 million in any year if revenues from all
locations are combined. However, the claims data we use to estimate
payments for this RFA and RIA does not identify which dialysis
facilities are parts of an LDO, regional chain, or other type of
ownership. Each individual dialysis facility has its own provider
number and bills Medicare using this number. Therefore, we consider
each ESRD facility to be a small entity for purposes of the RFA. We
consider a substantial number of entities to be significantly affected
if the proposed rule has an annual average impact on small entities of
3 to 5 percent or more. The majority of ESRD facilities will experience
impacts of approximately 2 percent of total revenues. There are 954
nonprofit ESRD facilities with a combined increase of 2.1 percent in
overall payments relative to current overall payments. We note that
although the overall effect of the wage index changes is budget
neutral, there are increases and decreases based on the location of
individual facilities. The analysis and discussion provided in this
section and elsewhere in this proposed rule complies with the RFA
requirements.
Because we acknowledge that many of the affected entities are small
entities, the analysis discussed throughout the preamble of this
proposed rule constitutes our regulatory flexibility analysis for the
remaining provisions and addresses comments received on these issues.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis, if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. Any
such regulatory impact analysis must conform to the provisions of
section 603 of the RFA. For purposes of section 1102(b) of the Act, we
define a small rural hospital as a hospital that is located outside of
a metropolitan statistical area and has fewer than 100 beds. We do not
believe this proposed rule has impact on significant operations of a
substantial number of small rural hospitals because most dialysis
facilities are freestanding. While there are 184 rural hospital-based
dialysis facilities, we do not know how many of them are based at
hospitals with fewer than 100 beds. However, overall, the 184 rural
hospital-based dialysis facilities will experience an estimated 2.1
percent increase in payments. As a result, this rule will not have a
significant impact on small rural hospitals. Therefore, the Secretary
has determined that this proposed rule will not have a significant
impact on the operations of a substantial number of small rural
hospitals.

[[Page 40231]]

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

A. RVU Impacts

1. Resource-Based Work, PE, and Malpractice RVUs
Section 1848(c)(2)(B)(ii) of the Act requires that increases or
decreases in RVUs may not cause the amount of expenditures for the year
to differ by more than $20 million from what expenditures would have
been in the absence of these changes. If this threshold is exceeded, we
make adjustments to preserve budget neutrality.
Our estimates of changes in Medicare revenues for PFS services
compare payment rates for CY 2010 with proposed payment rates for CY
2011 using CY 2009 Medicare utilization for all years. To the extent
that there are year-to-year changes in the volume and mix of services
provided by physicians, the actual impact on total Medicare revenues
will be different than those shown in Table 73. The payment impacts
reflect averages for each specialty based on Medicare utilization. The
payment impact for an individual physician would be different from the
average, based on the mix of services the physician furnishes. The
average change in total revenues would be less than the impact
displayed here because physicians furnish services to both Medicare and
non-Medicare patients and specialties may receive substantial Medicare
revenues for services that are not paid under the PFS. For instance,
independent laboratories receive approximately 85 percent of their
Medicare revenues from clinical laboratory services that are not paid
under the PFS.
Table 73 shows only the payment impact on PFS services. We note
that these impacts do not include the effect of the current law -6.1
percent CY 2011 PFS update. The following is an explanation of the
information represented in Table 73:
Column A (Specialty): The Medicare specialty code as
reflected in our physician/supplier enrollment files.
Column B (Allowed Charges): The aggregate estimated PFS
allowed charges for the specialty based on CY 2009 utilization and CY
2010 rates. That is, allowed charges are the PFS amounts for covered
services and include coinsurance and deductibles (which are the
financial responsibility of the beneficiary). These amounts have been
summed across all services furnished by physicians, practitioners, or
suppliers within a specialty to arrive at the total allowed charges for
the specialty.
Column C (Impact of Work and Malpractice (MP) RVU
Changes): This column shows the estimated CY 2011 impact on total
allowed charges of the changes in the work and malpractice RVUs.
Column D (Impact of PE RVU and Multiple Procedure Payment
Reduction Changes--Full): This column shows the estimated CY 2011
impact on total allowed charges of the changes in the PE RVUs if there
were no remaining transition to the full use of the new PPIS data. This
column also includes the impact of the various MPPR and imaging
equipment utilization policies.
Column E (Impact of PE RVU and MPPR Changes--Tran): This
column shows the estimated CY 2011 impact on total allowed charges of
the changes in the PE RVUs under the second year of the 4-year
transition to the full use of the new PPIS data. This column also
includes the impact of the various MPPR and imaging equipment
utilization policies.
Column F (Impact of MEI Rebasing): This column shows the
estimated CY 2011 impact on total allowed charges of the proposed CY
2011 rescaling of the RVUs so that the proportions of total payments
based on the work, PE, and malpractice RVUs match the proportions
proposed in the rebased CY 2006 MEI.
Column G (Combined Impact--Full): This column shows the
estimated CY 2011 combined impact on total allowed charges of all the
changes in the previous columns if there were no remaining transition
to the new PE RVUs using the PPIS data.
Column H (Combined Impact--Tran): This column shows the
estimated CY 2011 combined impact on total allowed charges of all the
changes in the previous columns under the second year of the 4-year
transition to the new PE RVUs using the PPIS data.

[[Page 40232]]

Table 73--CY 2011 PFS Proposed Rule Total Allowed Charge Estimated Impact for RVU, MPPR, and MEI Rebasing Changes*
--------------------------------------------------------------------------------------------------------------------------------------------------------
Impact of PE RVU and Combined impact
Allowed Impact of MPPR changes Impact of -------------------------
Specialty charges work and MP -------------------------- MEI
(mil) RVU changes Full Tran rebasing Full Tran
(A) (B) (C) (D) (E) (F) (G) (H)
--------------------------------------------------------------------------------------------------------------------------------------------------------
TOTAL........................................................ $79,731 0% 0% 0% 0% 0% 0%
01--ALLERGY/IMMUNOLOGY....................................... $176 0% 0% 0% 4% 4% 4%
02--ANESTHESIOLOGY........................................... $1,729 0% 3% 1% -3% 0% -2%
03--CARDIAC SURGERY.......................................... $373 0% -1% 0% 0% -1% 0%
04--CARDIOLOGY............................................... $6,801 0% -5% -2% 0% -5% -2%
05--COLON AND RECTAL SURGERY................................. $134 0% 4% 1% 0% 4% 1%
06--CRITICAL CARE............................................ $233 0% 2% 1% -2% 0% -1%
07--DERMATOLOGY.............................................. $2,678 0% 1% 1% 2% 3% 3%
08--EMERGENCY MEDICINE....................................... $2,527 0% 1% 1% -3% -2% -2%
09--ENDOCRINOLOGY............................................ $382 0% 3% 1% -1% 2% 0%
10--FAMILY PRACTICE.......................................... $5,351 0% 3% 1% 0% 3% 1%
11--GASTROENTEROLOGY......................................... $1,752 0% 2% 1% -1% 1% 0%
12--GENERAL PRACTICE......................................... $704 0% 2% 1% 0% 2% 1%
13--GENERAL SURGERY.......................................... $2,221 0% 3% 1% 0% 3% 1%
14--GERIATRICS............................................... $182 0% 5% 2% -2% 3% 0%
15--HAND SURGERY............................................. $100 0% 3% 1% 2% 5% 3%
16--HEMATOLOGY/ONCOLOGY...................................... $1,870 0% -5% -2% 1% -4% -1%
17--INFECTIOUS DISEASE....................................... $567 0% 4% 2% -2% 2% 0%
18--INTERNAL MEDICINE........................................ $10,381 0% 3% 1% -1% 2% 0%
19--INTERVENTIONAL PAIN MGMT................................. $379 0% 4% 2% 1% 5% 3%
20--INTERVENTIONAL RADIOLOGY................................. $222 0% -9% -4% 0% -9% -4%
21--MULTISPECIALTY CLINIC/OTHER.............................. $44 0% -5% -4% 1% -4% -3%
22--NEPHROLOGY............................................... $1,891 0% 0% 0% -1% -1% -1%
23--NEUROLOGY................................................ $1,415 0% 4% 1% 0% 4% 1%
24--NEUROSURGERY............................................. $622 0% 2% 1% 1% 3% 2%
25--NUCLEAR MEDICINE......................................... $57 0% -7% -4% 1% -6% -3%
27--OBSTETRICS/GYNECOLOGY.................................... $649 0% 1% 0% 1% 2% 1%
28--OPHTHALMOLOGY............................................ $5,154 0% 7% 3% 1% 8% 4%
29--ORTHOPEDIC SURGERY....................................... $3,339 0% 2% 1% 1% 3% 2%
30--OTOLARNGOLOGY............................................ $915 0% 3% 1% 1% 4% 2%
31--PATHOLOGY................................................ $1,040 0% -1% 0% -1% -2% -1%
32--PEDIATRICS............................................... $65 0% 2% 1% 0% 2% 1%
33--PHYSICAL MEDICINE........................................ $868 0% 4% 1% -1% 3% 0%
34--PLASTIC SURGERY.......................................... $306 0% 4% 2% 1% 5% 3%
35--PSYCHIATRY............................................... $1,105 0% 1% 1% -3% -2% -2%
36--PULMONARY DISEASE........................................ $1,736 0% 2% 1% -1% 1% 0%
37--RADIATION ONCOLOGY....................................... $1,889 0% -5% -2% 4% -1% 2%
38--RADIOLOGY................................................ $4,975 0% -12% -6% 0% -12% -6%
39--RHEUMATOLOGY............................................. $496 0% 0% 0% 1% 1% 1%
40--THORACIC SURGERY......................................... $388 0% -1% 0% 0% -1% 0%
41--UROLOGY.................................................. $1,909 0% -6% -2% 1% -5% -1%
42--VASCULAR SURGERY......................................... $702 0% -2% -1% 2% 0% 1%
43--AUDIOLOGIST.............................................. $52 0% -7% -2% 1% -6% -1%
44--CHIROPRACTOR............................................. $732 0% 3% 1% -2% 1% -1%
45--CLINICAL PSYCHOLOGIST.................................... $557 0% -6% -2% -5% -11% -7%
46--CLINICAL SOCIAL WORKER................................... $376 0% -5% -2% -5% -10% -7%
47--DIAGNOSTIC TESTING FACILITY.............................. $851 0% -26% -13% 6% -20% -7%
48--INDEPENDENT LABORATORY................................... $1,009 0% -6% -2% 4% -2% 2%
49--NURSE ANES/ANES ASST..................................... $706 0% 2% 2% -3% -1% -1%
50--NURSE PRACTITIONER....................................... $1,175 0% 4% 1% -1% 3% 0%
51--OPTOMETRY................................................ $937 0% 7% 3% 1% 8% 4%
52--ORAL/MAXILLOFACIAL SURGERY............................... $38 0% 3% 2% 2% 5% 4%
53--PHYSICAL/OCCUPATIONAL THERA.............................. $2,138 0% -7% -11% -1% -8% -12%
54--PHYSICIAN ASSISTANT...................................... $868 0% 3% 1% 0% 3% 1%
55--PODIATRY................................................. $1,738 0% 4% 2% 1% 5% 3%
56--PORTABLE X-RAY SUPPLIER.................................. $91 0% 3% 2% 6% 9% 8%
57--RADIATION THERAPY CENTERS................................ $69 0% -9% -3% 8% -1% 5%
OTHER........................................................ $67 0% 2% 1% -1% 2% 2%
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Does not include the impact of the current law -6.1 percent CY 2011 update.

[[Page 40233]]

2. CY 2011 PFS Impact Discussion
a. Changes in RVUs
The most widespread specialty impacts of the RVU changes are
generally related to two factors. First, as discussed in section
II.A.2. of this proposed rule, we are currently implementing the second
year of the 4-year transition to new PE RVUs using the new PPIS data
that were adopted in the CY 2010 PFS final rule with comment period (74
FR 61751). The impacts of using the new PPIS data are generally
consistent with the impacts discussed in the CY 2010 PFS final rule
with comment period (74 FR 61983 through 61984).
The second general factor contributing to the CY 2011 impacts shown
in Table 73 is the proposed CY 2011 rescaling of the RVUs so that in
the aggregate they match the proposed work, PE, and malpractice
proportions in the rebased CY 2006 MEI. That is, as discussed in
section II.E.1. of this proposed rule, the proposed rebased MEI has a
greater proportion attributable to malpractice and PE and,
correspondingly, a lesser proportion attributable to work. Specialties
that have a high proportion of total RVUs attributable to work, such as
anesthesiology, are estimated to experience a decrease in aggregate
payments as a result of this rescaling, while specialties that have a
high proportion attributable to PE, such as radiation oncology, are
estimated to experience an increase in aggregate payments. Malpractice
generally represents a small proportion of total payments and the
rescaling of the malpractice RVUs is not the primary driver of the
specialty impacts. As discussed in section II.E.1. of this proposed
rule, the proposed rescaling of the RVUs to match the proposed rebased
MEI is budget neutral overall.
Table 73 also includes the impacts resulting from our proposed
regulatory change to apply the current 50 percent MPPR policy to
therapy services. Under the PFS, we estimate that this change would
primarily reduce payments to the specialties of physical therapy and
occupational therapy. In order to maintain budget neutrality, we are
proposing to redistribute the PFS savings back into other services paid
under the PFS by increasing all PE RVUs by approximately 1 percent.
Because providers in settings outside of the PFS, such as
outpatient hospital departments, are also paid using the PFS payment
rates and policies for physical therapy services, we estimate that this
proposal would reduce (not redistribute) payments in those settings for
therapy services by approximately 13 percent in CY 2011.
In addition, Table 73 includes the impacts resulting from the
proposed regulatory change to the scope of the current contiguous body
area MPPR policy for imaging services from contiguous body areas to
include noncontiguous body areas. We estimate that this change would
primarily reduce payments to the specialties of IDTF and radiology. In
order to maintain budget neutrality, we are proposing to redistribute
these savings back into other services paid under the PFS by increasing
all PE RVUs by approximately 0.1 percent.
Table 73 also reflects the impacts resulting from certain ACA
provisions, including section 3135 that amends section 1848(b)(4) of
the Act to reduce the payment for expensive diagnostic imaging
equipment, and, effective July 1, 2010, increases the level of the MPPR
for contiguous body areas from 25 percent to 50 percent. The proposed
expansion of the MPPR policy is further discussed in section II.C.4. of
this proposed rule, while the discussions of the provisions of section
3135 of the ACA are found in sections V.M. and II.A.3.a. of this
proposed rule. As required by sections 1848(c)(2)(B)(v)(V) and (VI) of
the Act (as added by sections 3135(a) and (b) of the ACA), these
changes are not budget neutral and result in program savings. See
section IX.D below for a discussion of the budget impacts of the ACA
provisions.
We note that the payment impact for an individual physician may be
different from the average, based on the mix of services the physician
furnishes.
b. Combined Impact
Column H of Table 73 displays the estimated CY 2011 combined impact
on total allowed charges by specialty of all the proposed RVU and MPPR
changes. These impacts range from an increase of 8 percent for portable
x-ray suppliers, to a decrease of 12 percent for physical/occupational
therapy. There is generally a slightly positive net effect of our
proposals on primary care specialties, such as family practice,
internal medicine, and geriatrics. Again, these impacts are estimated
prior to the application of the negative CY 2011 CF update specified
under the current statute.
Table 74 shows the estimated impact on total payments for selected
high-volume procedures of all of the changes discussed previously,
including the effect of the CY 2011 negative PFS CF update. We selected
these procedures because they are the most commonly furnished by a
broad spectrum of physician specialties. There are separate columns
that show the change in the facility rates and the nonfacility rates.
For an explanation of facility and nonfacility PE, we refer readers to
Addendum A of this proposed rule.

Table 74--Impact of Proposed Rule and Estimated Physician Update on CY 2011 Payment for Selected Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
Facility Nonfacility
-----------------------------------------------------------------------------
CPT \1\ HCPCS Code MOD Short descriptor Percent Percent
CT 2010 \2\ CY 2011 \3\ change CY 2010 \2\ CY 2011 \3\ change
--------------------------------------------------------------------------------------------------------------------------------------------------------
11721......................... ....... Debride nail, 6 or more.......... $20.72 $18.41 -11 $31.23 $29.71 -5
17000......................... ....... Destruct premalg lesion.......... 40.88 39.04 -4 57.91 55.98 -3
27130......................... ....... Total hip arthroplasty........... 1,084.09 1,005.16 -7 NA NA NA
27244......................... ....... Treat thigh fracture............. 918.31 854.90 -7 NA NA NA
27447......................... ....... Total knee arthroplasty.......... 1,159.32 1,074.64 -7 NA NA NA
33533......................... ....... CABG, arterial, single........... 1,536.01 1,374.42 -11 NA NA NA
35301......................... ....... Rechanneling of artery........... 869.49 783.95 -10 NA NA NA
43239......................... ....... Upper GI endoscopy, biopsy....... 133.42 122.76 -8 256.05 243.80 -5
66821......................... ....... After cataract laser surgery..... 216.59 210.41 -3 228.80 222.69 -3
66984......................... ....... Cataract surg w/iol, 1 stage..... 549.57 524.43 -5 NA NA NA
67210......................... ....... Treatment of retinal lesion...... 479.17 457.89 -4 494.21 473.12 -4
71010......................... ....... Chest x-ray...................... NA NA NA 18.17 16.94 -7
71010......................... 26 Chest x-ray...................... 7.10 6.38 -10 7.10 6.38 -10

[[Page 40234]]

77056......................... ....... Mammogram, both breasts.......... NA NA NA 82.61 78.08 -5
77056......................... 26 Mammogram, both breasts.......... 34.63 30.69 -11 34.63 30.69 -11
77057......................... ....... Mammogram, screening............. NA NA NA 61.60 57.45 -7
77057......................... 26 Mammogram, screening............. 27.82 24.80 -11 27.82 24.80 -11
77427......................... ....... Radiation tx management, x5...... 153.00 141.17 -8 153.00 141.17 -8
88305......................... 26 Tissue exam by pathologist....... 28.67 26.03 -9 28.67 26.03 -9
90801......................... ....... Psy dx interview................. 100.21 88.14 -12 120.93 109.75 -9
90862......................... ....... Medication management............ 35.77 32.16 -10 44.28 41.00 -7
90935......................... ....... Hemodialysis, one evaluation..... 53.08 48.37 -9 NA NA NA
92012......................... ....... Eye exam established pat......... 38.32 36.09 -6 58.48 56.96 -3
92014......................... ....... Eye exam & treatment............. 58.48 55.00 -6 85.44 82.74 -3
92980......................... ....... Insert intracoronary stent....... 689.80 608.64 -12 NA NA NA
93000......................... ....... Electrocardiogram, complete...... NA NA NA 15.61 14.24 -9
93010......................... ....... Electrocardiogram report......... 7.10 6.38 -10 7.10 6.38 -10
93015......................... ....... Cardiovascular stress test....... NA NA NA 72.67 66.29 -9
93307......................... 26 Echo exam of heart............... 38.32 34.13 -11 38.32 34.13 -11
93510......................... 26 Left heart catheterization....... 198.71 174.81 -12 198.71 174.81 -12
98941......................... ....... Chiropractic manipulation........ 24.13 21.85 -9 27.25 25.29 -7
99203......................... ....... Office/outpatient visit, new..... 57.34 52.79 -8 76.93 72.67 -6
99213......................... ....... Office/outpatient visit, est..... 38.04 35.11 -8 51.38 48.86 -5
99214......................... ....... Office/outpatient visit, est..... 58.48 53.77 -8 76.93 72.43 -6
99222......................... ....... Initial hospital care............ 101.62 93.54 -8 NA NA NA
99223......................... ....... Initial hospital care............ 149.60 137.25 -8 NA NA NA
99231......................... ....... Subsequent hospital care......... 29.81 27.25 -9 NA NA NA
99232......................... ....... Subsequent hospital care......... 53.93 49.35 -9 NA NA NA
99233......................... ....... Subsequent hospital care......... 77.50 70.96 -8 NA NA NA
99236......................... ....... Observ/hosp same date............ 166.06 151.73 -9 NA NA NA
99239......................... ....... Hospital discharge day........... 77.78 71.94 -8 NA NA NA
99283......................... ....... Emergency dept visit............. 48.26 43.21 -10 NA NA NA
99284......................... ....... Emergency dept visit............. 91.41 81.76 -11 NA NA NA
99291......................... ....... Critical care, first hour........ 170.04 153.94 -9 203.25 187.33 -8
99292......................... ....... Critical care, add'l 30 min...... 85.16 77.09 -9 91.97 83.97 -9
99348......................... ....... Home visit, est patient.......... NA NA NA 63.59 58.19 -8
99350......................... ....... Home visit, est patient.......... NA NA NA 130.58 120.30 -8
G0008......................... ....... Admin influenza virus vac........ NA NA NA 16.75 16.45 -2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ CPT codes and descriptions are copyright 2010 American Medical Association. All Rights Reserved. Applicable FARS/DFARS apply.
\2\ Payments based upon corrected CY 2010 conversion factor of $28.3868 under the statute as of October 30, 2009 that would be in effect on December 31,
2010 under current law.
\3\ Payments based upon the projected CY 2011 conversion factor of $26.6574 adjusted by the proposed MEI rescaling factor of 0.921.

B. Geographic Practice Cost Indices (GPCIs)

As discussed in section II.D. of this proposed rule, we are
required to update the GPCI values at least every 3 years and phase in
the adjustment over 2 years (if there has not been an adjustment in the
past year). For CY 2011, we are proposing new GPCIs for each Medicare
locality. The updated GPCIs reflect the first year of the 2-year phase
in. The new GPCIs rely upon the 2010 HUD data for determining the
relative cost differences in the office rent component of the PE GPCIs,
as well as the 2006 through 2007 professional malpractice premium data
for determining the malpractice GPCIs. The 2006 through 2008 Bureau of
Labor and Statistics (BLS) Occupational Employment Statistics (OES)
data were used as a replacement for 2000 Census data for determining
the physician work GPCIs and the employee compensation component of the
PE GPCIs. As discussed in section II.D. of this proposed rule, the cost
share weights for each GPCI value, that is, work, PE, and malpractice,
reflect the same proportions determined for the proposed 2006-based
MEI.
Additionally, the proposed GPCIs reflect several provisions
required by the ACA. Section 1848(e)(1)(H) of the Act (as added by
section 3102(b) of the ACA) specifies that for CY 2010 and CY 2011, the
employee wage and rent portions of the PE GPCIs reflect only one-half
of the relative cost differences for each locality compared to the
national average and includes a ``hold harmless'' provision for any PFS
locality that would receive a reduction to its PE GPCI resulting from
the limited recognition of cost differences. Section 1848(e)(1)(E) of
the Act (as amended by section 3102(a) of the ACA) extends the 1.000
work GPCI floor only through December 31, 2010. Therefore, the proposed
CY 2011 GPCIs reflect the sunset of the 1.000 work GPCI floor. Section
1848(e)(1)(G) of the Act (as amended by section 134(b) of the MIPPA)
established a permanent 1.500 work GPCI floor in Alaska, beginning
January 1, 2009 and, therefore, the 1.500 work GPCI floor in Alaska
will remain in place for CY 2011. Moreover, section 1848(e)(1)(I) of
the Act (as added by section 10324(c) of the ACA) establishes a 1.000
PE GPCI floor for services furnished in frontier states effective
January 1, 2011. OACT estimates the combined impact of these provisions
on a fiscal year cash basis as $580 million for FY 2011.
As required by the statute, the updated GPCIs would be phased in
over a 2-year period. Addendum D to this proposed rule shows the
estimated effects of the revised GPCIs on locality

[[Page 40235]]

GAFs for the transitional year (CY 2011) in descending order. The GAFs
reflect the use of updated underlying GPCI data, updated cost share
weights, and the ACA provisions. The GAFs are a weighted composite of
each area's work, PE, and malpractice GPCIs using the national GPCI
cost share weights. While we do not actually use the GAFs in computing
the PFS payment for a specific service, they are useful in comparing
the estimated overall costs and payments for different localities. The
actual effect on payment for any specific service would deviate from
the estimated payment based on the GAF to the extent that the
proportions of work, PE, and malpractice expense RVUs for the specific
service differ from those of the GAF. The most significant changes
would occur in 12 payment localities, where the GAF increases by more
than 1 percent or decreases by more than 2 percent. The cumulative
effects of all of the GPCI revisions, including the updated underlying
GPCI data, updated cost share weights, and provisions of the ACA, are
reflected in the CY 2012 GPCI values that are displayed in Addendum E
to this proposed rule.

C. Rebasing and Revising of the MEI

As discussed in section II.E.1. of this proposed rule, we are
proposing to rebase and revise the MEI for the CY 2011 PFS.
Substituting the proposed 2006 MEI weights in place of the 2000 weights
and implementing the proposed revisions to the MEI has no impact on the
projected MEI increase for CY 2011. The projected MEI update for CY
2011 is 0.3 percent under both the 2000-based and 2006-based MEI. After
CY 2011, the MEI updates are slightly higher (0.1 percentage point) in
the early part of the forecast, unchanged in the medium term, and
slightly lower in the long term (between 0.1 to 0.2 percentage points).

D. The Affordable Care Act Provisions

1. Section 3103: Extension of Exceptions Process for Medicare Therapy
Caps
This provision extends the exceptions process for therapy caps
through December 31, 2010. Therapy caps are discussed in detail in
section III.A.1. of this proposed rule. OACT estimates the impact on a
fiscal year cash basis as $1.16 billion for FY 2011.
2. Section 3104: Extension of Payment for Technical Component of
Certain Physician Pathology Services
As discussed in section V.E. of this proposed rule, this provision
continues payment to independent laboratories for the TC of physician
pathology services for fee-for-service Medicare beneficiaries who are
inpatients or outpatients of a covered hospital through CY 2010. OACT
estimates the impact on a fiscal year cash basis as $80 million for FY
2011.
3. Sections 3105 and 10311: Extension of Ambulance Add-Ons
As discussed in section V.F. of this proposed rule, these
provisions require the extension of certain add-on payments for ground
ambulance services, and the extension of certain rural area
designations for purposes of air ambulance payment. As further
discussed in section V.F., we are amending the Medicare program
regulations to conform the regulations to these provisions of the ACA.
These statutory provisions are essentially prescriptive and do not
allow for discretionary alternatives on the part of the Secretary.
As discussed in the July 1, 2004 interim final rule (69 FR 40288),
in determining the super-rural bonus amount under section 1834(l)(12)
of Act, we followed the statutory guidance of using the data from the
Comptroller General (GAO) of the U.S. We obtained the same data as the
data that were used in the GAO's September 2003 Report titled
``Ambulance Services: Medicare Payments Can Be Better Targeted to Trips
in Less Densely Populated Rural Areas'' (GAO report number GAO-03-986)
and used the same general methodology in a regression analysis as was
used in that report. The result was that the average cost per trip in
the lowest quartile of rural county populations was 22.6 percent higher
than the average cost per trip in the highest quartile. As required by
section 1834(l)(12) of the Act, this percent increase is applied to the
base rate for ground ambulance transports that originate in qualified
rural areas, which were identified using the methodology set forth in
the statute. Payments for ambulance services under Medicare are
determined by the point of pick-up (by zip code area) where the
beneficiary is loaded on board the ambulance. We determined that ground
ambulance transports originating in 7,842 zip code areas (which were
determined to be in ``qualified rural areas'') out of 42,879 zip code
areas, according to the July 2010 zip code file, will realize increased
base rate payments under this provision; however, the number and level
of services that might occur in these areas for CY 2011 is unknown at
this time. While many elements may factor into the final impact of
sections 3105(a), (b), and (c) and 10311(a), (b), and (c) of the ACA,
our Office of the Actuary (OACT) estimates the impact of all these
provisions to be $10 million for FY 2011.
4. Section 3107: Extension of Physician Fee Schedule Mental Health Add-
On
As discussed in section V.G. of this proposed rule, this provision
extends the period of time for the five percent increase in Medicare
payment for specified mental health services through CY 2010. OACT
estimates the impact on a fiscal year cash basis as $20 million for FY
2011.
5. Section 3111: Payment for Bone Density Tests
As discussed in section V.I. of this proposed rule, this provision
restores payment for dual-energy x-ray absorptiometry (DXA) services
furnished during CYs 2010 and 2011 to 70 percent of the Medicare rate
paid in CY 2006. OACT estimates the impact on a fiscal year cash basis
as $60 million for FY 2011.
6. Section 3122: Extension of Medicare Reasonable Costs Payments for
Certain Clinical Diagnostic Laboratory Tests Furnished to Hospital
Patients in Certain Rural Areas
As discussed in section V.K. of this proposed rule, this provision
reinstitutes reasonable cost payment for clinical diagnostic laboratory
tests performed by hospitals with fewer than 50 beds that are located
in qualified rural areas as part of their outpatient services for cost
reporting periods beginning on or after July 1, 2010 through June 30,
2011. For some hospitals with cost reports that begin as late as June
30, 2011, this reinstitution of reasonable cost payment could affect
services performed as late as June 29, 2012, because this is the date
those cost reports will close.
7. Section 3135: Modification of Equipment Utilization Factor For
Advanced Imaging Services
As discussed in section V.M. of this proposed rule, for services
furnished on or after July 1, 2010, section 1848(b)(4)(D) of the Act
(as added by section 3135(b) of the ACA) adjusts the technical
component MPPR for multiple imaging studies provided in a single
imaging session on contiguous body parts within families of codes from
25 percent to 50 percent as of July 1, 2010. For services furnished on
or after January 1, 2011, section 1848(b)(4)(C) of the Act (as added by
section 3135(a) of the ACA) increases the equipment utilization rate to
75 percent for expensive diagnostic imaging equipment, changing the CY
2011 transitional utilization rate adopted in

[[Page 40236]]

the CY 2010 PFS final rule with comment period to the 75 percent rate.
Both of these provisions are not budget neutral. OACT estimates the
impact on a fiscal year cash basis to be savings to the Medicare
program of $160 million for FY 2011.
8. Section 3136: Revisions in Payments for Power Wheelchairs
As discussed in section V.N. of this proposed rule, this provision
requires the Secretary to revise the capped rental fee schedule amounts
for all power wheelchairs effective for power wheelchairs furnished on
or after January 1, 2011. Under the monthly capped rental payment
structure, the fee schedule will pay 15 percent (instead of 10 percent)
of the purchase price for the first three months and 6 percent (instead
of 7.5 percent) for the remaining rental months not to exceed 13
months. In addition, the lump sum (up front) purchase payment will be
eliminated for standard power-driven wheelchairs. For complex
rehabilitative power-driven wheelchairs, the provision permits payment
to be made on a lump sum purchase method or a monthly rental method.
These changes are prescriptive in the statute and does not allow for
discretionary alternatives.
We expect the changes mandated by section 3136 of the ACA as a
whole to achieve program savings as a result of total payments per
standard power wheelchair being less than 100 percent of the purchase
fee schedule amount. This decrease in expenditures is expected for two
reasons. Primarily, the provision will eliminate the lump sum payment
method for standard power-driven wheelchairs and instead payment will
be made under the monthly rental method resulting in lower aggregate
payments because many beneficiaries who use standard power wheelchairs
do not use them for as long as 13 months. In addition, we note that
currently a significantly lower volume of power-driven wheelchairs are
paid under the monthly payment method. The payment impact of increasing
monthly rental payments in the initial 3 months will be offset both by
the savings achieved from eliminating the lump sum payment method for
standard power-driven wheelchairs and by decreasing payments for the
remaining months of rental from 7.5 percent to 6 percent of the
purchase price for all power-driven wheelchairs. We compared the
estimates of current payments for power-driven wheelchairs to estimates
of payments resulting from the changes which showed an estimated
payment impact of a decrease in expenditures of approximately $780
million over a 5-year period. The FY 2011 cash savings was $120
million.
9. Section 3401: Revisions of Certain Market Basket Updates and
Incorporation of Productivity Adjustments
As discussed in section V.P. of this proposed rule, section 3401 of
the ACA incorporates a productivity adjustment into the update factors
for certain payment systems. Specifically, section 3401 requires that
in CY 2011 (and in subsequent years), update factors under the
ambulatory surgical center payment system, the ambulance fee schedule,
and the clinical laboratory fee schedule be adjusted by the
productivity adjustment. OACT estimates the impact to be savings to the
Medicare program of $20 million, $30 million, and $50 million for the
ambulatory surgical center payment system, the ambulance fee schedule,
and the clinical laboratory fee schedule, respectively, for FY 2011.
Furthermore section 3401 changed the 2011 ESRD composite rate Market
Basket minus one increase to a Market Basket increase. This provision
would be a cost to the Medicare program of $40 million (does not
include coinsurance).
10. Section 4103: Medicare Coverage of Annual Wellness Visit Providing
a Personalized Prevention Plan
As discussed in section V.Q. of this proposed rule, for services
furnished on or after January 1, 2011, section 1861(s)(2)(FF) of the
Act (as added by section 4103 of the ACA) provides Medicare coverage,
with no coinsurance or deductible, for an annual wellness visit. The
annual wellness visit entails the creation of a personalized prevention
plan for an individual that includes a health risk assessment and may
include other elements, such as updating the family history,
identifying providers that regularly provide medical care to the
individual, body mass index measurement, development of a screening
service schedule, and identification of risk factors. OACT estimates
the impact on a fiscal year cash basis to be $110 million for FY 2011.
11. Section 4104: Removal of Barriers to Preventive Services in
Medicare
As discussed in section V.R. of this proposed rule, for services
furnished on or after January 1, 2011, sections 1833(a)(1) and 1833(b)
of the Act (as amended by section 4104 of the ACA) waive the deductible
and coinsurance requirements for most preventive services, and waive
the deductible for colorectal cancer screening tests that are reported
with other codes. Services to which no coinsurance or deductible would
be applied are the annual wellness visit, the initial preventive
physical examination, and any covered preventive service if it is
recommended with a grade of A or B by the United States Preventive
Services Task Force. We estimate that this new benefit will result in
an increase in Medicare payments. OACT estimates the impact on a fiscal
year cash basis to be $110 million for FY 2011.
12. Section 5501: Expanding Access to Primary Care Services and General
Surgery Services
As discussed in section V.S. of this proposed rule, for services
furnished on or after January 1, 2011 and before January 1, 2016,
sections 1833(x) and (y) of the Act (as added by section 5501 of the
ACA) provide primary care practitioners, as well as general surgeons
practicing in geographic health professional shortage areas, with 10
percent incentive payments based on their provision of primary care or
major surgical services, respectively. OACT estimates the impact on a
fiscal year cash basis to be $170 million for FY 2011.
13. Section 6003: Disclosure Requirements for In-office Ancillary
Services Exception to the Prohibition of Physician Self-Referral for
Certain Imaging Services
In section V.T of the preamble of this proposed rule, we propose to
amend Sec. 411.355(b)(2) to include a new disclosure requirement
created by section 6003 of the ACA and related to the in-office
ancillary services exception to the physician self-referral
prohibition. Specifically, the statute requires that, with respect to
magnetic resonance imaging, computed tomography, and positron emission
tomography, the referring physician must inform the patient in writing
at the time of the referral that the patient may obtain the same
imaging services from another supplier. In addition, the statute
requires physicians to provide a written list of other suppliers who
furnish the same imaging services in the area in which the patient
resides.
We propose that the written notice shall include a list of at least
10 other suppliers who provide the services for which the individual is
being referred and which are located within a 25-mile radius of the
referring physician's office location. If there are fewer than 10 other
suppliers located within a 25-mile radius of the physician's office
location, the physician shall list all of the other suppliers of the
imaging service that are present within a 25-mile radius of the

[[Page 40237]]

referring physician's office location, including up to 10 suppliers.
Provision of the written list of alternate suppliers will not be
required if no other suppliers provide the services for which the
individual is being referred within a 25-mile radius. We also propose
that the notice should be written in a manner sufficient to be
reasonably understood by all patients and should include for each
supplier on the list, at a minimum, the supplier's name, address,
telephone number, and distance from the referring physician's office
location. A record of the disclosure notification, signed by the
patient, shall be maintained as a part of the patient's medical record.
Our proposal minimizes the administrative burden for the physician
by requiring the development of only one list of alternative suppliers
for each office location, rather than multiple lists targeting the
various areas in which the physician's patients reside.
We do not anticipate that our proposals in section V.T. of the
preamble of this proposed rule would have a significant economic impact
on a substantial number of physicians, other health care providers and
suppliers, or the Medicare or Medicaid programs and their
beneficiaries. Specifically, we believe that this proposed rule would
affect only those physicians who provide MRI, CT, PET services under
the in-office ancillary services exception and beneficiaries receiving
those services. We are uncertain of the number of physicians who will
have to comply with this disclosure requirement. Using data from the
2009 CMS Statistics booklet, we propose an estimate of 71,000 Medicare
enrolled physicians would have to comply with this new requirement.
This figure represents 20 percent of primary care and medical specialty
physicians enrolled in Medicare Part B. In order to ensure accuracy of
the effect of this provision on physician practices, we are soliciting
comments regarding the appropriateness of this estimate. The burden
associated with disclosing the information, receiving the patient's
signature on the form and maintaining a record of such disclosure will
be de minimis for the individual physician.
Our proposed criteria for the new disclosure requirement would
present a negligible economic impact on the physician or group practice
required to create the disclosure notice. The physician or group
practice would incur only a one-time cost associated with developing a
disclosure notice that informs patients that they may receive the same
imaging services from another supplier and also lists other suppliers
located within a 25-mile radius of the physician's office location at
the time of the referral. We believe it would take an individual 1 hour
to create the notice informing patients that they may receive imaging
services from another supplier as well as to compile the list of 10
other suppliers. In addition, we believe it would require a negligible
amount of time to provide the notice and list of suppliers to the
patient and to maintain a copy of the notice in the patient's medical
record.
We believe that beneficiaries would be impacted positively by this
new provision. The disclosure that the patient may receive the referred
imaging services from another supplier contributes to informed
decision-making about the availability of such imaging services from
other suppliers. We also believe that furnishing a list of other
suppliers who provide the same services in the vicinity of the
referring physician serves patient convenience. The proposed regulation
makes no significant changes that would impede patient access to health
care services, and it will likely improve patients' awareness of
options in deciding where to receive imaging services.
14. Section 6404: Maximum Period for Submission of Medicare Claims
Reduced to Not More Than 12 Months
As discussed in section V.U. of this proposed rule, section 6404 of
the ACA reduces the maximum time period for filing Medicare claims to
no more than 12 months after the date of service. Under the new law,
claims for services furnished on or after January 1, 2010, must be
filed within 1 calendar year after the date of service. In addition,
section 6404 of the ACA provides that claims for services furnished
before January 1, 2010, must be filed no later than December 31, 2010.
Section 6404 of the ACA also permits the Secretary to make certain
exceptions to the 1-year filing deadline. This proposed rule would
create two new exceptions to the 1-year filing deadline.
The first exception would permit the time limits for filing claims
to be extended where a beneficiary becomes retroactively entitled to
Medicare benefits, but was not entitled to Medicare benefits at the
time the services were furnished. Under this exception, the time to
file a claim would be extended through the last day of the sixth month
following the month in which the beneficiary received notification of
the retroactive Medicare entitlement to the date of the furnished
service.
The second exception would permit the time limits for filing claims
to be extended where: (1) At the time the service was furnished, the
beneficiary was not entitled to Medicare; (2) subsequently, the
beneficiary received notification of Medicare entitlement,
retroactively effective to the date of the furnished service; and (3)
subsequently the State Medicaid agency recovered the Medicaid payment
for the furnished service from a provider or supplier 11 months or more
after date the service was furnished. Under this exception, the time to
file a claim would be extended through the last day of the sixth month
following the month in which the State recovered the Medicaid payment
from the provider or supplier.
The budgetary impact related to this provision is significant as
future payment of claims for services incurred will now be made at an
earlier date, relative to the 12-month submission expiration. This is
reflected by the Part A and Part B payment amounts of $60 and $50
million for FY 2011. However, for purposes of the Regulatory Impact
Analysis, the economic impact of this provision is non-economically
significant, as to the interest lost on money now required to pay
claims prior to the 12-month submission expiration is minimal.
Providers and suppliers have established billing practices for the
submission of claims for payment to the Medicare program. Although this
proposed rule would require providers and suppliers to submit Medicare
fee-for-service claims within 12 months from the date of service, we
believe providers and suppliers would easily revise their billing
practices on a one-time basis, and suffer no economic impact. In fact,
analysis of Medicare claims data shows that more than 99 percent of
Part A and Part B claims are filed in 12 months or less. In addition,
some providers and suppliers will receive payment and interest on
claims that are filed at an earlier date.
Lastly, providers, suppliers, or the small number of beneficiaries
that occasionally submit claims may benefit from the availability of
the two proposed new exceptions to the timely filing rule; however, we
believe the impact on program costs would be negligible.

E. Other Provisions of the Proposed Regulation

1. Part B Drug Payment: ASP Issues
Application of our proposed policies for ``Carry Over ASP'' and
``Partial Quarter ASP Data,'' as discussed in section VI.A. of this
proposed rule, are dependent on the status and quality of quarterly
manufacturer data

[[Page 40238]]

submissions, so we cannot quantify associated savings.
Furthermore, we do not expect that our proposed policy for
determining the payment amount for drugs and biologicals which include
intentional overfill, as discussed in section VI.A of this proposed
rule, will impact payments made by the Medicare program.
Finally, as discussed in section VI.A of this proposed rule, we are
proposing to provide for appropriate price substitutions that account
for market-related pricing changes and would allow Medicare to pay
based off lower market prices for those drugs and biologicals that
consistently exceed the applicable threshold percentage. We believe
that this proposal will generate some savings for the Medicare program
and its beneficiaries since any substituted prices would be for amounts
less than the calculated 106 percent of the ASP.
2. Ambulance Fee Schedule: Proposed Policy for Reporting Units When
Billing for Ambulance Fractional Mileage
As discussed in section VI.B. of this proposed rule, we are
proposing to implement fractional mileage billing for all providers and
suppliers of ambulance services. For all claims for mileage totaling up
to 100 covered miles, we are proposing to require all providers and
suppliers of ambulance services to bill mileage rounded up to the
nearest tenth of a mile rather than the nearest whole mile and are
proposing to pay based on that amount. By requiring that providers and
suppliers round up to the nearest tenth of a mile rather than the
nearest whole mile, providers and suppliers would be submitting claims
for anywhere between 0.1 and 0.9 of a mile less per claim and Medicare
would pay based on that amount. We anticipate that requiring greater
accuracy in billing for ambulance mileage will generate modest cost
savings for the Medicare program. Based on our rough estimates using CY
2008 claims data, Medicare could potentially save at least $45 million
per year in payments for base mileage billed by suppliers, and perhaps
as much as $80 million per year when considering other types of
ambulance mileage payments such as those for rural mileage and those
made to institutional providers.
3. Chiropractic Services Demonstration
As discussed in section VI.D. of this proposed rule, we are
continuing the recoupment of the $50 million in expenditures from this
demonstration in order to satisfy the budget neutrality requirement in
section 651(f)(1)(b) of the MMA. We initiated this recoupment in CY
2010 and this will be the second year. As discussed in the CY 2010 PFS
final rule with comment period, we finalized a policy to recoup $10
million each year through adjustments to the PFS for all chiropractors
in CYs 2010 through 2014. To implement this required budget neutrality
adjustment, we are recouping $10 million in CY 2011 by reducing the
payment amount under the PFS for the chiropractic CPT codes (that is,
CPT codes 98940, 98941, and 98942) by approximately 2 percent.
4. Renal Dialysis Services Furnished by ESRD Facilities
The ESRD related provisions are discussed in sections V.P. and
VI.E. of this proposed rule. To understand the impact of the changes
affecting payments to different categories of ESRD facilities, it is
necessary to compare estimated payments under the current year (CY 2010
payments) to estimated payments under the revisions to the composite
rate payment system (CY 2011 payments) as discussed in section VI.E. of
this proposed rule. To estimate the impact among various classes of
ESRD facilities, it is imperative that the estimates of current
payments and estimates of proposed payments contain similar inputs.
Therefore, we simulated payments only for those ESRD facilities for
which we are able to calculate both current CY 2010 payments and
proposed CY 2011 payments.
Also, as explained in the ESRD PPS proposed rule (74 FR 50019),
section 1881(b)(14)(E)(i) of the Act requires a 4-year transition
(phase-in) from the current composite payment system to the ESRD PPS,
and section 1881(b)(14)(E)(ii) allows ESRD facilities to make a one-
time election to be excluded from the transition. As of January 1,
2011, ESRD facilities that elect to go through the transition would be
paid a blended amount that will consist of 75 percent of the basic
case-mix adjusted composite payment system and the remaining 25 percent
would be based on the ESRD PPS payment. Therefore, these proposed rates
listed in the impact table below reflect only the composite rate
portion of the blended payment amounts for facilities going through the
first year of the 4-year transition under the new ESRD PPS. A full
analysis of the projected impact of the ESRD PPS will be addressed in
the ESRD PPS final rule which will be published in the summer.
ESRD providers were grouped into the categories based on
characteristics provided in the Online Survey and Certification and
Reporting (OSCAR) file and the most recent cost report data from the
Healthcare Cost Report Information System (HCRIS). We also used the
December 2009 update of CY 2009 National Claims History file as a basis
for Medicare dialysis treatments and separately billable drugs and
biologicals. Since the December 2009 update of the CY 2009 National
Claims History File is incomplete, we updated the data. The description
of the updates for the separately billable drugs is described in
section IV.E. of this proposed rule. To update the treatment counts we
used the ratio of the June 2009 to the December 2008 updates of the CY
2008 National Claims History File figure for treatments. This was an
increase of 12.4 percent. Due to data limitations, we are unable to
estimate current and proposed payments for 32 of the 5318 ESRD
facilities that bill for ESRD dialysis treatments.
Table 75 shows the impact of this year's proposed changes to CY
2011 payments to hospital-based and independent ESRD facilities. The
first column of Table 75 identifies the type of ESRD provider, the
second column indicates the number of ESRD facilities for each type,
and the third column indicates the number of dialysis treatments. The
fourth column shows the effect of all proposed changes to the ESRD wage
index for CY 2011 as it affects the composite rate payments to ESRD
facilities. The fourth column compares aggregate ESRD wage-adjusted
composite rate payments in CY 2011 to aggregate ESRD wage-adjusted
composite rate payments in CY 2010. In CY 2010, ESRD facilities receive
100 percent of the CBSA wage-adjusted composite rate. The overall
effect to all ESRD providers in aggregate is zero because the CY 2011
ESRD wage index has been multiplied by a budget neutrality adjustment
factor to comply with the statutory requirement that any wage index
revisions be done in a manner that results in the same aggregate amount
of expenditures as would have been made without any changes in the wage
index. The fifth column shows the effect of proposed changes to the
ESRD wage index in CY 2011 and the effect of section 3401(h) of the
ACA, which amends section 1881(b)(14)(F) of the Act to revise the ESRD
market basket increase factor. Effective January 1, 2011, there is a
full ESRD bundled market basket update to the composite rate component
of the blended payment amount under the payment system. We anticipate
an estimated ESRD market basket increase factor of 2.5 percent for
those facilities

[[Page 40239]]

electing to go through the ESRD PPS transition. The sixth column shows
the overall effect of the proposed changes in composite rate payments
to ESRD providers, including the drug add-on. The overall effect is
measured as the difference between the proposed CY 2011 payment with
all changes as proposed in this rule and current CY 2010 payment. This
payment amount is computed by multiplying the wage-adjusted composite
rate with the drug add-on for each provider times the number of
dialysis treatments from the CY 2009 claims. The CY 2011 proposed
payment is the composite rate for each provider (with the proposed 14.7
percent drug add on) times dialysis treatments from CY 2009 claims. The
CY 2010 current payment is the composite rate for each provider (with
the current 15.0 percent drug add on) times dialysis treatments from CY
2009 claims.
The overall impact to ESRD providers in aggregate is 2.2 percent as
shown in Table 75. Most ESRD facilities will see an increase in
payments as a result of the ACA provision. While section 3401(h) of the
ACA modifies the ESRD bundled market basket, which we anticipate will
be a 2.5 percent increase to the ESRD composite rate portion of the
blended payment amount, this 2.5 percent increase does not apply to the
drug add-on to the composite rate. For this reason, the impact of all
changes in this proposed rule is a 2.2 percent increase for all ESRD
providers. Overall, payments to independent ESRD facilities will
increase by 2.2 percent and payments to hospital-based ESRD facilities
will increase by 2.1 percent.

Table 75--Impact of CY 2012 Changes in Payments to Hospital-Based and Independent ESRD Facilities
[Percent change in composite rate payments to ESRD facilities]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Effect of changes Overall effect of
Number of in wage index and wage index
Number of dialysis Effect of changes of affordable affordable care
facilities treatments (in in wage index \1\ care act act & drug add-on
millions) provision \2\ \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Providers............................................ 5,286 38.8 0.0% 2.5% 2.2%
Independent.......................................... 4,715 35.1 0.0% 2.5% 2.2%
Hospital Based....................................... 571 3.7 -0.1% 2.4% 2.1%
By Facility Size
Less than 5000 treatments............................ 1,973 5.6 0.1% 2.6% 2.3%
5000 to 9999 treatments.............................. 2,042 14.8 0.1% 2.6% 2.3%
Greater than 9999 treatments......................... 1,271 18.3 -0.1% 2.4% 2.1%
Type of Ownership
Profit............................................... 4,332 32.1 0.0% 2.5% 2.3%
Nonprofit............................................ 954 6.7 -0.1% 2.4% 2.1%
By Geographic Location
Rural................................................ 1,167 6.3 0.2% 2.7% 2.4%
Urban................................................ 4,119 32.5 0.0% 2.5% 2.2%
By Region
New England.......................................... 163 1.3 -0.6% 1.9% 1.6%
Middle Atlantic...................................... 591 4.8 -0.4% 2.1% 1.8%
East North Central................................... 869 6.0 0.2% 2.7% 2.4%
West North Central................................... 397 2.1 -0.1% 2.4% 2.2%
South Atlantic....................................... 1,188 8.8 0.0% 2.5% 2.2%
East South Central................................... 415 2.9 0.0% 2.5% 2.3%
West South Central................................... 712 5.6 0.4% 2.9% 2.7%
Mountain............................................. 310 1.8 0.2% 2.7% 2.4%
Pacific.............................................. 603 5.1 0.0% 2.5% 2.3%
Puerto Rico & Virgin Islands......................... 38 0.4 -2.4% 0.0% -0.2%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Payments have been adjusted to reflect budget neutrality. 2010 includes the MIPPA 1 percent increase and site neutral rates. 2010 & 2011 are 100
percent new CBSA wage adjusted compsite rate.
\1\ This column shows the overall effect of wage index changes on ESRD providers. Composite rate payments are computed using the proposed CY 2011 wage
indexes which are compared to composite rate payments using the current CY 2010 wage indexes.
\2\ This column shows the effect of the changes in the Wage Indexes and the ACA provision which includes an ESRD Bundled Market Basket (anticipated 2.5
percent) increase to the composite rate. This provision is effective January 1, 2011.
\3\ This column shows the percent change between CY 2011 and CY 2010 composite rate payments to ESRD facilities.
\4\ The CY 2011 payments include the CY 2011 wage adjusted composite rate, an anticipated 2.5 percent increase due to the ACA effective January 1, 2011,
and the drug add-on of 14.7 percent. The CY 2010 payments include the CY 2010 wage adjusted composite rate, a 1 percent increase and site neutral
rates effective January 1, 2009, and the drug add-on of 15.0 percent. This column shows the effect of wage index, ACA, and drug add-on changes.
Although as a result of the ACA provision we anticipate a 2.5 percent increase to the composite rate in CY 2011, this increase does not apply to the
drug add-on to the composite rate. For this reason, the impact of all changes in this proposed rule is a 2.2 percent increase for all ESRD providers.

5. Section 131(b) of the MIPPA: Physician Payment, Efficiency, and
Quality Improvements--Physician Quality Reporting Initiative (PQRI)
As discussed in section VI.F.1 of this proposed rule, we propose
several different reporting options for EPs who wish to participate in
the 2011 PQRI. Although there may be some cost incurred in the PQRI and
their associated code sets, and for expanding an existing clinical data
warehouse to accommodate registry-based reporting and EHR-based
reporting for the PQRI, we do not anticipate a significant cost impact
on the Medicare program.
Participation in the CY 2011 PQRI by individual EPs is voluntary
and individual EPs and group practices may have different processes for
integrating the PQRI into their practice's work flows. Given this
variability and the multiple reporting options that we propose to
provide, it is difficult to accurately estimate the impact of the PQRI
on providers. Furthermore, we believe that costs for EPs who are

[[Page 40240]]

participating in the PQRI for the first time in 2011 will be
considerably higher than the cost for EPs who participated in PQRI in
prior years. In addition, for many EPs, the cost of participating in
the PQRI is offset by the incentive payment received.
With respect to the potential incentive payment that will be made
for the 2011 PQRI, we estimate this amount to be approximately $100
million. This estimate is derived from looking at our 2008 incentive
payment of more than $93 million and then accounting for the fact that
the 2008 incentive payment was 1.5 percent of an EP's total estimated
Medicare Part B PFS allowed charges for all covered professional
services furnished during the 2008 reporting period. For 2011, the
incentive payment is 1.0 percent of an EP's total estimated Medicare
Part B PFS allowed charges for all covered professional services
furnished during the 2011 reporting period. Although we expect that the
lower incentive payment amount for 2011 would reduce the total outlay
by approximately one-third, we also expect more EPs to participate in
the 2011 PQRI as there are more methods of data submission and
additional alternative reporting periods.
One factor that influences the cost to individual EPs is the time
and effort associated with individual EPs identifying applicable PQRI
quality measures and reviewing and selecting a reporting option. This
burden will vary with each individual EP by the number of applicable
measures, the EP's familiarity and understanding of the PQRI,
experience with PQRI participation, and the method(s) selected by the
EP for reporting of the measures, and incorporating the reporting of
the measures into the office work flows. Information obtained from the
Physician Voluntary Reporting Program (PVRP), which was a predecessor
to the PQRI and was the first step for the reporting of physician
quality of care through certain quality metrics, indicated an average
labor cost per practice of approximately $50 per hour. To account for
salary increases over time, we will use an average practice labor cost
of $58 per hour for our estimates, based on an assumption of an average
annual increase of approximately 3 percent. Therefore, assuming that it
takes an individual EP approximately 5 hours to review the PQRI quality
measures, review the various reporting options, select the most
appropriate reporting option, identify the applicable measures for
which they can report the necessary information, and incorporate
reporting of the selected measures into their office work flows, we
estimate that the cost to EPs associated with preparing to report PQRI
quality measures would be approximately $290 per individual EP ($58 per
hour x 5 hours).
Another factor that influences the cost to individual EPs is how
they choose to report the PQRI measures (that is, whether they select
the claims-based, registry-based or EHR-based reporting mechanism). For
claims-based PQRI reporting, estimates from the PVRP indicate the time
needed to perform all the steps necessary to report quality data codes
(QDCs) for 1 measure on a claim ranges from 15 seconds (0.25 minutes)
to 12 minutes for complicated cases or measures. In previous years,
when we required reporting on 80 percent of eligible cases for claims-
based reporting, we found that on average, the median number of
reporting instances for each of the PQRI measures was 9. Since we
propose to reduce the required reporting rate by over one-third to 50
percent, then for purposes of this impact analysis we will assume that
an EP will need to report each selected measure for 6 reporting
instances, or 6 cases. Assuming that an EP, on average, will report 3
measures and that an EP reports on an average of 6 reporting instances
per measure, we estimate that the cost to an individual EP associated
with claims-based reporting of PQRI measures would range from
approximately $4.35 (0.25 min per reporting instance x 6 reporting
instances per measure x 3 measures x $58 per hour) to $208.80 (12 min
per reporting instance x 6 reporting instances per measure x 3 measures
x $58 per hour). If an EP satisfactorily reports, these costs will more
than likely be negated by the incentive earned. For the 2007 PQRI,
which had a 1.5 percent incentive for a 6-month reporting period, the
mean incentive amount was close to $700 for an individual EP and the
median incentive payment amount was over $300.
For registry-based reporting, individual EPs must generally incur a
cost to submit data to registries. Estimated fees for using a qualified
registry range from no charge, or a nominal charge, for an individual
EP to use a registry to several thousand dollars, with a majority of
registries charging fees ranging from $500-$1000. However, our impact
analysis should be limited to the incremental costs associated with
PQRI reporting, which we believe are minimal. Many EPs who select
registry-based reporting were already utilizing the registry for other
purposes and would not need to report additional data to the registry
specifically for PQRI. The registries also often provide the EP
services above and beyond what is required for PQRI.
For EHR-based reporting, an individual EP generally would incur a
cost associated with purchasing an EHR product. Although we do not
believe that the majority of EPs would purchase an EHR solely for the
purpose of participating in PQRI, we estimate that an individual EP who
chooses to do so would have to spend anywhere from $25,000-$54,000 to
purchase and implement a certified EHR and $10,000 annually for ongoing
maintenance.
Although we believe that the majority of EPs attempting to qualify
for the additional 0.5 percent incentive payment authorized by section
1848(m)(7) of the Act would be those who are already required by their
Boards to participate in an MOCP, individual EPs who wish to qualify
for the additional 0.5 percent incentive payment and are not currently
participating in an MOCP would also have to incur a cost for
participating in an MOCP. The manner in which fees are charged for
participating in an MOCP vary by specialty. Some Boards charge a single
fee for participation in the full cycle of MOC. Such fees appear to
range anywhere from over $1,100 to nearly $1,800 per cycle. Some Boards
have annual fees that are paid by their diplomates. On average, ABMS
diplomates pay approximately $200.00 per year for participating in MOC.
Some Boards have an additional fee for the MOC Part III secure
examination, but most Boards do not have additional charges for
participation in the Part IV practice/quality improvement activities.
With respect to the proposed process for group practices to be
treated as satisfactorily submitting quality measures data for the CY
2011 PQRI discussed in section VI.F.1 of this proposed rule, group
practices interested in participating in the CY 2011 PQRI through the
group practice reporting option (GPRO) I or GPRO II may also incur a
cost. However, for groups that satisfactorily report for 2011 PQRI, we
believe these costs would be completely offset by the incentive payment
earned since the group practice would be eligible for an incentive
payment equal to 1 percent of the entire group's total estimated
Medicare Part B PFS allowed charges for covered professional services
furnished during the reporting period.
One factor in the cost to group practices would be the costs
associated with the self-nomination process. Similar to our estimates
for staff involved with the claims-based reporting option for
individual EPs, we also estimate that the group practice

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

[[Page 40242]]

integrating the eRx Incentive Program into their practices' work flows.
Given this variability and the multiple reporting options that we
propose to provide, it is difficult to accurately estimate the impact
of the eRx Incentive Program on providers. Furthermore, we believe that
costs for EPs who are participating in the eRx Incentive Program for
the first time in 2011 will be considerably higher than the cost for
EPs who participated in the eRx Incentive Program in prior years. In
addition, for many EPs (especially those who participated in the eRx
Incentive Program in prior years), the cost of participating in the eRx
Incentive Program will be offset by the incentive payment received.
At this time, no eRx incentive payments have been made yet. We are
currently analyzing 2009 eRx data, which was the first year of the
program, and anticipate making the 2009 incentive payments later this
year. We estimate that the incentive payments for the 2011 eRx
Incentive Program (which will be paid in 2012) will be approximately
$81 million. This estimate is based on preliminary participation
numbers from the early part of 2010 and incentive payments that have
been made for PQRI. We anticipate that despite a decrease in the
incentive payment amount from 2 percent in 2010 to 1 percent of total
estimated Medicare Part B allowed charges for covered professional
services in 2011, more EPs (and groups) will choose to participate in
the 2011 eRx Incentive Program to avoid a prospective 1 percent payment
penalty in 2012 for not demonstrating that they are successful
electronic prescribers. Even though the incentive payment amount for
the 2011 eRx Incentive Program is equal to the incentive payment amount
for the 2011 PQRI, we believe that the total incentive amount that will
be paid for the 2011 eRx Incentive Program will be less than the total
incentive payment amount that will be paid for the PQRI discussed
above. The eRx Incentive Program does not apply to all EPs. For
example, EPs who do not have prescribing privileges or EPs who do not
practice in a particular care setting would not be able to participate
in the eRx Incentive Program even though they can participate in PQRI.
Any EP who wishes to participate in the eRx Incentive Program must
have a qualified electronic prescribing system in order to participate.
Therefore, a one-time potential cost to some individual EPs would be
the cost of purchasing and using an eRx system, which varies by the
commercial software package selected, the level at which the
professional currently employs information technology in his or her
practice and the training needed. One study indicated that a midrange
complete electronic medical record with electronic prescribing
functionality costs $2,500 per license with an annual fee of $90 per
license for quarterly updates of the drug database after setup costs
while standalone prescribing, messaging, and problem list system may
cost $1,200 per physician per year after setup costs. Hardware costs
and setup fees substantially add to the final cost of any software
package. (Corley, S.T. (2003). ``Electronic prescribing: a review of
costs and benefits.'' Topics in Health Information Management 24(1):29-
38.). These are the estimates that we propose to use for our impact
analysis.
Similar to PQRI, one factor in the cost to individual EPs is the
time and effort associated with individual EPs reviewing the electronic
prescribing measure to determine whether it is applicable to them,
reviewing the available reporting options and selecting one, gathering
the required information, and incorporating reporting of the measure
into their office work flows. Since the eRx Incentive Program consists
of only 1 quality measure, we propose to estimate 2 hours as the amount
of time needed for individual EPs to prepare for participation in the
eRx Incentive Program. Information obtained from the Physician
Voluntary Reporting Program (PVRP), which was a predecessor to the PQRI
and was the first step for the reporting of physician quality of care
through certain quality metrics, indicated an average labor cost per
practice of approximately $50 per hour. To account for salary increases
over time, we will use an average practice labor cost of $58 per hour
for our estimates, based on an assumption of an average annual increase
of approximately 3 percent. At an average cost of approximately $58 per
hour, we estimate the total preparation costs to individual EPs to be
approximately $116 ($58 per hour x 2 hours).
Another factor that influences the cost to individual EPs is how
they choose to report the electronic prescribing measure (that is,
whether they select the claims-based, registry-based or EHR-based
reporting mechanism). For claims-based reporting, there would be a cost
associated with reporting the appropriate QDC on the claims an
individual EP submits for payment. Based on the information from the
PVRP described above for the amount of time it takes a median practice
to report one measure one time (1.75 min) and the proposed requirement
to report 25 electronic prescribing events during 2011, we estimate the
annual estimated cost per individual EP to report the electronic
prescribing measure via claims-submission to be $42.29 (1.75 min per
case x 1 measure x 25 cases per measure x $58 per hour). Assuming that
the mean and median incentive payment amounts per individual EP would
be comparable to those for the PQRI since the incentive payments are
calculated in the same manner, we believe that for most successful
electronic prescribers who earn an incentive, these costs would be
negated by the incentive payment received.
For EPs who select the registry-based reporting mechanism, we do
not anticipate any additional cost for individual EPs to report data to
a registry, as individual EPs opting for registry-based reporting are
more than likely already reporting data to the registry. Little if any,
additional data would need to be reported to the registry for purposes
of participation in the CY 2011 eRx Incentive Program. Individual EPs
using registries for PQRI will likely experience minimal, if any,
increased costs charged by the registry to report this 1 additional
measure.
For EHR-based reporting, the EP must extract the necessary clinical
data from his or her EHR, and submit the necessary data to the CMS-
designated clinical data warehouse. Once the EHR is programmed by the
vendor to allow data submission to CMS, the cost to the individual EP
associated with the time and effort to submit data on the electronic
prescribing measure should be minimal.
With respect to the proposed process for group practices to be
treated as successful electronic prescribers under the CY 2011 eRx
Incentive Program discussed in section VI.F.2 of this proposed rule,
group practices have the same option as individual eligible
professionals in terms of the form and manner for reporting the eRx
measure (that is, group practices have the option of reporting the
measure through claims, a qualified registry, or a qualified EHR
product). There are only 2 differences between the requirements for an
individual EP and a group practice: (1) The fact that a group practice
would have to self-nominate; and (2) the number of times a group
practice would be required to report the eRx measure. Overall, there
could be less cost associated with a practice participating in the eRx
Incentive Program as a group rather than the individual members of the
group separately participating. We do not anticipate any additional
costs associated with the group practice self-nomination process since
we propose to

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limit the group practices to those selected to participate in the 2011
PQRI GPRO I or PQRI GPRO II. The practices only would need to indicate
their desire to participate in the eRx GPRO at the time they self-
nominate for either PQRI GPRO I or PQRI GPRO II.
The costs for a group practice reporting to an EHR or registry
should be similar to the costs associated with registry and EHR
reporting for an individual EP, as the process is the same with the
exception that more electronic prescribing events must be reported by
the group. For similar reasons, the costs for a group practice
reporting via claims should also be similar to the costs associated
with claims-based reporting for an individual EP. Therefore, we
estimate that the costs for group practices who are selected to
participate in the CY 2011 eRx Incentive Program as a group would range
from $126.88 (1.75 min per case x 1 measure x 75 cases per measure x
$58 per hour) for the smallest groups participating under GPRO II to
$4,229.17 (1.75 min per case x 2500 cases per measure x $58 per hour)
for the groups participating under GPRO I.
We believe that the costs to individual EPs and group practices
associated with avoiding the eRx penalty that goes into effect in 2012
would be similar to the costs of an EP or group practice reporting the
electronic prescribing measure for purposes of the 2011 eRx incentive.
The proposed requirements for avoiding the 2012 eRx penalty, including
the reporting period, essentially overlaps with the proposed
requirements for the 2011 eRx incentive.
Based on our proposal to consider only registries qualified to
submit quality measures results and numerator and denominator data on
quality measures to CMS on their participant's behalf for the 2011 PQRI
to be qualified to submit results and numerator and denominator data on
the eRx measure for the CY 2011 eRx Incentive Program, we do not
anticipate any cost to the registry associated with becoming a registry
qualified to submit the eRx measure for CY 2011.
The cost for the registry would be the time and effort associated
with the registry calculating results for the eRx measure from the data
submitted to the registry by its participants and submitting the
quality measures results and numerator and denominator data on the eRx
quality measure to CMS on behalf of their participants. We believe such
costs would be minimal as registries would already be required to
perform these activities for PQRI.
Likewise, based on our proposal to consider only EHR products
qualified for the CY 2011 PQRI to be qualified to submit results and
numerator and denominator data on the electronic prescribing measure
for the CY 2011 eRx Incentive Program, there would be no need for EHR
vendors to undergo a separate self-nomination process for the eRx
Incentive Program. Therefore, there would be no additional cost
associated with the self-nomination process.
The cost to the EHR vendor associated with the EHR-based reporting
requirements of this reporting initiative is the time and effort
associated with the EHR vendor programming its EHR product(s) to
extract the clinical data that the individual EP needs to submit to CMS
for purposes of reporting the CY 2011 eRx measure. Since we propose
that only EHR products qualified for the 2011 PQRI would be qualified
for the CY 2011 eRx Incentive Program, and the eRx Incentive Program
consists of only one measure, we believe that any burden associated
with the EHR vendor to program its product(s) to enable individual EPs
to submit data on the eRx measure to the CMS-designated clinical data
warehouse would be minimal.
7. Durable Medical Equipment-Related Issues
a. Off-the-Shelf (OTS) Orthotics Exemption
In section VI.G. of this proposed rule, we are proposing to expand
the exemptions from the Competitive Bidding Program (CBP) for certain
OTS orthotics to physicians or other practitioners (as defined by the
Secretary) if furnished to their own patients as part of their
professional service.
The proposed exemption is a self-implementing mandate required by
section 154(d) of MIPPA, which added section 1847(a)(7) of the Act.
Section 1847(a)(7)(A) of the Act expanded the exemptions from the CBP
for certain OTS orthotics to physicians or other practitioners (as
defined by the Secretary) if furnished to their own patients as part of
their professional service. Section 1847(a)(7)(B) of the Act, as added
by section 154(d) of MIPPA, also expanded the exemption from CBP for
certain OTS DME items (crutches, canes, walkers, folding manual
wheelchairs, blood glucose monitors, and infusion pumps) when furnished
by hospitals to the hospital's own patients during an admission or on
the date of discharge.
We believe this exemption would have a negligible impact on
physicians and other providers. The exemption will allow physicians to
continue to provide these items to their own patients without
submitting a bid and becoming a contract supplier. This will also allow
continued access to OTS items for beneficiaries while being seen in
their physician's office.
b. Changes to Payment for Oxygen Equipment
The revisions pertaining to oxygen and oxygen equipment in section
VI.G. of this proposed rule reflect changes made by section 144(b) of
MIPPA and regulations implementing that provision. In Sec. 414.226(g),
exceptions are listed to the requirement that the supplier that
furnishes oxygen equipment in the 1st month of the 36-month period must
continue to furnish it until medical necessity ends or the 36-month of
continuous use ends. Section VI.G. changes one exception (Sec.
414.226(g)(1)(ii)) to read that if a beneficiary relocates to an area
that is outside the normal service area of the supplier before the 18th
month, then the supplier does not have to continue to furnish the item
or make arrangements.
We expect that revising Sec. 414.226(g)(1)(ii) so that only
suppliers that have received at least 18 months of rental payments must
continue to furnish the oxygen equipment until medical necessity ends
or the end of the reasonable useful lifetime should have a minor impact
on the supplier, but should provide protection to beneficiaries. The
reason that we expect the revised exception will have little impact has
foremost to do with the fact that it applies in cases that are the
exception to the normal circumstances. Only 38 percent of the
beneficiaries are still renting by the 18th month of the rental period;
only suppliers furnishing oxygen equipment to this subgroup of
beneficiaries will be affected by this proposed change. Further,
relocation between the 18th to the 36th month is not a common
occurrence. Such relocation happens with less than 0.5 percent of the
beneficiaries using oxygen equipment. In addition, between the 32nd and
35th month, relocation happens with the beneficiaries in about 0.06
percent of the time on average.
c. Diabetic Testing Supplies
We are establishing requirements for conducting a national
competition for furnishing diabetic supplies on a mail order basis.
Specifically this proposed rule will establish 3 requirements: A new
definition for what constitutes mail order; a rule that requires
contract suppliers to provide at a minimum 50 percent of all of the
different types of diabetic testing products on the market by brand and
model name; and a

[[Page 40244]]

prohibition against influencing and incentivizing beneficiaries to
switch their brand of monitor and testing suppliers.
Currently based on claims data from fiscal year 2009 over 62
percent of beneficiaries receive their replacement diabetic testing
supplies from mail order suppliers. This definition will not impact
these beneficiaries because they can continue to obtain their items
through mail order. The remaining 38 percent of beneficiaries may
continue to obtain these items from a local storefront. We do not
expect this rule to have any adverse affects on beneficiaries because
the new definition of mail order is reflective of the way that
beneficiaries currently get their testing supplies. However, we believe
that by clarifying this definition we will protect beneficiaries from
paying higher co-payment amounts and we anticipate program savings that
would have been eroded by suppliers circumventing our definition to
continue to provide items, even if not awarded a contract under
competitive bidding and to obtain the higher fee schedule payment
amount. This definition is also consistent with the way that suppliers
currently do business by either providing items through mail order or
at a local storefront. For these reasons we believe this new definition
will have minimal impact.
Also, we considered the option to not bifurcate bidding based on
delivery method and to bid for diabetic testing suppliers regardless of
how the items were obtained. We rejected this approach because it would
force companies with different business models to compete against each
other, by requiring local pharmacies to compete with national mail
order suppliers in order to win a contract to be able to furnish
testing supplies.
In order to implement a national mail order competition for
diabetic supplies, we are also proposing to implement the special ``50
percent rule'' mandated by MIPPA. This rule requires a bidder to
demonstrate that its bid ``covers types of diabetic testing strip
products that, in the aggregate and taking into account volume for the
different products, cover 50 percent (or such higher percentage as the
Secretary may specify) of all such types of products.'' The 50 percent
threshold would ensure that beneficiaries have access to mail order
delivery of the top-selling diabetic test strip products from every
contract supplier. We plan to use the information that bidding
suppliers provide on their bidding Form B where suppliers list the
products they plan to furnish. We believe this requirement will have a
minimal impact on suppliers because most suppliers currently provide a
wide range of the brands and models in order to gain market share. The
statute states that suppliers are required to carry at least 50 percent
of all brands on the market. However, the Secretary can establish
suppliers to carry a higher percentage of brands. We have adopted 50
percent criteria because we believe this is reflective of what
suppliers are currently doing and ensures appropriate access for
beneficiaries.
In addition to the 50 percent rule, we are also proposing to
establish an anti-switching requirement. This provision would prevent
contract suppliers from switching beneficiaries from their current
brand to a brand provided by the supplier. We believe this requirement
will protect the beneficiary and physician choice of glucose monitoring
systems. The decision concerning the type of monitor and testing
supplies that a beneficiary chooses should not be made by the supplier
but rather by the beneficiary and their physician. We believe that this
provision will have a minimal impact on suppliers because suppliers
currently offer a variety of products and generally do require
beneficiaries to switch from the brands they are familiar with and
customarily use.
d. Metropolitan Statistical Areas
We believe that the provisions pertaining to subdividing
metropolitan statistical areas (MSAs) with populations of at least
8,000,000 for the purpose of establishing competitive bidding areas
(CBAs) under Round 2 of the DMEPOS Competitive Bidding Program will
have a positive impact on most suppliers, particularly small suppliers.
The authority provided by section 1847(a)(1)(D)(ii)(II) of the Act
would be used to create CBAs that are smaller than the highly and
densely populated MSAs of: Chicago-Naperville-Joliet, IL-IN-WI; Los
Angeles-Long Beach-Santa Ana, CA; and New York-Northern New Jersey-Long
Island, NY-NJ-PA. This should result in more manageable service areas
for suppliers to navigate when furnishing items. More importantly, it
should ensure more timely delivery of items and services to
beneficiaries located throughout each of the MSAs. It should also
benefit small suppliers because they would have smaller geographic
areas to cover as contract suppliers than the large MSAs, which in some
cases, might prevent them from being considered for participation under
the program. The larger suppliers would still have the opportunity to
bid in all of the CBAs within each MSA. We expect that subdividing the
large MSAs of Chicago, Los Angeles, and New York would not have a
negative impact on program savings, as long as each CBA is large enough
to be attractive to suppliers for bidding purposes.
Table 76 considers FY cash impact on the entire Medicare program,
including Medicare Advantage for FYs 2011 thru 2015 of the provisions
of this proposed rule related to the establishment of CBAs during Round
2 and prior to calendar year 2015. The FY-CY distinction is an
important one when comparing savings. For example, the savings for the
Medicare DMEPOS Competitive Bidding Program will be for 9 months of FY
2013, but for 12 months of CY 2013. Table 76 considers the impact on
program expenditures, and does not include beneficiary coinsurance.
Finally, the estimates in Table 76 incorporate spillover effects from
the competitive acquisition program onto the Medicare Advantage
program. The expectation is that the 21 additional MSAs added to the
Medicare DMEPOS Competitive Bidding Program would lower prices for DME
products in FFS would lead to lower prices in the Medicare Advantage
market. The table below considers FY cash impact of the above
provisions on the entire Medicare program, including Medicare Advantage
for the FY.

Table 76--Fiscal Year Costs to the Medicare Program
------------------------------------------------------------------------
Cost (in
FY $millions)
------------------------------------------------------------------------
2011.................................................. 0
2012.................................................. 0
2013.................................................. -40
2014.................................................. -70
2015.................................................. -110
------------------------------------------------------------------------

Subdividing the large MSAs of Chicago, Los Angeles, and New York is
considered to have little to no fiscal impact. The exceptions to the
Medicare DMEPOS Competitive Bidding program involving rural areas, MSAs
with populations less than 250,000, and low population density areas in
selected MSAs before 2015 are considered to have little to no impact
because the baseline never considered these areas as subject to
competitive bidding prices.
8. Air Ambulance
In section VI.G. of this proposed rule, we present our proposals
regarding air ambulance and provider and supplier enrollment. We note
that this proposal is an administrative initiative that may result in
Medicare program savings but at this time those savings are
inestimable. We believe the probable

[[Page 40245]]

costs providers or suppliers will incur as a result of this rule to be
negligible.

F. Alternatives Considered

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

G. Impact on Beneficiaries

There are a number of changes in this proposed rule that would have
an effect on beneficiaries. In general, we believe that many of the
proposed changes, including the refinements of the PQRI with its focus
on measuring, submitting, and analyzing quality data, the expansion of
the list of Medicare-approved telehealth services, the incentive
payments for primary care services furnished by primary care
practitioners in any location and major surgical procedures furnished
by general surgeons in HPSAs, the waiver of beneficiary cost-sharing
for most preventive services, and the annual wellness visit proposals,
will have a positive impact and improve the quality and value of care
provided to Medicare beneficiaries.
The regulatory provisions may affect beneficiary liability in some
cases. For example, the waiver of the deductible and coinsurance for
the annual wellness visit, the IPPE, and preventive services with a
grade of A or B from the USPSTF would reduce beneficiary liability for
these services. Most changes in aggregate beneficiary liability due to
a particular provision would be a function of the coinsurance (20
percent if applicable for the particular provision after the
beneficiary has met the deductible). To illustrate this point, as shown
in Table 74, the CY 2010 national payment amount in the nonfacility
setting for CPT code 99203 (Office/outpatient visit, new) under the
conversion factor that was consistent with the statute as of October
30, 2009 and that would be in effect on December 31, 2010 under current
law, is $76.93 which means that in CY 2010 a beneficiary would be
responsible for 20 percent of this amount, or $15.39. Based on this
proposed rule, the CY 2011 national payment amount in the nonfacility
setting for CPT code 99203, as shown in Table 74, is $72.67, which
means that, in CY 2011, the beneficiary coinsurance for this service
would be $14.53.
Additionally, beneficiary liability would also be impacted by the
effect of the aggregate cost (savings) of the provisions on the
standard calculation of the Medicare Part B premium rate (generally 25
percent of the provision's cost or savings).
Most policies discussed in this rule that impact payment rates,
such as the expansion of the MPPR to therapy services and the increased
discount on the TC of multiple imaging procedures from 25 percent to 50
percent, would similarly impact beneficiaries' coinsurance.

H. Accounting Statement

As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 77, we have
prepared an accounting statement showing the estimated expenditures
associated with this proposed rule. This estimate includes the
estimated FY 2011 cash benefit impact associated with certain ACA and
MIPPA provisions, and the CY 2011 incurred benefit impact associated
with the estimated CY 2011 PFS conversion factor update based on the FY
2011 President's Budget baseline.

Table 77--Accounting Statement: Classification of Estimated Expenditures
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
CY 2011 Annualized Monetized Estimated decrease in expenditures
Transfers. of $5.7 billion for PFS conversion
factor update.
From Whom To Whom?................ Federal Government to physicians,
other practitioners and providers
and suppliers who receive payment
under Medicare.
FY 2011 Annualized Monetized Estimated increase in expenditures
Transfers. of $2 billion for Affordable Care
Act provisions.
From Whom To Whom?................ Federal Government to providers.
------------------------------------------------------------------------

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

List of Subjects

42 CFR Part 405

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

42 CFR Part 409

Health facilities, Medicare.

42 CFR Part 410

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

42 CFR Part 411

Kidney diseases, Medicare, Physician Referral, Reporting and record
keeping requirements.

42 CFR Part 413

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

42 CFR Part 414

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

42 CFR Part 415

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

42 CFR Part 424

Emergency medical services, Health facilities, Health professions,
Medicare, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth
below:

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

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

[[Page 40246]]

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

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

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

Sec. 405.2449 Preventive services.

For services furnished on or after January 1, 2011, preventive
services covered under the Medicare Federally qualified health center
benefit are those preventive services defined in section 1861(ddd)(3)
of the Act, and Sec. 410.2 of this chapter. Specifically, these
include the following:
(a) The specific services currently listed in section 1861(ww)(2)
of the Act, with the explicit exclusion of electrocardiograms;
(b) The Initial Preventive Physical Examination (IPPE) (as
specified by section 1861(ww)(1) of the Act as added by section 611 of
the Medicare Prescription Drug, Improvement and Modernization Act of
2003 (Pub. L. 108-173) and Sec. 410.16 of this chapter); and
(c) The Personalized Prevention Plan Services (PPPS), also known as
the ``Annual Wellness Visit'' (as specified by section 1861(hhh) of the
Act as added by section 4103 of the Affordable Care Act (Pub. L. 111-
148) and part 410, subpart B, Sec. 410.15 of this chapter).
3. Section 405.2470 is amended by adding a new paragraph (d) to
read as follows:

Sec. 405.2470 Reports and maintenance of records.

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

PART 409--HOSPITAL INSURANCE BENEFITS

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

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

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

Sec. 409.17 [Amended]

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

Subpart C--Posthospital SNF Care

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

Sec. 409.20 Coverage of services.

(a) * * *
(3) Physical therapy, occupational therapy, and speech-language
pathology services.
* * * * *
7. Section 409.23 is revised to read as follows:

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

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

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

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

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

Subpart A--General Provisions

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

Sec. 410.2 Definitions.

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

Sec. 410.3 [Amended]

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

Subpart B--Medical and Other Health Services

11. Section 410.15 is added to read as follows:

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

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

[[Page 40247]]

(iii) Measurement of an individual's height, weight, body-mass
index (or waist circumference, if appropriate), blood pressure, and
other routine measurements as deemed appropriate, based on the
beneficiary's medical and family history.
(iv) Detection of any cognitive impairment that the individual may
have, as that term is defined in this section.
(v) Review of the individual's potential (risk factors) for
depression, including current or past experiences with depression or
other mood disorders, based on the use of an appropriate screening
instrument for persons without a current diagnosis of depression, which
the health professional may select from various available standardized
screening tests designed for this purpose and recognized by national
medical professional organizations.
(vi) Review of the individual's functional ability and level of
safety, based on direct observation or the use of appropriate screening
questions or a screening questionnaire, which the health professional
as defined in this section may select from various available screening
questions or standardized questionnaires designed for this purpose and
recognized by national professional medical organizations.
(vii) Establishment of the following:
(A) A written screening schedule for the individual such as a
checklist for the next 5 to 10 years, as appropriate, based on
recommendations of the United States Preventive Services Task Force and
the Advisory Committee on Immunization Practices, and the individual's
health status, screening history, and age-appropriate preventive
services covered by Medicare.
(B) A list of risk factors and conditions for which primary,
secondary or tertiary interventions are recommended or are underway for
the individual, including any mental health conditions or any such risk
factors or conditions that have been identified through an initial
preventive physical examination (as described under Sec. 410.16 of
this subpart), and a list of treatment options and their associated
risks and benefits.
(viii) Furnishing of personalized health advice and a referral, as
appropriate, to health education or preventive counseling services or
programs aimed at reducing identified risk factors and improving self-
management, or community-based lifestyle interventions to reduce health
risks and promote self-management and wellness, including weight loss,
physical activity, smoking cessation, fall prevention and nutrition.
(ix) Any other element determined appropriate through the National
Coverage Determination process.
Health professional for purposes of this section means:
(i) A physician who is a doctor of medicine or osteopathy (as
defined in section 1861(r)(1) of the Social Security Act); or
(ii) A physician assistant, nurse practitioner, or clinical nurse
specialist (as defined in section 1861(aa)(5) of the Act; or
(iii) A medical professional (including a health educator,
registered dietitian or nutritionist) or a team of medical
professionals, who are working under the supervision of a physician as
defined in paragraph (i) of this definition.
Review of the individual's functional ability and level of safety
for purposes of this section includes, at minimum, assessment of the
following topics:
(i) Hearing impairment,
(ii) Ability to successfully perform activities of daily living,
(iii) Fall risk and
(iv) Home safety.
Subsequent annual wellness visit providing personalized prevention
plan services means the following services furnished an eligible
beneficiary by a health professional as those terms are defined in this
section:
(i) An update of the individual's medical and family history.
(ii) An update of the list of current providers and suppliers that
are regularly involved in providing medical care to the individual as
that list was developed for the first annual wellness visit providing
personalized prevention plan services.
(iii) Measurement of an individual's weight (or waist
circumference), blood pressure and other routine measurements as deemed
appropriate, based on the individual's medical and family history.
(iv) Detection of any cognitive impairment that the individual may
have, as that term is defined in this section.
(v) An update to the following:
(A) The written screening schedule for the individual as that
schedule is defined in paragraph (a) of this section for the first
annual wellness visit providing personalized prevention plan services.
(B) The list of risk factors and conditions for which primary,
secondary or tertiary interventions are recommended or are underway for
the individual as that list was developed at the first annual wellness
visit providing personalized prevention plan services.
(vi) Furnishing of personalized health advice to the individual and
a referral, as appropriate, to health education or preventive
counseling services or programs as that advice and related services are
defined in paragraph (a) of this section.
(vii) Any other element determined appropriate through the National
Coverage Determination process.
(b) Conditions for coverage of annual wellness visits providing
personalized prevention plan services. Medicare Part B pays for first
and subsequent annual wellness visits providing personalized prevention
plan services that are furnished to an eligible beneficiary, as
described in this section, if they are furnished by a heath
professional, as defined in this section.
(c) Limitations on coverage of an annual wellness visit providing
personalized prevention plan services.
(1) Payment may not be made for either a first or a subsequent
annual wellness visit providing personalized prevention plan services
that is performed for an individual who is not an eligible beneficiary
as described in this section.
(2) Payment may not be made for either a first or a subsequent
annual wellness visit providing personalized prevention plan services
that is performed for an individual who is an eligible beneficiary as
described in this section and who has had either an initial preventive
physical examination as specified in section 410.16 of this subpart or
either a first or a subsequent annual wellness visit providing
personalized prevention plan services performed within the past 12
months.
(d) Effective date. Coverage for an annual wellness visit providing
personalized prevention plan services is effective for services
furnished on or after January 1, 2011.
12. Section 410.32 is amended by adding paragraph (b)(2)(vii) to
read as follows:

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

* * * * *
(b) * * *
(2) * * *
(vii) Diagnostic tests performed by a certified nurse-midwife
authorized to perform the tests under applicable State laws.
* * * * *
13. Section 410.78 is amended by revising the introductory text of
paragraph (b) to read as follows:

Sec. 410.78 Telehealth services.

* * * * *

[[Page 40248]]

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

Subpart I--Payment for SMI Benefits

14. Section 410.150 is amended by adding paragraph (a)(20) to read
as follows:

Sec. 410.150 To whom payment is made.

(a) * * *
(20) To a certified nurse-midwife for professional services
furnished by the certified nurse-midwife in all settings and for
services and supplies furnished incident to those services. Payment is
made only if no facility or other provider charges or is paid any
amount for the furnishing of the professional services of the certified
nurse-midwife.
15. Section 410.152 is amended by revising paragraph (l) to read as
follows:

Sec. 410.152 Amounts of payment.

* * * * *
(l) Amount of payment: Preventive services. Medicare Part B pays
100 percent of the Medicare payment amount established under the
applicable payment methodology for the service setting for providers
and suppliers for the following preventive services:
(1) Pneumococcal (as specified in paragraph (h) of this section),
influenza, and hepatitis B vaccine and administration.
(2) Screening mammography.
(3) Screening pap tests and screening pelvic exam.
(4) Prostate cancer screening tests (excluding digital rectal
examinations).
(5) Colorectal cancer screening tests (excluding barium enemas).
(6) Bone mass measurement.
(7) Medical nutrition therapy (MNT) services.
(8) Cardiovascular screening blood tests.
(9) Diabetes screening tests.
(10) Ultrasound screening for abdominal aortic aneurysm (AAA).
(11) Additional preventive services identified for coverage through
the national coverage determination (NCD) process.
(12) Initial Preventive Physical Examination (IPPE).
(13) Personalized Prevention Plan Services (PPPS).
16. Section 410.160 is amended by--
A. Revising paragraph (b)(2).
B. Adding paragraphs (b)(10), (11), (12), and (13).
The revisions and additions read as follows:

Sec. 410.160 Part B annual deductible.

* * * * *
(b) * * *
(2) Pneumococcal, influenza, and hepatitis b vaccines and their
administration.
* * * * *
(10) Bone mass measurement.
(11) Medical nutrition therapy (MNT) services.
(12) Personalized prevention plan services (PPPS).
(13) Additional preventive services identified for coverage through
the national coverage determination (NCD) process.
* * * * *

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

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

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

Subpart A--General Exclusions and Exclusion of Particular Services

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

Sec. 411.15 Particular services excluded from coverage.

The following services are excluded from coverage.
(a) * * *
(1) Examinations performed for a purpose other than treatment or
diagnosis of a specific illness, symptoms, complaint, or injury, except
for screening mammography, colorectal cancer screening tests, screening
pelvic exams, prostate cancer screening tests, glaucoma screening
exams, ultrasound screening for abdominal aortic screening for
abdominal aortic aneurysms (AAA), cardiovascular disease screening
tests, diabetes screening tests, a screening electrocardiogram, initial
preventive physical examinations that meet the criteria specified in
paragraphs (k)(6) through (k)(15) of this section, additional
preventive services that meet the criteria in Sec. 410.64 of this
chapter, or annual wellness visits providing personalized prevention
plan services
* * * * *
(k) * * *
(16) In the case of an annual wellness visit providing a
personalized prevention plan, subject to the conditions and limitations
specified in Sec. 410.15 of this chapter.
* * * * *

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

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

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

* * * * *
(b) * * *
(7) Disclosure requirement for certain imaging services.
(i) With respect to magnetic resonance imaging, computed
tomography, and positron emission tomography, the referring physician
shall provide written notice to the patient at the time of the referral
that the patient may receive the same services from a person other than
one described in paragraph (b)(1) of this section. Except as set forth
in paragraph (b)(7)(ii) of this section, the written notice shall
include a list of at least 10 other suppliers (as defined in Sec.
400.202 of this chapter) that provide the services for which the
individual is being referred and which are located within a 25-mile
radius of the referring physician's office location at the time of the
referral. The notice should be written in a manner sufficient to be
reasonably understood by all patients and should include for each
supplier on the list, at a minimum, the supplier's name, address,
telephone number, and distance from the referring physician's

[[Page 40249]]

office location. A record of the disclosure notification, signed by the
patient, shall be maintained as a part of the patient's medical record.
(ii) If there are fewer than 10 other suppliers located within a
25-mile radius of the physician's office location at the time of the
referral, the physician shall list all of the other suppliers of the
imaging service that are present within a 25-mile radius of the
referring physician's office location, including up to 10 suppliers.
Provision of the written list of alternate suppliers will not be
required if no other suppliers provide the services for which the
individual is being referred within the 25-mile radius.
* * * * *

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

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

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

Subpart E--Payments to Providers

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

Sec. 413.70 Payment for services of a CAH.

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

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

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

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

Subpart A--General Provisions

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

Sec. 414.2 Definitions.

* * * * *
Health Professional Shortage Area (HPSA) means an area designated
under section 332(a)(1)(A) of the Public Health Service Act as
identified by the Secretary prior to the beginning of such year.
Major surgical procedure means a surgical procedure for which a 10-
day or 90-day global period is used for payment under the PFS and
section 1848(b) of the Act.
* * * * *
24. Section 414.26 is amended by--
A. Redesignating paragraph (c) as paragraph (d).
B. Adding a new paragraph (c).
The addition reads as follows:

Sec. 414.26 Determining the GAF.

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

Subpart B--Physicians and Other Practitioners

25. Section 414.54 is revised to read as follows:

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

(a) For services furnished after December 31, 1991, allowed amounts
under the fee schedule established under section 1833(a)(1)(K) of the
Act for the payment of certified nurse-midwife services may not exceed
65 percent of the physician fee schedule amount for the service.
(b) For certified nurse midwife services furnished on or after
January 1, 2011, allowed amounts may not exceed 100 percent of the
physician fee schedule amount for the services.
26. Section 414.65 is amended by revising the introductory text of
paragraph (a)(1) to read as follows:

Sec. 414.65 Payment for telehealth services.

(a) * * *
(1) The Medicare payment amount for office or other outpatient
visits, subsequent hospital care services (with the limitation of one
telehealth subsequent hospital care service every 3 days), subsequent
nursing facility care services (not including the Federally-mandated
periodic visits under Sec. 483.40(c) and with the limitation of one
telehealth nursing facility care service every 30 days), professional
consultations, psychiatric diagnostic interview examination,
neurobehavioral status exam, individual psychotherapy, pharmacologic
management, end-stage renal disease-related services included in the
monthly capitation payment (except for one ``hands on'' visit per month
to examine the access site), individual and group medical nutrition
therapy services, individual and group kidney disease education
services, individual and group diabetes self-management training (DSMT)
services (except for 1 hour of in-person DSMT services to be furnished
in the year following the initial DSMT service to ensure effective
injection training), and individual and group health and behavior
assessment and intervention furnished via an interactive
telecommunications system is equal to the current fee schedule amount
applicable for the service of the physician or practitioner.
* * * * *
27. Section 414.67 is revised to read as follows:

[[Page 40250]]

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

(a) Health Professional Shortage Area (HPSA) physician bonus
program. A HPSA physician incentive payment will be made subject to the
following:
(1) HPSA bonuses are payable for services furnished by physicians
as defined in section 1861(r) of the Act in areas designated as of
December 31 of the prior year as geographic primary medical care HPSAs
as defined in section 332(a)(1)(A) of the Public Health Service Act.
(2) HPSA bonuses are payable for services furnished by
psychiatrists in areas designated as of December 31 of the prior year
as geographic mental health HPSAs if the services are not already
eligible for the bonus based on being in a geographic primary care
HPSA.
(3) Physicians eligible for the HPSA physician bonus are entitled
to a 10 percent incentive payment above the amount paid for their
professional services under the physician fee schedule.
(4) Physicians furnishing services in areas that are designated as
geographic HPSAs prior to the beginning of the year but not included on
the published list of zip codes for which automated HPSA bonus payments
are made should use the AQ modifier to receive the HPSA physician bonus
payment.
(b) HPSA surgical incentive payment program. A HPSA surgical
incentive payment will be made subject to the following:
(1) A major surgical procedure as defined in Sec. 414.2 of this
part is furnished by a general surgeon on or after January 1, 2011 and
before January 1, 2016 in an area recognized for the HPSA physician
bonus program under paragraph (a)(1) of this section.
(2) Payment will be made on a quarterly basis in an amount equal to
10 percent of the Part B payment amount for major surgical procedures
furnished as described in paragraph (1), in addition to the amount the
physician would otherwise be paid.
(3) Physicians furnishing services in areas that are designated as
geographic HPSAs eligible for the HPSA physician bonus program under
paragraph (a)(1) of this section prior to the beginning of the year but
not included on the published list of zip codes for which automated
HPSA surgical bonus payments are made should report a specified HCPCS
code modifier to receive the HPSA surgical bonus payment.
(4) The payment described in paragraph (b)(2) of this section is
made to the surgeon or, where the surgeon has reassigned his or her
benefits to a critical access hospital (CAH) paid under the optional
method, to the CAH based on an institutional claim.
28. Section 414.80 is added to subpart B to read as follows:

Sec. 414.80 Incentive payment for primary care services.

(a) Definitions. As defined in this section--
Eligible primary care practitioner means one of the following:
(i) A physician (as defined in section 1861(r)(1)) who meets all of
the following criteria:
(A) Enrolled in Medicare with a primary specialty designation of
08-family practice, 11-internal medicine, 37-pediatrics, or 38-
geriatrics.
(B) At least 60 percent of the physician's allowed charges during a
reference period specified by the Secretary are for primary care
services.
(ii) A nurse practitioner, clinical nurse specialist, or physician
assistant (as defined in section 1861(aa)(5)) who meets all of the
following criteria:
(A) Enrolled in Medicare with a primary specialty designation of
50-nurse practitioner, 89-certified clinical nurse, or 97-physician
assistant.
(B) At least 60 percent of the practitioner's allowed charges
during a reference period specified by the Secretary are for primary
care services.
Primary care services means new and established patient office or
other outpatient evaluation and management (E/M) visits; initial,
subsequent, discharge, and other nursing facility E/M services; new and
established patient domiciliary, rest home (e.g., boarding home), or
custodial care E/M services; domiciliary, rest home (e.g., assisted
living facility), or home care plan oversight services; and new and
established patient home E/M visits.
(b) Payment.
(1) For primary care services furnished by an eligible primary care
practitioner on or after January 1, 2011 and before January 1, 2016,
payment is made on a quarterly basis in an amount equal to 10 percent
of the payment amount for the primary care services under Part B, in
addition to the amount the primary care practitioner would otherwise be
paid for the primary care services under Part B.
(2) The payment described in paragraph (b)(1) of this section is
made to the eligible primary care practitioner or, where the physician
has reassigned his or her benefits to a critical access hospital (CAH)
paid under the optional method, to the CAH based on an institutional
claim.
29. A new Sec. 414.90 is added to subpart B to read as follows:

Sec. 414.90 Physician quality reporting initiative (PQRI).

(a) Basis and Scope. This part implements the following provisions
of the Act:
(1) 1848(a)--Payment Based on Fee Schedule.
(2) 1848(k)--Quality Reporting System.
(3) 1848(m)--Incentive Payments for Quality Reporting.
(b) Definitions. As used in this section, unless otherwise
indicated--
Covered professional services means services for which payment is
made under, or is based on, the Medicare physician fee schedule as
provided under section 1848(k)(3) of the Act and which are furnished by
an eligible professional.
Eligible professional (EP) means any of the following:
(i) A physician.
(ii) A practitioner described in section 1842(b)(18)(C) of the Act.
(iii) A physical or occupational therapist or a qualified speech-
language pathologist.
(iv) A qualified audiologist (as defined in section 1861(ll)(3)(B)
of the Act).
Group practice means a single Taxpayer Identification Number (TIN)
with 2 or more eligible professionals, as identified by their
individual National Provider Identifier (NPI), who have reassigned
their Medicare billing rights to the TIN. This term also includes group
practices participating in Medicare demonstration projects approved by
the Secretary.
Maintenance of certification program means a continuous assessment
program, such as qualified American Board of Medical Specialties
Maintenance of Certification Program or an equivalent program (as
determined by the Secretary), that advances quality and the lifelong
learning and self-assessment of board certified specialty physicians by
focusing on the competencies of patient care, medical knowledge,
practice-based learning, interpersonal and communication skills and
professionalism. Such a program must include the following:
(i) The program requires the physician to maintain a valid
unrestricted license in the United States.
(ii) The program requires a physician to participate in educational
and self-assessment programs that require an assessment of what was
learned.
(iii) The program requires a physician to demonstrate, through a
formalized secure examination, that the physician

[[Page 40251]]

has the fundamental diagnostic skills, medical knowledge, and clinical
judgment to provide quality care in their respective specialty.
(iv) The program requires successful completion of a qualified
Maintenance of Certification Program practice assessment.
Maintenance of certification program practice assessment means an
assessment of a physician's practice that--
(i) Includes an initial assessment of an eligible professional's
practice that is designed to demonstrate the physician's use of
evidence-based medicine;
(ii) Includes a survey of patient experience with care; and
(iii) Requires a physician to implement a quality improvement
intervention to address a practice weakness identified in the initial
assessment under paragraph (i) and then to remeasure to assess
performance improvement after such intervention.
Measures group means a subset of four or more 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.
Performance rate means the percentage of a defined population who
receives a particular process of care or achieve a particular outcome
for a particular quality measure.
Physician quality reporting initiative (PQRI) means the physician
reporting system under section 1848(k) of the Act for the reporting by
eligible professionals of data on quality measures and the incentive
payment associated with this physician reporting system.
Qualified electronic health record (EHR) means an EHR vendor's
product and version that, with respect to a particular program year,
has self-nominated and successfully completed a vetting process (as
specified by CMS) to demonstrate the product's compliance with the PQRI
qualification requirements specified by CMS for a program year.
Qualified registry means a medical registry or a Maintenance of
Certification Program operated by a specialty body of the American
Board of Medical Specialties that, with respect to a particular program
year, has self-nominated and successfully completed a vetting process
(as specified by CMS) to demonstrate its compliance with the PQRI
qualification requirements specified by CMS for that program year. The
registry may act as a data submission vendor, which has the requisite
legal authority to provide PQRI data (as specified by CMS) on behalf of
an eligible professional to CMS.
Quality reporting period means with respect to a year, a period
specified by the Secretary.
Reporting rate means the percentage of patients that the eligible
professional indicated a quality action was or was not performed
divided by the total number of patients in the denominator of the
measure.
(c) Incentive payments. With respect to covered professional
services furnished during a reporting period by an eligible
professional, if--
(1) There are any quality measures that have been established under
the PQRI that are applicable to any such services furnished by such
professional (or in the case of a group practice under paragraph (h) of
this section, such group practice) for such reporting period; and
(2) The eligible professional (or in the case of a group practice
under paragraph (h) of this section, the group practice) satisfactorily
submits (as determined under paragraph (g) of this section for eligible
professionals and paragraph (h) of this section for group practices) to
the Secretary data on such quality measures in accordance with the PQRI
for such reporting period, in addition to the amount otherwise paid
under section 1848 of the Act, there also shall be paid to the eligible
professional (or to an employer or facility in the cases described in
section 1842(b)(6)(A) of the Act or, in the case of a group practice)
under paragraph (h) of this section, to the group practice, from the
Federal Supplementary Medical Insurance Trust Fund established under
section 1841 an amount equal to the applicable quality percent (as
specified in paragraph (c)(3) of this section) of the eligible
professional's (or, in the case of a group practice under paragraph (h)
of this section, the group practice's) total estimated allowed charges
for all covered professional services furnished by the eligible
professional (or, in the case of a group practice under paragraph (h)
of this section, by the group practice) during the applicable reporting
period. For purposes of this paragraph,
(i) The eligible professional's (or, in the case of a group
practice under paragraph (h) of this section, the group practice's)
total estimated allowed charges for covered professional services
furnished during a reporting period are determined based on claims
processed in the National Claims History (NCH) no later than 2 months
after the end of the applicable reporting period;
(ii) In the case of an eligible professional who furnishes covered
professional services in more than one practice, incentive payments are
separately determined for each practice based on claims submitted for
the eligible professional for each practice;
(iii) Incentive payments earned by an eligible professional (or in
the case of a group practice under paragraph (h) of this section, by a
group practice) for a particular program year will be paid as a single
consolidated payment to the TIN holder of record.
(3) Applicable quality percent. The applicable quality percent is
as follows:
(i) For 2011, 1.0 percent; and
(ii) For 2012, 2013, and 2014, 0.5 percent;
(d) Additional incentive payment. (1) Through 2014, if an eligible
professional meets the requirements described in paragraph (d)(2) of
this section, the applicable percent for such year, as described in
paragraphs (c)(3)(i) and (ii) of this section, must be increased by 0.5
percentage points.
(2) In order to qualify for the additional incentive payment
described in paragraph (d)(1) of this section, an eligible professional
shall meet the following requirements:
(i) The eligible professional must--
(A) Satisfactorily submit data on quality measures for purposes of
this section for a year; and
(B) Have such data submitted on their behalf through a Maintenance
of Certification program (as defined in paragraph (b) of this section)
that meets:
(1) The criteria for a registry (as specified by CMS)); or
(2) An alternative form and manner determined appropriate by the
Secretary.
(ii) The eligible professional, more frequently than is required to
qualify for or maintain board certification status--
(A) Participates in such a Maintenance of Certification Program for
a year; and
(B) Sucessfully completes a qualified Maintenance of Certification
Program practice assessment (as defined in paragraph (b) of this
section) for such year.
(iii) A Maintenance of Certification program submits to the
Secretary, on behalf of the eligible professional, information --
(A) In a form and manner specified by the Secretary, that the
eligible professional has successfully met the requirements of
paragraph (d)(2)(ii) of this section which may be in the form of a
structural measure);
(B) If requested by the Secretary, on the survey of patient
experience with care (as described in paragraph (b) of this section);
and
(C) As the Secretary may require, on the methods, measures, and
data used

[[Page 40252]]

under the Maintenance of Certification Program and the qualified
Maintenance of Certification Program practice assessment.
(e) Incentive payment adjustment. (1) With respect to covered
professional services furnished by an eligible professional during 2015
or any subsequent year, if the eligible professional does not
satisfactorily submit data on quality measures for covered professional
services for the quality reporting period for the year (as determined
under paragraph (g) for eligible professionals and paragraph (h) of
this section for group practices), the fee schedule amount for such
services furnished by such professional during the year (including the
fee schedule amount for purposes of determining a payment based on such
amount) must be equal to the applicable percent of the fee schedule
amount that would otherwise apply to such services under section
1848(m) of the Act.
(2) Applicable percent. For purposes of paragraph (1) of this
section, the term `applicable percent' means--
(i) For 2015, 98.5 percent; and
(ii) For 2016 and each subsequent year, 98 percent.
(f) Use of consensus-based quality measures. For each program year,
CMS will publish the final list of measures and the final detailed
measure specifications for all quality measures selected for inclusion
in the PQRI quality measure set for a given program year on a CMS Web
site by no later than December 31 of the prior year.
(1) Subject to paragraph (f)(2) of this section, for purposes of
reporting data on quality measures for covered professional services
furnished during a year, subject to paragraph (g) of this section, the
quality measures specified under this paragraph must be such measures
selected by the Secretary from measures that have been endorsed by the
entity with a contract with the Secretary under section 1890(a) of the
Act.
(2) Exception. In the case of a specified area or medical topic
determined appropriate by the Secretary for which a feasible and
practical measure has not been endorsed by the entity with a contract
under section 1890(a) of the Act, the Secretary may specify a measure
that is not so endorsed as long as due consideration is given to
measures that have been endorsed or adopted by a consensus organization
identified by the Secretary, such as the AQA alliance.
(3) Opportunity to provide input on measures. For each quality
measure adopted by the Secretary under this paragraph, the Secretary
shall ensure that eligible professionals have the opportunity to
provide input during the development, endorsement, or selection of
quality measures applicable to services they furnish.
(g) Requirements for individual eligible professionals to qualify
to receive an incentive payment. In order to qualify to earn a PQRI
incentive payment for a particular program year, an individual eligible
professional, as identified by a unique TIN/NPI combination, must meet
the criteria for satisfactory reporting specified by CMS for such year
by reporting on either individual PQRI quality measures or PQRI
measures groups identified by CMS during a reporting period specified
in paragraph (g)(1) of this section and using one of the reporting
mechanisms specified in paragraph (g)(2) of this section. Although an
eligible professional may attempt to qualify for the PQRI incentive
payment by reporting on both individual PQRI quality measures and
measures groups, using more than one reporting mechanism (as specified
in paragraph (g)(2) of this section), or reporting for more than one
reporting period, he or she will receive only one PQRI incentive
payment per TIN/NPI combination for a program year.
(1) Reporting periods. For purposes of this paragraph, the
reporting period with respect to a program year are--
(i) The 12-month period from January 1 through December 31 of each
program year; or
(ii) The 6-month period from July 1 through December 31 of each
program year.
(iii) Exceptions. The 6-month reporting period is not available for
EHR-based reporting of individual PQRI quality measures or for
reporting by group practices under the process described in paragraph
(h) of this section.
(2) Reporting mechanisms. For each program year, an eligible
professional who wishes to participate in the PQRI must report
information on the individual PQRI quality measures or PQRI measures
groups identified by CMS in the following manner:
(i) Reporting the individual PQRI quality measures or PQRI measures
groups to CMS, by no later than 2 months after the end of the
applicable reporting period, on the eligible professional's Medicare
Part B claims for covered professional services furnished during the
applicable reporting period;
(ii) Reporting the individual PQRI quality measures or PQRI
measures groups to a qualified registry (as specified in paragraph (b)
of this section) in the form and manner and by the deadline specified
by the qualified registry selected by the eligible professional. The
selected registry will submit information, as required by CMS, for
covered professional services furnished by the eligible professional
during the applicable reporting period to CMS on the eligible
professional's behalf; or
(iii) Reporting the individual PQRI quality measures to CMS by
extracting clinical data using a secure data submission method, as
required by CMS, from a qualified EHR product (as defined in paragraph
(b) of this section) by the deadline specified by CMS for covered
professional services furnished by the eligible professional during the
applicable reporting period. Prior to actual data submission for a
given program year and by a date specified by CMS, the eligible
professional must submit a test file containing real or dummy clinical
quality data extracted from the qualified EHR product selected by the
eligible professional using a secure data submission method, as
required by CMS.
(h) Requirements for group practices to qualify to receive an
incentive payment. A group practice (as defined in paragraph (b) of
this section) will be treated as satisfactorily submitting data on
quality measures under PQRI for covered professional services for a
reporting period (or for purposes of paragraph (e) of this section, for
a quality reporting period for the year), if, in lieu of reporting PQRI
measures, the group practice--
(1) Meets the participation requirements specified by CMS for the
PQRI group practice reporting option (GPRO);
(2) Is selected by CMS to participate in the PQRI GPRO;
(3) Reports measures specified by CMS in the form and manner, and
at a time specified by CMS; and
(4) Meets the criteria for satisfactory reporting specified by CMS.
(5) No double payments. Payments to a group practice under this
paragraph must be in lieu of the payments that would otherwise be made
under the PQRI to eligible professionals in the group practice for
meeting the criteria for satisfactory reporting for individual eligible
professionals.
(i) If an eligible professional, as identified by an individual
NPI, has reassigned his or her Medicare billing rights to a TIN
selected to participate in the PQRI GPRO for a program year, then for
that program year the eligible professional must participate in the
PQRI via the GPRO. For any program year in which the TIN is selected to

[[Page 40253]]

participate in the PQRI GPRO, the eligible professional cannot
individually qualify for a PQRI incentive payment by meeting the
requirements specified in paragraph (g) of this section.
(ii) If, for the program year, the eligible professional
participates in the PQRI under another TIN that is not selected to
participate in the PQRI GPRO for that program year, then the eligible
professional may individually qualify for a PQRI incentive by meeting
the requirements specified in paragraph (g) of this section under that
TIN.
(i) Limitations on review. (1) Except as specified in paragraph
(h)(2) of this section, there is no administrative or judicial review
under section 1869, section 1879, or otherwise of--
(i) The determination of measures applicable to services furnished
by eligible professionals under PQRI;
(ii) The determination of the payment limitation; and
(iii) The determination of any PQRI incentive payment and the PQRI
payment adjustment.
(j) Informal review. Except as specified in paragraph (i) of this
section eligible professionals (or in the case of reporting under
paragraph (h) of this section, group practices) may seek a review of
the determination that an eligible professional (or in the case of
reporting under paragraph (h) of this section, group practices) did not
satisfactorily submit data on quality measures under the PQRI.
(1) To request an informal review, an eligible professional (or in
the case of reporting under paragraph (h) of this section, group
practices) must submit a written request to CMS within 90 days of the
release of the feedback reports. The request must summarize the
concern(s) and reasons for requesting an informal review and may also
include information to assist in the review.
(2) CMS will provide a written response within 60 days of the
receipt of the original request. All decisions based on the informal
review will be final. There will be no further review or appeal.
(k) Public reporting of an eligible professional's or group
practice's PQRI data. For each program year, CMS will post on a public
Web site, in an easily understandable format, a list of the names of
eligible professionals (or in the case of reporting under paragraph
(h), group practices) who satisfactorily submitted PQRI quality
measures.
30. A new Sec. 414.92 is added to subpart B to read as follows:

Sec. 414.92 Electronic prescribing incentive program.

(a) Basis and scope. This part implements the following provisions
of the Act:
(1) Section 1848(a)--Payment Based on Fee Schedule.
(2) Section 1848(m)--Incentive Payments for Quality Reporting.
(b) Definitions. As used in the part, unless otherwise indicated--
Covered professional services means services for which payment is
made under, or is based on, the Medicare physician fee schedule as
provided under section 1848(k)(3) of the Act and which are furnished by
an eligible professional.
Electronic prescribing (eRx) incentive program means the incentive
payment program established under section 1848(m) of the Act for the
adoption and use of electronic prescribing technology by eligible
professionals.
Eligible professional means any of the following healthcare
professionals who have prescribing authority:
(i) A physician.
(ii) A practitioner described in section 1842(b)(18)(C) of the Act.
(iii) A physical or occupational therapist or a qualified speech-
language pathologist.
(iv) A qualified audiologist (as defined in section 1861(ll)(3)(B)
of the Act).
Group practice means a group practice, as defined at Sec.
414.90(b), that--
(i) Is or is deemed to be participating in the Physician Quality
Reporting Initiative (PQRI) group practice reporting option (GPRO)
under Sec. 414.90; and
(ii) Has indicated its desire to participate in the eRx GPRO.
Qualified electronic health record (EHR) means an EHR product and
version that, with respect to a particular program year, is designated
by CMS as a qualified EHR for the purpose of the PQRI (as described in
Sec. 414.90) and the product's vendor has indicated a desire to have
the product qualified for purposes of the product's users to submit
information related to the eRx measure.
Qualified registry means a medical registry or a Maintenance of
Certification Program operated by a specialty body of the American
Board of Medical Specialties that, with respect to a particular program
year, is designated by CMS as a qualified registry for the purpose of
the PQRI (as described in Sec. 414.90) and that has indicated its
desire to be qualified to submit the eRx measure on behalf of eligible
professionals for the purposes of the eRx Incentive Program.
(c) Incentive payments. (1) Subject to paragraph (c)(3) of this
section, with respect to covered professional services furnished during
a reporting period by an eligible professional, if the eligible
professional is a successful electronic prescriber for such reporting
period, in addition to the amount otherwise paid under section 1848 of
the Act, there also shall be paid to the eligible professional (or to
an employer or facility in the cases described in paragraph (A) of
section 1842(b)(6)) or, in the case of a group practice under paragraph
(e) of this section, to the group practice, from the Federal
Supplementary Medical Insurance Trust Fund established under section
1841 of the Act an amount equal to the applicable eRx percent (as
specified in paragraph (c)(1)(ii) of this section) of the eligible
professional's (or, in the case of a group practice under paragraph (e)
of this section, the group practice's) total estimated allowed charges
for all covered professional services furnished by the eligible
professional (or, in the case of a group practice under paragraph (e)
of this section, by the group practice) during the applicable reporting
period.
(i) For purposes of this paragraph,
(A) The eligible professional's (or, in the case of a group
practice under paragraph (e) of this section, the group practice's)
total estimated allowed charges for covered professional services
furnished during a reporting period are determined based on claims
processed in the National Claims History (NCH) no later than 2 months
after the end of the applicable reporting period;
(B) In the case of an eligible professional who furnishes covered
professional services in more than one practice, incentive payments are
separately determined for each practice based on claims submitted for
the eligible professional for each practice;
(C) Incentive payments earned by an eligible professional (or in
the case of a group practice under paragraph (e) of this section, by a
group practice) for a particular program year will be paid as a single
consolidated payment to the TIN holder of record.
(ii) Applicable eRx percent. The applicable eRx percent is as
follows:
(A) For the 2011 and 2012 program years, 1.0 percent; and
(B) For the 2013 program year, 0.5 percent.
(iii) Limitation with respect to electronic health record (EHR)
incentive payments. The provisions of this paragraph do not apply to an
eligible professional (or, in the case of a group practice under
paragraph (e) of this section, a group practice) if, for the EHR

[[Page 40254]]

reporting period the eligible professional (or group practice) receives
an incentive payment under section 1848(o)(1)(A) of the Act with
respect to a certified EHR technology (as defined in section 1848(o)(4)
of the Act) that has the capability of eRx.
(2) Incentive payment adjustment. Subject to paragraph (c)(1)(ii)
and paragraph (c)(3) of this section, with respect to covered
professional services furnished by an eligible professional during
2012, 2013, or 2014, if the eligible professional (or in the case of a
group practice under paragraph (e) of this section, the group practice)
is not a successful electronic prescriber (as specified by CMS for
purposes of the payment adjustment) for an applicable reporting period
(as specified by CMS) the fee schedule amount for such services
furnished by such professional (or group practice) during the program
year (including the fee schedule amount for purposes of determining a
payment based on such amount) is equal to the applicable percent (as
specified in paragraph (c)(2)(i) of this section) of the fee schedule
amount that would otherwise apply to such services under section 1848
of the Act.
(i) Applicable percent. The applicable percent is as follows:
(A) For 2012, 99 percent;
(B) For 2013, 98.5 percent; and
(C) For 2014, 98 percent.
(ii) Significant hardship exception. An eligible professional (or
in the case of a group practice under paragraph (e) of this section, a
group practice) may be exempt from the application of the payment
adjustment under this paragraph if, subject to annual renewal, CMS
determines that compliance with the requirement for being a successful
electronic prescriber (as specified by CMS for purposes of the payment
adjustment) would result in a significant hardship. For purposes of
this paragraph, any of the following circumstances constitute a
``significant hardship:''
(A) An eligible professional (or group practice) who practices in a
rural area with limited high speed Internet access.
(B) An eligible professional (or group practice) who practices in
an area with limited available pharmacies for electronic prescribing.
(C) Other circumstances identified by CMS.
(3) Limitation with respect to electronic prescribing quality
measures. The provisions of paragraphs (c)(1) and (c)(2) of this
section do not apply to an eligible professional (or, in the case of a
group practice under paragraph (e) of this section, a group practice)
if for the reporting period the allowed charges under section 1848 of
the Act for all covered professional services furnished by the eligible
professional (or group, as applicable) for the codes to which the
electronic prescribing measure (as identified by CMS) applies are less
than 10 percent of the total of the allowed charges under section 1848
of the Act for all such covered professional services furnished by the
eligible professional (or the group practice, as applicable).
(d) Requirements for individual eligible professionals to qualify
to receive an incentive payment. In order to be considered a successful
electronic prescriber and qualify to earn an eRx an incentive payment
(subject to paragraph (c)(3) of this section), an individual eligible
professional, as identified by a unique TIN/NPI combination, must meet
the criteria for successful electronic prescriber specified by CMS
during the reporting period specified in paragraph (d)(1) of this
section and using one of the reporting mechanisms specified in
paragraph (d)(2) of this section. Although an eligible professional may
attempt to qualify for the eRx incentive payment using more than one
reporting mechanism (as specified in paragraph (d)(2) of this section),
he or she will receive only one eRx incentive payment per TIN/NPI
combination for a program year.
(1) Reporting period. For purposes of this paragraph, the reporting
period with respect to a program year is the entire calendar year.
(2) Reporting mechanisms. An eligible professional who wishes to
participate in the eRx Incentive Program must report information on the
eRx measure identified by CMS to--
(i) CMS, by no later than 2 months after the end of the applicable
reporting period, on the eligible professional's Medicare Part B claims
for covered professional services furnished by the eligible
professional during the reporting period specified in paragraph (d)(1)
of this section;
(ii) A qualified registry (as defined in paragraph (b)) in the form
and manner and by the deadline specified by the qualified registry
selected by the eligible professional. The selected registry will
submit information, as required by CMS, for covered professional
services furnished by the eligible professional during the reporting
period specified in paragraph (d)(1) of this section to CMS on the
eligible professional's behalf; or
(iii) CMS by extracting clinical data using a secure data
submission method, as required by CMS, from a qualified EHR product (as
defined in paragraph (b) of this section) by the deadline specified by
CMS for covered professional services furnished by the eligible
professional during the reporting period specified in paragraph (d)(1)
of this section. Prior to actual data submission for a given program
year and by a date specified by CMS, the eligible professional must
submit a test file containing real or dummy clinical quality data
extracted from the qualified EHR product selected by the eligible
professional using a secure data submission method, as required by CMS.
(e) Requirements for group practices to qualify to receive an
incentive payment.
(1) A group practice (as defined in paragraph (b) of this section)
will be treated as a successful electronic prescriber for covered
professional services for a reporting period if the group practice
meets the criteria for successful electronic prescriber specified by
CMS in the form and manner and at the time specified by CMS.
(2) No double payments. Payments to a group practice under this
paragraph must be in lieu of the payments that would otherwise be made
under the eRx Incentive Program to eligible professionals in the group
practice for being a successful electronic prescriber.
(i) If an eligible professional, as identified by an individual
NPI, has reassigned his or her Medicare billing rights to a TIN
selected to participate in the eRx GPRO for a program year, then for
that program year the eligible professional must participate in the eRx
Incentive Program via the GPRO. For any program year in which the TIN
is selected to participate in the eRx Incentive Program GPRO, the
eligible professional cannot individually qualify for an eRx incentive
payment by meeting the requirements specified in paragraph (d) of this
section.
(ii) If, for the program year, the eligible professional
participates in the eRx Incentive Program under another TIN that is not
selected to participate in the eRx Incentive Program GPRO for that
program year, then the eligible professional may individually qualify
for an eRx incentive by meeting the requirements specified in paragraph
(d) of this section under that TIN.
(f) Public reporting of an eligible professional's or group
practice's erx incentive program data. For each program year, CMS will
post on a public Web site, in an easily understandable format, a list
of the names of eligible professionals (or in the case of reporting
under paragraph (e) of this section, group practices) who are
successful electronic prescribers.

[[Page 40255]]

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

31. Section 414.202 is amended by adding a definition of ``complex
rehabilitative power-driven wheelchair'' in alphabetical order to read
as follows:

Sec. 414.202 Definitions.

* * * * *
Complex rehabilitative power-driven wheelchair means a power-driven
wheelchair that is classified as--
(1) Group 2 power wheelchair with power options that can
accommodate rehabilitative features (for example, tilt in space); or
(2) Group 3 power wheelchair.
* * * * *
32. Section 414.226 is amended by revising paragraph (g)(1) to read
as follows:

Sec. 414.226 Oxygen and oxygen equipment.

* * * * *
(g) * * *
(1) The supplier that furnishes oxygen equipment for the first
month during which payment is made under this section must continue to
furnish the equipment until medical necessity ends, or the 36-month
period of continuous use ends, whichever is earlier, unless--
(i) The item becomes subject to a competitive acquisition program
implemented in accordance with section 1847(a) of the Act;
(ii) Before the 18th month of continuous use, the beneficiary
relocates to an area that is outside the normal service area of the
supplier that initially furnished the equipment;
(iii) The beneficiary elects to obtain oxygen equipment from a
different supplier prior to the expiration of the 36-month rental
period; or
(iv) CMS or the carrier determines that an exception should apply
in an individual case based on the circumstances.
* * * * *
33. Section 414.229 is amended by--
A. Revising paragraphs (a)(3), (d)(1), and (h).
B. Adding paragraphs (a)(4), (a)(5), and (b)(3).
The revisions and additions read as follows:

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

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

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

34. Section 414.402 is amended by adding the definitions of
``Affected party,'' ``Breach of contract,'' ``Corrective Action Plan,''
``Hearing Officer,'' ``Mail order item,'' ``National mail order
competitive bidding program,'' ``Nonmail order item'' and ``Parties to
the hearing'' in alphabetical order to read as follows:

Sec. 414.402 Definitions.

Affected party means a contract supplier that has been notified
that their DMEPOS CBP contract will be terminated for a breach of
contract.
* * * * *
Breach of contract means any deviation from contract requirements,
including a failure to comply with a governmental agency or licensing
organization requirements, constitutes a breach of contract.
* * * * *
Corrective action plan (CAP) means a contract supplier's written
document with supporting information that describes the actions the
contract supplier will take within a specified timeframe to remedy a
breach of contract.
* * * * *
Hearing Officer (HO) means an individual, who was not involved with
the CBIC recommendation to terminate a DMEPOS Competitive Bidding
Program contract, who is designated by CMS to review and make an
unbiased and independent determination following the Competitive
Bidding Implementation Contractor's (CBIC's) recommendation to
terminate a DMEPOS Competitive Bidding Program contract.
* * * * *
Mail order item means any item (for example, diabetic testing
supplies) shipped or delivered to the beneficiary's home, regardless of
the method of delivery.
* * * * *
National mail order competitive bidding program means a program and
competition resulting in the award of contracts to suppliers for
furnishing mail order items throughout the nation.
* * * * *
Nonmail order item means any item (for example, diabetic testing
supplies) that a beneficiary or caregiver picks up in person at a local
pharmacy or supplier storefront.
Parties to the hearing means the DMEPOS contract supplier and CMS.
* * * * *
35. Section 414.404 is amended by revising paragraph (b)(1)(i) to
read as follows:

Sec. 414.404 Scope and applicability.

* * * * *
(b) * * *
(1) * * *
(i) The items furnished are limited to crutches, canes, walkers,
folding manual wheelchairs, blood glucose monitors, and infusion pumps
that are DME, and,

[[Page 40256]]

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

Sec. 414.408 Payment rules.

* * * * *
(f) * * *
(1) The single payment amounts for new purchased durable medical
equipment, including power wheelchairs that are purchased when the
equipment is initially furnished, and enteral nutrition equipment are
calculated based on the bids submitted and accepted for these items.
For contracts entered into beginning on or after January 1, 2011,
payment on a lump sum purchase basis is only available for power
wheelchairs classified as complex rehabilitative power wheelchairs.
* * * * *
(h) * * *
(2) For contracts entered into beginning on or after January 1,
2011, the monthly fee schedule amount for rental of power wheelchairs
equals 15 percent of the single payment amounts calculated for new
durable medical equipment under paragraph (f)(1) of this section for
each of the first 3 months, and 6 percent of the single payment amounts
calculated for these items for each of the remaining months 4 through
13.
* * * * *
37. Section 414.410 is amended as follows:
A. Revising paragraphs (a)(2) and (a)(3).
B. Adding a new paragraph (a)(4).
The revisions and addition read as follows:

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

(a) * * *
(2) In CY 2011, in an additional 91 MSAs (the additional 70 MSAs
selected by CMS as of June 1, 2008, and the next 21 largest MSAs by
total population based on 2009 population estimates, and not already
phased in as of June 1, 2008). CMS may subdivide any of the 91 MSAs
with a population of greater than 8,000,000 into separate CBAs, thereby
resulting in more than 91 CBAs.
(3) After CY 2011, additional CBAs (or, in the case of national
mail order for items and services, after CY 2010).
(4) For competitions (other than for national mail order items and
services) after CY 2011 and prior to CY 2015, the following areas are
excluded:
(i) Rural areas.
(ii) MSAs not selected under paragraphs (a)(1) or (a)(2) of this
section with a population of less than 250,000.
(iii) An area with low population density within an MSA not
selected under paragraphs (a)(1) or (a)(2) of this section.
* * * * *
38. Section 414.411 is added to read as follows:

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

(a) National mail order competitions. A supplier must demonstrate
that their bid submitted as part of a national mail order competition
for diabetic testing strips covers the furnishing of a sufficient
number of different types of diabetic testing strip products that, in
the aggregate, and taking into account volume for the different
products, includes at least 50 percent of all the different types of
products on the market. A type of diabetic testing strip means a
specific brand and model of testing strips.
(b) Other competitions. CMS may apply this special rule to non-mail
order or local competitions for diabetic testing strips.
39. Section 414.422 is amended by adding paragraph (e)(3) to read
as follows:

Sec. 414.422 Term of contracts.

* * * * *
(e) * * *
(3) Contract suppliers for diabetic testing supplies must furnish
the brand of diabetic testing supplies that works with the home blood
glucose monitor selected by the beneficiary. The contract supplier is
prohibited from influencing or incentivizing the beneficiary by
persuading, pressuring, or advising them to switch from their current
brand or for new beneficiaries from their preferred brand of glucose
monitor and testing supplies. The contract supplier may not furnish
information about alternative brands to the beneficiary unless the
beneficiary requests such information.
* * * * *
40. Section 414.423 is added to read as follows:

Sec. 414.423 Appeals process for termination of competitive bidding
contract.

This section implements an appeals process for suppliers that CMS
has determined are in breach of their Medicare DMEPOS Competitive
Bidding Program contracts and where CMS has taken action to terminate
the supplier's contract. Except as specified in this regulation
termination decisions made under this section are final and binding.
(a) Terminations for breach of contract. CMS may terminate a
supplier's DMEPOS Competitive Bidding Program contract when it
determines that the supplier has violated any of the terms of its
contract.
(b) Notice of termination--(1) CMS notification. If CMS determines
a supplier to be in breach of its contract either in part or in whole,
it will notify the Medicare DMEPOS supplier of the termination by
certified mail.
(2) Content of the notice. The CMS notice sent by the CBIC will
include the following:
(i) The reasons for the termination.
(ii) The right to request a hearing by a CBIC Hearing Officer, and
depending on the nature of the breach, the supplier may also be allowed
to submit a CAP in lieu of requesting a hearing by a CBIC Hearing
Officer, as specified in paragraph (c)(1)(i) of this section.
(iii) The address to which the written request for a hearing must
be mailed.
(iv) The address to which the CAP must be mailed, if applicable.
(v) Penalties that will accompany the termination, such as not
being eligible to bid in future rounds of competitive bidding.
(vi) The effective date of termination is 45 days from the date of
the notification letter unless a timely hearing request has been filed
or a Corrective Action Plan (CAP) has been submitted within 30 days of
the date on the notification letter.
(c) Corrective Action Plan.
(1) Option for Corrective Action Plan (CAP).
(i) CMS has the option to allow a DMEPOS supplier to provide a
written Corrective Action Plan (CAP) to remedy the deficiencies
identified in the notice, when CMS determines that the delay in the
termination date caused by allowing a CAP will not cause harm to
beneficiaries, for example, we would not allow a CAP if the supplier
has been excluded, debarred, or convicted of a healthcare related
crime.
(ii) If a supplier chooses not to submit a CAP or if CMS determines
that a supplier's CAP is insufficient, the supplier may request a
hearing on the termination.
(2) Submission of a CAP.

[[Page 40257]]

(i) A Corrective Action Plan must be submitted within 30 calendar
days from the date on the notification letter. If the supplier decides
not to submit a Corrective Action Plan the supplier may within 30 days
of the date on the termination letter may request a hearing by a CBIC
hearing officer.
(ii) Suppliers will only have the opportunity to submit a CAP when
they are first notified that they have been determined to be in breach
of contract. If the CAP is not acceptable or properly implemented,
suppliers will receive a termination notice.
(d) The purpose of the Corrective Action Plan.
(1) For the supplier to eliminate all of the deficiencies that were
identified in the CBIC notice to terminate its contract to avoid
contract termination.
(2) To identify the timeframes by which the supplier will implement
each of the components of the CAP.
(e) Review of the CAP.
(1) The CBIC will review the CAP and submit a recommendation to CMS
concerning whether the CAP includes the steps necessary to remedy the
contract deficiencies as identified in the notice.
(2) If CMS accepts the CAP, including supplier's designated
timeframe for its completion; the supplier must provide a follow-up
report within 5 days after the supplier has fully implemented the CAP
that verifies that all of the deficiencies identified in the CAP have
been corrected in accordance with the timeframes accepted by CMS.
(3) If the supplier does not implement an acceptable CAP the
supplier will receive a new notice that their contract will be
terminated within 45 calendar days of the date on the notice to
terminate.
(f) Right to request a hearing by the CBIC hearing officer (HO).
(1) A supplier who has received a notice that CMS considers the
supplier in breach of contract or that the supplier's CAP is not
acceptable has the right to request a hearing before a HO who was not
involved with the original determination.
(2) A supplier who wishes to appeal the termination notice must
submit a written request to the CBIC. The request for a hearing must be
received by the CBIC within 30 calendar days from the date of the
notice to terminate.
(3) A request for hearing must be in writing and submitted by an
authorized official of the supplier.
(4) The appeals process for the Medicare DMEPOS Competitive Bidding
Program is not to be used in place of other existing appeals processes
that apply to other parts of Medicare.
(5) In the absence of submitting a CAP when the supplier is offered
the opportunity to submit a CAP within 30 days of the notice in
accordance with paragraph (c)(1) of this section, a supplier's failure
to timely request a hearing will result in a termination of the
supplier's DMEPOS Competitive Bidding Program contract effective 45
days from the date on the notice to terminate.
(g) The CBIC Hearing Officer schedules and conducts the hearing.
(1) Within 30 calendar days from the receipt of the supplier's
timely request for a hearing the hearing officer will contact the
parties to schedule the hearing.
(2) The hearing may be held in person or by telephone at the
supplier's request.
(3) The scheduling notice to the parties must indicate the time and
place for the hearing and must be sent to the supplier 30 days before
the date of the hearing.
(4) The HO may, on his or her own motion, or at the request of a
party, change the time and place for the hearing, but must give the
parties to the hearing 30 day notice of the change.
(5) The HO's scheduling notice must provide the parties to the
hearing and the CBIC the following information:
(i) Description of the hearing procedure.
(ii) The general and specific issues to be resolved.
(iii) The supplier has the burden to prove it is not in violation
of the contract.
(iv) The opportunity for parties to the hearing to submit evidence
to support their positions.
(v) All evidence submitted, both from the supplier and CMS, in
preparation for the hearing with all affected parties within 15 days
prior to the scheduled dated of the hearing.
(h) Burden of proof.
(1) The burden of proof is on the Competitive Bidding Program
contract supplier to demonstrate to the HO with convincing evidence
that it has not breached its contract or that termination is not
appropriate.
(2) The supplier's supporting evidence must be submitted with its
request for a hearing.
(3) If the Medicare DMEPOS supplier fails to submit this evidence
at the time of its submission, the Medicare DMEPOS supplier is
precluded from introducing new evidence later during the hearing
process, unless permitted by the hearing officer.
(4) The CBIC and CMS also have the opportunity to submit evidence
to the HO within 10 days of receiving a notice announcing the hearing.
(5) The HO will share all evidence submitted, both from the
supplier and/or CMS, in preparation for the hearing with all affected
parties within 15 days prior to the scheduled date of the hearing.
(i) Role of the Hearing Officer. The HO will conduct a thorough and
independent review of the evidence including the information and
documentation submitted for the hearing and other information that the
HO considers pertinent for the hearing. The role of the HO includes, at
a minimum, the following:
(1) Conducts the hearing and decides the order in which the
evidence and the arguments of the parties are presented;
(2) Determine the rules on admissibility of the evidence;
(3) Examines the witnesses, in addition to the examinations
conducted by CMS, CBIC and the contract supplier;
(4) The CBIC may assist CMS in the appeals process including being
present at the hearing, testifying as a witness, or performing other,
related ministerial duties.
(5) Determines the rules for requesting documents and other
evidence from other parties;
(6) Ensures a complete record of the hearing is made available to
all parties to the hearing;
(7) Prepares a file of the record of the hearing which includes all
evidence submitted as well as any relevant documents identified by the
HO and considered as part of the hearing; and
(8) Complies with all applicable provisions of 42 U.S.C. Title 18
and related provisions of the Act, the applicable regulations issued by
the Secretary, and manual instructions issued by CMS.
(j) Hearing Officer recommendation.
(1) The HO will issue a written recommendation to CMS within 30
days of the close of the hearing or as soon as practical after the
hearing.
(2) The recommendation will explain the basis and the rationale for
the HO's recommendation.
(3) The hearing officer must include the record of the hearing,
along with evidence and documents produced during the hearing along
with its recommendation.
(k) CMS' consideration of a HO's recommendation.
(1) CMS' review of the HO recommendation will not allow the
supplier to submit new information.
(2) After reviewing the HO recommendation, CMS' decision will be
made within 30 days from the date of receipt of the HO's
recommendation.
(3) A CMS decision to terminate will indicate the effective date of
the termination.

[[Page 40258]]

(4) This decision is final and binding.
(l) Effect of contract termination.
(1) A contract supplier whose contract has been terminated may no
longer furnish competitive bid items to beneficiaries within a CBA and
be reimbursed by Medicare for these items after the effective date of
the termination.
(2) A contract supplier whose contract has been terminated must
notify all beneficiaries who are receiving rented competitive bid items
or competitive bid items received on a recurring basis, of the
termination of their contract. The notice to the beneficiary from the
supplier whose contract was terminated must be provided within 5 days
of receipt of the final notice of termination. The notification to the
beneficiaries must inform the beneficiaries that they are going to have
to select a new contract supplier to furnish these items in order for
Medicare to pay these items.
(m) Effective date of the contract termination.
(1) A supplier's DMEPOS CBP contract is terminated effective on the
termination date specified in the CBIC notice to the supplier, unless
the supplier timely requests a hearing with the HO or the supplier has
submitted a CAP under paragraph (x) of this section.
(2) If a supplier requests an HO review of the CMS decision to
terminate its contract, and CMS based upon on the HO recommendation
terminates the supplier's contract, the effective date of the
termination will be the date specified in the CBIC notice to the
supplier.
(3) For violations of the terms of the supplier's DMEPOS CBP
contract that may harm beneficiaries, such as a supplier providing an
inferior product that causes harm to the beneficiary, no delays of the
effective date of the termination will be allowed.

Subpart H-Fee Schedule for Ambulance Services

39. Section 414.610 is amended by revising paragraphs (c)(1)(i),
(c)(5)(ii), (f), and (h) to read as follows:

Sec. 414.610 Basis of payments.

* * * * *
(c) * * *
(1) Ground ambulance service levels. (i) The CF is multiplied by
the applicable RVUs for each level of service to produce a service-
level base rate. For services furnished during the period July 1, 2004
through December 31, 2006, ambulance services originating in urban
areas (both base rate and mileage) are paid based on a rate that is one
percent higher than otherwise is applicable under this section, and
ambulance services originating in rural areas (both base rate and
mileage) are paid based on a rate that is two percent higher than
otherwise is applicable under this section. For services furnished
during the period July 1, 2008 through December 21, 2010, ambulance
services originating in urban areas (both base rate and mileage) are
paid based on a rate that is two percent higher than otherwise is
applicable under this section, and ambulance services originating in
rural areas (both base rate and mileage) are paid based on a rate that
is three percent higher than otherwise is applicable under this
section.
* * * * *
(5) * * *
(ii) For services furnished during the period July 1, 2004 through
December 31, 2010, the payment amount for the ground ambulance base
rate is increased by 22.6 percent where the point of pickup is in a
rural area determined to be in the lowest 25 percent of rural
population arrayed by population density. The amount of this increase
is based on CMS's estimate of the ratio of the average cost per trip
for the rural areas in the lowest quartile of population compared to
the average cost per trip for the rural areas in the highest quartile
of population. In making this estimate, CMS may use data provided by
the GAO.
* * * * *
(f) Updates. The CF, the air ambulance base rates, and the mileage
rates are updated annually by an inflation factor established by law.
The inflation factor is based on the consumer price index for all urban
consumers (CPI-U) (U.S. city average) for the 12-month period ending
with June of the previous year and, as of January 1, 2011, is reduced
by the 10-year moving average of changes in annual economy-wide private
nonfarm business multi-factor productivity (MFP) (as projected by the
Secretary for the 10-year period ending with the applicable fiscal
year, year, cost reporting period, or other annual period.)
* * * * *
(h) Treatment of certain areas for payment for air ambulance
services. Any area that was designated as a rural area for purposes of
making payments under the ambulance fee schedule for air ambulance
services furnished on December 31, 2006, must be treated as a rural
area for purposes of making payments under the ambulance fee schedule
for air ambulance services furnished during the period July 1, 2008
through December 31, 2010.
40. Section 414.620 is revised to read as follows:

Sec. 414.620 Publication of the ambulance fee schedule.

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

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

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

Sec. 414.804 Basis of payment.

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

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

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

Sec. 414.902 Definitions.

* * * * *
Biosimilar biological product means a biological product approved
under an abbreviated application for a license of a biological product
that relies in part on data or information in an application for
another biological product licensed under section 351 of the Public
Health Service Act (PHSA) as defined at section 1847A(c)(6)(H) of the
Act.
* * * * *
Reference biological product means the biological product licensed
under such section 351 of the PHSA that is referred to in the
application of the biosimilar biological product as defined at section
1847A(c)(6)(I) of the Act.
* * * * *
43. Section 414.904 is amended by--

[[Page 40259]]

A. Adding paragraphs (a)(3), (i), and (j).
B. Revising paragraph (d)(3).
The revisions and additions read as follows:

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

(a) * * *
(3) For purposes of this section--
(i) CMS calculates an average sales price payment limit based on
the amount of product included in a vial or other container as
reflected on the FDA-approved label.
(ii) Additional product contained in the vial or other container
does not represent a cost to providers and is not incorporated into the
ASP payment limit.
(iii) No payment shall be made for amounts of product in excess of
that reflected on the FDA-approved label.
* * * * *
(d) * * *
(3) Widely available market price and average manufacturer price.
If the Inspector General finds that the average sales price exceeds the
widely available market price or the average manufacturer price by the
applicable threshold percentage specified in paragraph (d)(3)(iii) of
this section, the Inspector General is responsible for informing the
Secretary (at such times as specified by the Secretary) and the payment
amount for the drug or biological will be substituted by the lesser of
the widely available market price or 103 percent of the average
manufacturer price as subject to the following adjustments:
(i) The payment amount substitution will be applied at the next ASP
payment amount calculation period after the Inspector General informs
the Secretary (at such times specified by the Secretary) about drugs or
biologicals that have exceeded the applicable threshold percentage, and
will remain in effect for one quarter after publication.
(ii) Payment at 103 percent of the average manufacturer price for a
billing code will be applied at such times when:
(A) The threshold for making price substitutions, as defined in
section (iii) is met; and,
(B) When 103 percent of the AMP is less than the 106 percent of the
ASP during the quarter in which the average manufacturer price would be
applied.
(iii) The applicable threshold for AMP comparisons for calendar
years 2005, 2006, 2007, 2008, 2009, 2010, is 5 percent. For CY 2011,
the threshold for ASP comparisons is reached when:
(A) The ASP for the billing code has exceeded the AMP for the
billing code by 5 percent or more in two consecutive quarters, or three
of the last four quarters; immediately preceding the quarter to which
the price substitution recommendation would apply; and,
(B) The average manufacturer price for the billing code is
calculated using the same set of NDCs used for the average sales price
calculation as per this section for the billing code;
(iv) The applicable threshold for WAMP comparisons for calendar
years 2005 through 2011 is 5 percent.
(v) No payment amount substitutions will occur before the
preliminary injunction issued on December 19, 2007, by the United
States District of Columbia in National Association of Chain Drug
Stores et al. v. Health and Human Services, Civil Action No. 1:07-cv-
02017 (RCL), is vacated.
* * * * *
(i) If manufacturer ASP data is not available prior to the
publication deadline for quarterly payment limits, the payment limit is
calculated by carrying over the most recent available manufacturer ASP
price from a previous quarter for an NDC, adjusted by the weighted
average of the change in the manufacturer ASPs for the NDCs that were
reported during both the most recently available quarter and the
current quarter.
(j) Biosimilar biological products. Effective July 1, 2010, the
payment amount for a biosimilar biological drug product (as defined in
Sec. 414.902 of this subpart) is the sum of the average sales price of
all NDCs assigned to the biosimilar biological product as determined
under section 1847A(b)(6) of the Act and 6 percent of the amount
determined under section 1847A(b)(4) of the Act for the reference drug
product (as defined in Sec. 414.902 of this subpart).

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

44. The authority citation for part 415 continues to read as
follows:

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

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

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

Sec. 415.130 Conditions for payment: Physician pathology services.

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

PART 424--CONDITIONS FOR MEDICARE PAYMENT

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

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

Subpart B--Certification and Plan of Treatment Requirements

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

Sec. 424.20 Requirements for posthospital SNF care.

* * * * *
(e) * * *
(2) A physician extender (that is, a nurse practitioner, a clinical
nurse specialist, or a physician assistant as those terms are defined
in section 1861(aa)(5) of the Act) who does not have a direct or
indirect employment relationship with the facility but who is working
in collaboration with a physician. For purposes of this section--
(i) Collaboration.
(A) Collaboration means a process whereby a physician extender
works with a doctor of medicine or osteopathy to deliver health care
services.
(B) The services are delivered within the scope of the physician
extender's professional expertise, with medical direction and
appropriate supervision as provided for in guidelines jointly developed
by the physician extender and the physician or other mechanisms defined
by Federal regulations and the law of the State in which the services
are performed.

[[Page 40260]]

(ii) Types of employment relationships.
(A) Direct employment relationship. A direct employment
relationship with the facility is one in which the physician extender
meets the common law definition of the facility's ``employee,'' as
specified in 20 CFR 404.1005, 404.1007, and 404.1009. When a physician
extender meets this definition with respect to an entity other than the
facility itself, and that entity has an agreement with the facility for
the provision of nursing services under Sec. 409.21 of this
subchapter, the facility is considered to have an indirect employment
relationship with the physician extender.
(B) Indirect employment relationship. (1) When a physician extender
meets the definition of a direct employment relationship in paragraph
(e)(2)(ii)(A) of this section with respect to an entity other than the
facility itself, and that entity has an agreement with the facility for
the provision of nursing services under Sec. 409.21 of this
subchapter, the facility is considered to have an indirect employment
relationship with the physician extender.
(2) An indirect employment relationship does not exist if the
agreement between the entity and the facility involves only the
performance of delegated physician tasks under Sec. 483.40(e) of this
chapter.
* * * * *

Subpart C--Claims for Payment

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

Sec. 424.44 Time limits for filing claims.

(a) Time limits.
(1) For services furnished on or after January 1, 2010, except as
provided in paragraphs (b) and (e) of this section, the claim must be
filed no later than the close of the period ending 1 calendar year
after the date of service.
(2) For services furnished before January 1, 2010, except as
provided in paragraphs (b) and (e) of this section, the claim must be
filed on or before December 31 of the following year for services that
were furnished during the first 9 months of a calendar year, and on or
before December 31st of the second following year for services that
were furnished during the last 3 months of the calendar year, except
that for services furnished during the last 3 months of 2009 all claims
must be filed no later than December 31, 2010.
(b) Exceptions to time limits. Exceptions to the time limits for
filing claims include the following:
(1) The time for filing a claim will be extended if CMS or one of
its contractors determines that a failure to meet the deadline in
paragraph (a) of this section was caused by error or misrepresentation
of an employee, Medicare contractor (including Medicare Administrative
Contractor, intermediary, or carrier), or agent of the Department that
was performing Medicare functions and acting within the scope of its
authority.
(2) The time for filing a claim will be extended if CMS or one of
its contractors determines that a failure to meet the deadline in
paragraph (a) of this section is caused by all of the following
conditions:
(i) At the time the service was furnished the beneficiary was not
entitled to Medicare.
(ii) The beneficiary subsequently received notification of Medicare
entitlement effective retroactively to or before the date of the
furnished service.
(3) The time for filing a claim will be extended if CMS or one of
its contractors determines that a failure to meet the deadline in
paragraph (a) of this section is caused by all of the following
conditions:
(i) At the time the service was furnished the beneficiary was not
entitled to Medicare.
(ii) The beneficiary subsequently received notification of Medicare
entitlement effective retroactively to or before the date of the
furnished service.
(iii) A State Medicaid agency recovered the Medicaid payment for
the furnished service from a provider or supplier 11 months or more
after the service was furnished.
(4) Extension of time. (i) The time to file a claim will be
extended through the last day of the 6th calendar month following the
month in which the error or misrepresentation referenced in paragraph
(b)(1) of this section, is corrected. However, no extension of time
will be granted for paragraph (b)(1) when the request for that
exception is made to CMS or one of its contractors more than 4 years
after the date of service.
(ii) If CMS or one of its contractors determines that both of the
conditions are met in paragraph (b)(2) of this section but that all of
the conditions in paragraph (b)(3) are not satisfied, the time to file
a claim will be extended through the last day of the 6th calendar month
following the month in which the beneficiary received notification of
Medicare entitlement effective retroactively to or before the date of
the furnished service.
(iii) If CMS or one of its contractors determines that all of the
conditions are met in paragraph (b)(3) of this section, the time to
file a claim will be extended through the last day of the 6th calendar
month following the month in which the State Medicaid agency recovered
the Medicaid payment for the furnished service from the provider or
supplier.
* * * * *
(e) As specified in Sec. Sec. 424.520 and 424.521 of this subpart,
there are restrictions on the ability of the following newly-enrolled
suppliers to submit claims for items or services furnished prior to the
effective date of their Medicare billing privileges:
(1) Physician or non-physician practitioner organizations.
(2) Physicians.
(3) Nonphysician practitioners.
(4) Independent diagnostic testing facilities.
* * * * *

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

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

Sec. 424.502 Definitions.

* * * * *
Voluntary termination means that a provider or supplier, including
an individual physician or non-physician practitioner, submits written
confirmation to CMS of its decision to discontinue enrollment in the
Medicare program.
50. Section 424.510 is amended by revising paragraph (d)(1)(iii) to
read as follows:

Sec. 424.510 Requirements for enrolling in the Medicare program.

* * * * *
(d) * * *
(1) * * *
(iii) Submission of all documentation, including all applicable
Federal and State licenses, certifications (including, but not limited
to Federal Aviation Administration and Clinical Laboratory Improvement
Act certifications), and regulatory requirements that apply to the
specific provider or supplier type that relate to providing health care
service, required by CMS under this or other statutory or regulatory
authority, or under the Paperwork Reduction Act of 1995, to establish
the provider or supplier's eligibility to furnish Medicare covered
items or services to beneficiaries in the Medicare program.
* * * * *
51. Section 424.516 is amended by adding paragraph (e)(3) to read
as follows:

[[Page 40261]]

Sec. 424.516 Additional provider and supplier requirements for
enrolling and maintaining active enrollment status in the Medicare
program.

* * * * *
(e) * * *
(3) Within 30 days any revocation or suspension of a Federal or
State license or certification (including Federal Aviation
Administration and Clinical Laboratory Improvement Act certifications),
an air ambulance supplier must report a revocation or suspension of its
license or certification to the applicable Medicare contractor.
* * * * *

Authority: (Catalog of Federal Domestic Assistance Program No.
93.773, Medicare--Hospital Insurance; and Program No. 93.774,
Medicare--Supplementary Medical Insurance Program).

Dated: June 18, 2010.
Marilyn Tavenner,
Acting Administrator and Chief Operating Officer, Centers for Medicare
& Medicaid Services.
Approved: June 24, 2010.
Kathleen Sebelius,
Secretary.

ADDENDUM A: Explanation and Use of Addendum B

The Addenda on the following pages provide various data
pertaining to the Medicare fee schedule for physicians' services
furnished in CY 2011. Addendum B contains the RVUs for work,
nonfacility PE, facility PE, and malpractice expense, and other
information for all services included in the PFS.
In previous years, we have listed many services in Addendum B
that are not paid under the PFS. To avoid publishing as many pages
of codes for these services, we are not including clinical
laboratory codes or the alpha-numeric codes (Healthcare Common
Procedure Coding System (HCPCS) codes not included in CPT) not paid
under the PFS in Addendum B.
Addendum B contains the following information for each CPT code
and alpha-numeric HCPCS code, except for: Alpha-numeric codes
beginning with B (enteral and parenteral therapy); ``E'' (durable
medical equipment); ``K'' (temporary codes for nonphysicians'
services or items); or ``L'' (orthotics); and codes for
anesthesiology. Please also note the following:
An ``NA'' in the ``Nonfacility PE RVUs'' column of
Addendum B means that CMS has not developed PE RVUs in the
nonfacility setting for the service because it is typically
performed in the hospital (for example, an open heart surgery is
generally performed in the hospital setting and not a physician's
office). If there is an ``NA'' in the nonfacility PE RVU column, and
the contractor determines that this service can be performed in the
nonfacility setting, the service will be paid at the facility PE RVU
rate.
Services that have an ``NA'' in the ``Facility PE
RVUs'' column of Addendum B are typically not paid under the PFS
when provided in a facility setting. These services (which include
``incident to'' services and the technical portion of diagnostic
tests) are generally paid under either the hospital outpatient
prospective payment system or bundled into the hospital inpatient
prospective payment system payment. In some cases, these services
may be paid in a facility setting at the PFS rate (for example,
therapy services), but there would be no payment made to the
practitioner under the PFS in these situations.
1. CPT/HCPCS code. This is the CPT or alpha-numeric HCPCS number
for the service. Alpha-numeric HCPCS codes are included at the end
of this Addendum.
2. Modifier. A modifier is shown if there is a technical
component (modifier TC) and a professional component (PC) (modifier-
26) for the service. If there is a PC and a TC for the service,
Addendum B contains three entries for the code, specifically a code
for: The global values (both professional and technical); modifier--
26 (PC); and modifier--TC. The global service is not designated by a
modifier, and physicians must bill using the code without a modifier
if the physician furnishes both the PC and the TC of the service.
Modifier-53 is shown for a discontinued procedure, for example a
colonoscopy that is not completed. There will be RVUs for a code
with this modifier.
3. Status indicator. This indicator shows whether the CPT/HCPCS
code is included in the PFS and whether it is separately payable if
the service is covered.
A = Active code. These codes are separately payable under the
PFS if covered. There will be RVUs for codes with this status. The
presence of an ``A'' indicator does not mean that Medicare has made
a national coverage determination regarding the service. Contractors
remain responsible for coverage decisions in the absence of a
national Medicare policy.
B = Bundled code. Payments for covered services are always
bundled into payment for other services not specified. If RVUs are
shown, they are not used for Medicare payment. If these services are
covered, payment for them is subsumed by the payment for the
services to which they are incident (an example is a telephone call
from a hospital nurse regarding care of a patient).
C = Contractors price the code. Contractors establish RVUs and
payment amounts for these services, generally on an individual case
basis following review of documentation, such as an operative
report.
E = Excluded from the PFS by regulation. These codes are for
items and services that CMS chose to exclude from the PFS by
regulation. No RVUs are shown, and no payment may be made under the
PFS for these codes. Payment for them, when covered, continues under
reasonable charge procedures.
I = Not valid for Medicare purposes. Medicare uses another code
for the reporting of, and the payment for these services. (Codes not
subject to a 90-day grace period.)
M = Measurement codes, used for reporting purposes only. There
are no RVUs and no payment amounts for these codes. CMS uses them to
aid with performance measurement. No separate payment is made. These
codes should be billed with a zero (($0.00) charge and are denied)
on the MPFSDB.
N = Noncovered service. These codes are noncovered services.
Medicare payment may not be made for these codes. If RVUs are shown,
they are not used for Medicare payment.
R = Restricted coverage. Special coverage instructions apply. If
the service is covered and no RVUs are shown, it is contractor-
priced.
T = There are RVUs for these services, but they are only paid if
there are no other services payable under the PFS billed on the same
date by the same provider. If any other services payable under the
PFS are billed on the same date by the same provider, these services
are bundled into the service(s) for which payment is made.
X = Statutory exclusion. These codes represent an item or
service that is not within the statutory definition of ``physicians'
services'' for PFS payment purposes. No RVUs are shown for these
codes, and no payment may be made under the PFS. (Examples are
ambulance services and clinical diagnostic laboratory services.)
4. Description of code. This is an abbreviated version of the
narrative description of the code.
5. Physician work RVUs. These are the RVUs for the physician
work in CY 2011.
6. Fully implemented nonfacility PE RVUs. These are the fully
implemented resource-based PE RVUs for nonfacility settings.
7. CY 2011 transitional nonfacility PE RVUs. These are the CY
2011 resource-based PE RVUs for nonfacility settings.
8. Fully implemented facility PE RVUs. These are the fully
implemented resource-based PE RVUs for facility settings.
9. CY 2011 Transitional facility PE RVUs. These are the CY 2011
resource-based PE RVUs for facility settings.
10. Malpractice expense RVUs. These are the RVUs for the
malpractice expense for CY 2011.

Note: The BN reduction resulting from the chiropractic
demonstration is not reflected in the RVUs for CPT codes 98940,
98941 and 98942. The required reduction will only be reflected in
the files used for Medicare payment.

11. Global period. This indicator shows the number of days in
the global period for the code (0, 10, or 90 days). An explanation
of the alpha codes follows:
MMM = Code describes a service furnished in uncomplicated
maternity cases, including antepartum care, delivery, and postpartum
care. The usual global surgical concept does not apply. See the
Physicians' Current Procedural Terminology for specific definitions.
XXX = The global concept does not apply.
YYY = The global period is to be set by the contractor (for
example, unlisted surgery codes).
ZZZ = Code related to another service that is always included in
the global period of the other service. (Note: Physician work and PE
are associated with intra-service time and, in some instances, with
the post-service time.)

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[FR Doc. 2010-15900 Filed 6-25-10; 4:15 pm]
BILLING CODE 4120-01-P