The conversion factors under the Medicare Physician Fee Schedule for 1998 will change as follows:

These changes do not include changes in relative values. The actual increase or decrease for an individual physician or group of physicians will depend on the mix of services provided.

Geographic Practice Cost Index (GPCI) Changes
Medicare law requires that GPCIs be revised for 1998 and 1999. The law also provides that one- half of the GPCI adjustment become effective in 1998, with the remainder effective in 1999. The revised GPCIs will have a negligible effect on physician payments in 1998. Payments will change by less than 0.5 percent in 75 of the 89 payment localities, with changes greater than 1 percent in only 2 localities resulting from the GPCI revisions.

Physician Supervision of Diagnostic Tests
Effective for procedures furnished on or after January 1, 1998, diagnostic procedures covered under 1861 (s)(3) of the Social Security Act and payable under the physician fee schedule must be furnished under a specified level of physician supervision. (Other statutory provisions, such as the Clinical Laboratory Improvement Act (CLIA), etc., which contain supervisory standards for physicians, are not affected by this new policy and continue to be required, if applicable.) These supervision requirements do not apply to diagnostic tests furnished in hospitals.

With the exception of certain procedures personally performed by independent qualified psychologists, clinical psychologists, qualified audiologists, and physical therapists who are certified as qualified electrophysiologic clinical specialists, all diagnostic tests payable under the physician fee schedule must be furnished under at least a general level of physician supervision. General supervision means the procedure is furnished under the physician' s overall direction and control, but the physician s presence is not required during the performance of the procedure. Under general supervision, the training of the non- physician personnel who actually perform the diagnostic procedure and the maintenance oft e necessary equipment and supplies are the continuing responsibility of the physician.

In addition, some tests also require either direct or personal supervision. Direct supervision in the office setting does not mean that the physician must be present in the room when the procedure is performed. However, the physician must be present in the office suite and immediately available to furnish assistance and direction throughout the performance of the procedure. Personal supervision means a physician must be in attendance in the room during the performance of the procedure. When direct or personal supervision is required, physician supervision at the specified level is required throughout the performance of the test.

This policy applies to technical components (TCs) (including TCs billed globally with the professional component (PC) of the procedure) and other diagnostic procedures which do not have relative value units reflecting physician work.

Independent Diagnostic Testing Facilities (IDTFs)
A new entity referred to as IDTFs will replace Independent Physiological Laboratories (IPLs) on a phased-in basis scheduled to be completed on July 1, 1998. The main features of the IDTF policy are as follows:

  1. An IDTF must have one or more supervising physicians who are responsible for the direct and ongoing oversight of the quality of the testing performed, the proper operation and calibration of the equipment used to perform tests, and the qualification of non-physician personnel who use the equipment. This level o supervision equates to that required for general supervision.
  2. The supervising physician must evidence proficiency in the performance and interpretation of each type of diagnostic procedure performed by the IDTF.
  3. Any non-physician personnel used by the I1)Th to perform tests must demonstrate the basic qualifications to perform the tests in question and have training and proficiency as evidenced by licensure or certification by the appropriate State agency or must be certified by the appropriate national credentialing body. In addition, the physician supervision requirements for diagnostic tests (described above) also apply.
  4. All procedures performed by the IDTF must be specifically ordered in writing by the physician who treats the beneficiary, that is, the physician who is furnishing a consultation or treating a beneficiary for a specific medical problem and who uses the results in the management of the beneficiary's specific medical problem. (Certain non-physician practitioners may order tests when operating within the scope of their State licensure.) The order must specif\r the diagnosis or other basis for the testing. The supervising physician for the IDTF may not order tests performed by the fE)TF, and the fI)TF may not add any procedures based on internal protocols without a written order from the treating physician.
  5. An IDTF that operates across State boundaries (i.e., multi-State entities) must maintain documentation that its supervising physicians and technicians are licensed and certified in each of the States in which it is furnishing services.

The operational aspects of this new type of facility are still under development. Entities wishing to be recognized as IDTFs must send a letter to the Part B carrier for their service area attesting that they meet all IDTF criteria set forth in federal regulations (42 CFR 410.33). As soon as a carrier determines that an entity qualifies as an IDTF, the carrier will notify the entity of its new status and billing number.

Increase in Work Relative Value Units for Global Surgical Services to Account for the 1997 Increases for Work Relative Value Units in Evaluation and Management Services
In the November 22, 1996 Final Rule with comment period, as part of the 5-year review of all physician work RVUs, most of the work RVUs were increased for evaluation and management services for hospital, office, and other outpatient visits. The work RVUs for evaluation and management services were increased partly in recognition of the increase in pre-service and post- service work.

At that time, no adjustments were made to the work RVUs assigned to global sur ical services, which, in addition to the surgical procedure, include the related pre-service an post-service evaluation and management visits a surgeon provides within a defined period of time. Effective January 1, 1998, work RVUs for global surgical services will increase to make them consistent with the 1997 increases in the work RVUs for evaluation and management services.

Change in Billing for Caloric Vestibular Testing
For services furnished on or after January 1, 1998, when a physician or, as appropriate, a supplier, performs and/or interprets four ear irrigations under CPT code 92543, caloric vestibular testing, the physician or supplier is to bill four units of CPT code 92543. Although four is the usual number of irngations performed, the physician or supplier must bill the actual number performed, e.g., if a total of two irrigations are performed (one to each ear), bill only two units. This change is being made so that Medicare bills are consistent with the American Medical Association's interpretation of the code.


Each year, the non-physician fee schedules are adjusted by a default formula set in the statute by Congress, unless other Congressional action is taken to modify the update factor. Under the default methodology, the 1998 updates are as follows.

Clinical Laboratory Services
For 1998, the national limitation amount which serves as a cap on local carrier fee schedule amounts for clinical diagnostic laboratory services is reduced from the current 76 percent of the median to 74 percent of the median. The update factor for local carrier fee schedule amounts is zero (0) percent for 1998.

Reasonable Charge Payment Changes
The Inflation Indexed Charge (IIC) update factor for 1998 is 2.3 percent for non-ambulance services. For suppliers of ambulance services, the 1998 IIC screen is increased by 1.3 percent. This is the result of 4531 of the Balanced Budget Act of 1997 which provides that the reasonable charge for ambulance services for calendar year 1998 may not exceed the reasonable charge for ambulance services for calendar year 1997 by more than the consumer price index for all urban consumers (CPIU) as estimated by the HCFA for the 12 month period end in on June 30, 1998 reduced by 1.0 percentage point. The estimate for the CPI-U is 2.3 percent and t e reasonable charge update factor applicable to ambulance services is 1.3 percent (2.3 - 1.0 = 1.3).

Durable Medical Equipment and Prosthetics and Orthotics
The 1998 update factor for covered durable medical equipment is zero (0). For prosthetics and orthotics, there is a 1 percent increase.

Screening Mammography
Screening mammography, code 76092, is paid for under a special statutory rule. The allowable amount is the lowest of the actual charge, the statutory cap, or the physician fee schedule amount for code 76091. The 1998udate factor for the 1997 statutory cap is 2.2 percent. The statutory payment limit for 1998 is as Allows: $64.73 for the global procedure; $20.71 for the professional component; and $44.02 for the technical component.

Change in or Screening Mammography
Effective for services furrnished on or after January 1, 1998, the frequency limitation for a screening mammogram for an asymptomatic woman over 39 years of age is eliminated and the Part B deductible is waived. (See below for additional information.)

Change in Payment Methodology and Amounts for Physician Assistants, Nurse Practitioners, and clinical Nurse Specialists
Effective for services furnished on or after January 1, 1998, Medicare payments for the professional services of these non-physician practitioners are linked to the physician fee schedule and the allowable amounts for these practitioner services will increase. (See page 8 for additional information.)


Change in Coverage for Screening Mammography
Section 4101 of the BBA of 1997, Public Law 105-33, provides coverage for annual screening mammograms for asymptomatic women over 39 years of age. As of January 1, 1998, screening mammograms are no longer subject to the Part B deductible. There is no change in coverage of mammograms for women in other age groups. Payment may be made for one screening between a woman' s 35th and 40th birthdays. No payment may be made for a woman under age 35.

Change in Coverage for Screening Pap Smear and Pelvic Examinations
Effective January 1, 1998, 4102 of the BBA of 1997 provides coverage every 3 years for a screening Pap smear and pelvic examination (including a clinical breast examination) or annual coverage for women (1) at high risk of cervical or vaginal cancer, or (2) of childbearing age who have had a Pap smear during the preceding 3 years indicating the presence of cervical or vaginal cancer or other abnormality. The Part B deductible for screening Pap smear and pelvic examinations is waived. Pelvic examinations will be paid under the physician fee schedule.

Coverage of Colorectal Cancer Screening
Section 4104 of the BBA of 1997 provides or specific coverage of the following screening tests for colorectal cancer effective January 1, 1998: screening fecal-occult blood tests, screening flexible sigmoidoscoy, and screening colonoscopy. Section 4104 also requires the Secretary to determine if screening barium enemas should be covered as a colorectal cancer screening test.

Screening fecal-occult blood tests are covered at a frequency of once every 12 months for individuals who have attained age 50. A new code, GO 107, has been created to be used for screening fecal-occult blood tests. This code will be paid at the same amount as code 82270, diagnostic fecal-occult blood test, under the clinical laboratory fee schedule for your area.

A screening flexible sigmoidoscopy is covered at a frequency of once every 48 months for individuals who have attained age 50. A new code, GO 104, has been created for screening flexible sigmoidoscopy. This code will be paid at the same amount as code 45330, diagnostic flexible sigmoidoscopy, under the physician fee schedule in your area. If during the course of the screening flexible sigmoidoscopy a lesion or growth is detected which results in a biopsy or removal of the growth, the procedure code for a flexible sigmoidoscopy with biopsy or removal of lesion should be reported rather than code GO 104.

A screening colonoscopy is covered at a frequency of once eve 24 months for individuals at high risk for colorectal cancer. The law defines hi risk as a person w o, because of family history, prior experience of cancer or precursor neoplastic polyps, a history of chronic digestive disease condition (including inflammatory bowel disease, Crohn's disease, or ulcerative colitis), the presence of any appropriate gene markers for colorectal cancer, or other predisposing factors, faces a high risk for colorectal cancer. A new code, GO105, has been created for screening colonoscopy. This code will be paid at the same amount as code 45378, diagnostic colonoscopy, under the physician fee schedule in your area. If during the screening colonoscopy a lesion or growth is detected which results in a biopsy or removal of the growth, the procedure code for a colonoscopy with biopsy or removal of lesion should be reported rather than code GO 105.

A screening barium enema may be substituted for either a screening flexible sigmoidoscopy or a screening colonoscopy if an individual's physician has determined that the screening barium enema will be as effective as the screening flexible sigmoidoscopy or screening colonoscopy for that individual. Payment will not be made for both a screening barium enema and a screening flexible sigmoidoscopy for an individual who is not at risk for colorectal cancer during the same 48 month period, nor will payment be made for oth a screening barium enema and a screening colonoscopy for an individual who is at high risk for colorectal cancer during the same 24 month period. Two new codes, GO 106 (Colorectal cancer screening; alternative to GO 104, screening sigmoidoscoy, barium enema) and GO 120 (Colorectal cancer screening; alternative to GO 105, screening co onoscopy, barium enema), are to be used for barium enemas that are substituted for either the sigmoidoscopy or the colonoscopy , as indicated by the appropriate code nomenclature. Substitution of the barium enema for either t e screening sigmoidoscopy or screening colonoscopy must be ordered in writing by the beneficiary' s attending physician. Both GO 106 and GO 120 will be paid at the same amount as code 74280, diagnostic barium enema, under the physician fee schedule for your area.

Additionally, two other codes, GO 121 (Colorectal cancer screening; colonoscopy on individual not meeting criteria for high risk) and GO122 (Colorectal cancer screening; barium enema), are to be used when the high risk criteria are not met, or a barium enema is performed but not as a substitute for either a sigmoidoscopy or colonoscopy. Both of these codes are non-covered services.

Changes in the Diabetes Benefit
Coverage of diabetes outpatient self-management training services will be effective July 1, 1998. In establishing payment amounts, as required under 4105 of the BBA of 1997, HCFA will consult with appropriate organizations representing individuals or Medicare beneficiaries with diabetes, e.g., American Diabetes Association. Medicare coinsurance and deductibles will apply.

Private Contracts Between Beneficiaries and Physicians/Practitioners
Section 1802 of the Social Security Act, as amended by 4507 of the BBA of 1997, also permits a physician or practitioner to enter into private contracts with Medicare beneficiaries to provide covered services, if specific requirements are met. For purposes of this provision, the term "physician" means only a doctor of medicine or a doctor of osteopathy. For purposes of this provision, the term "practitioner" means any of the following to the extent that they are legally authorized to practice by the State and otherwise meet Medicare requirements: physician assistant, nurse practitioner, clinical nurse specialist, certified registered nurse anesthetist, certified nurse midwife, clinical psychologist, or clinical social worker.

At this time, HCFA is requiring that a physician or practitioner who has signed an agreement to participate in Medicare must terminate that agreement at the end of a calendar year before he or she may opt out of Medicare during the next calendar year. For example, a participating physician who signs or automatically rolls over a current year participation agreement during the 1998 enrollment period cannot exercise the private contracting option in 1998. HCFA is exploring whether it would e administratively possible to permit physicians and practitioners to exercise the private contracting option at times other than the annual participating physician enrollment period. In order to allow physicians and practitioners more time to consider this option, and in view of the many other changes that were enacted in the BBA of 1997, HCFA is extending the 1998 enrollment period for an additional month, until February 2, 1998. A decision concerning whether to allow physicians to exercise the private contract option at times other than the annual enrollment period, will be made before February 2, 1998.

Physicians and practitioners who reassign benefits to organizations that participate in Medicare (such as their employer, a facility whose services are provided or a health care delivery system) may not opt out because they are bound by the participation agreement signed by the organization that bills and is paid for their services. In order for the physician or practitioner to opt out of Medicare, either the organization must terminate its participation agreement or the physician or practitioner must terminate the reassignment of Medicare benefits to the organization.

With respect to non-covered services, a private contract is unnecessary and section 4507 does not apply. In other words, beneficiaries continue to be able to pay for any services that Medicare does not cover out of their own pockets, under the payment arrangement they make with their physician, without having to enter into a private contract subject to the provisions of section 4507. Examples of noncovered services include cosmetic surgery, hearing aids, routine physical exams, and certain screening preventive benefits more frequently than a specified number during a given period of time (e.g., a screening mammogram more than once a year).

A physician or practitioner may furnish a service that Medicare covers under some circumstances but which the physician anticipates would not be deemed "reasonable and necessary" by Medicare in the particular case (e.g., multiple nursing home visits, some concurrent care services, two mammograms within a twelve month period, etc.). If the beneficiary receives an "Advance Beneficiary Notice" that the service may not be covered by Medicare and that the beneficiary will have to pay for the service if it is denied by Medicare, a private contract is not necessary to bill the beneficiary if the claim is denied.

Under 4507 of the BBA, when a physician or practitioner chooses to enter into a private contract with a Medicare beneficiary to provide services that would otherwise be covered by Medicare, no services provided by that individual are covered by Medicare and no Medicare payment can be made to that physician or practitioner directly or on a capitated basis. The physician or practitioner must "opt out" of Medicare for a two - year period. Under the statute, the physician or practitioner cannot choose to opt out of Medicare for some Medicare beneficiaries but not others; or for some services but not others.

Medicare will make payment for covered, medically necessary services that are ordered by a physician or practitioner who has opted out of Medicare, if the physician or practitioner has acquired a unique provider identification number (UPIN) from Medicare and provided that the services are not furnished by a physician or practitioner who has opted out.

In an emergency or urgent care situation a physician or practitioner who opts out may treat a Medicare beneficiary with whom he or she does not have a private contract. In that case, the physician or practitioner may not charge the beneficiary more than what a non-participating physician would be permitted to charge and must submit a claim to Medicare on the beneficiary' s behalf. Payment will be made for Medicare covered items or services furnished in emergency or urgent situations when the beneficiary has not signed a private contract.

Physicians who provide services to Medicare beneficiaries enrolled in the new Medical Savings Account (MSA) demonstration created by the BBA of 1997 are not required to enter into a private contract with those beneficiaries and opt out of Medicare for two years under 4507.

A physician who is a member of a group practice may enter into a private contract under 4507 and opt out of Medicare, without affecting the ability of the other members of the group practice to provide and bill for Medicare services.

Contents of the Private Contract With the Beneficiary

Under 4507 of the BBA, a valid private contract must:

Contents of the Affidavit The physician or practitioner must file an affidavit with Medicare no later than 10 days after the first private contract is entered into. Under 4507 of the BBA, a valid affidavit must:

Additional information on private agreements will be included in a future bulletin.

One Year Delay in Implementing New Practice Expense Component
For 1998, practice expense relative value units will be adjusted for certain services in anticipation of the implementation of resource based practice expenses in 1999. Office visits will increase while certain other services will be reduced according to a statutory formula. The formula requires that services which were proposed to be reduced in the June 18, 1997 proposed notice, and were not performed at least 75 percent of the time in an office setting, would get reduced relative value units for practice expense calculated as 110 percent of the work relative value units for the service. The codes affected by this provision and their final values are shown in the accompanying fee schedule.

Starting in 1999, there will be a 3-year transition period to phase in the resource based relative value units, which will be fully implemented in 2002.

Expanded Requirements for Furnishing Diagnostic Information
Effective January 1, 1998, non-physician practitioners are required to provide diagnostic codes on Medicare claims for physicians services they perform.

Also effective January 1, 1998, physicians and practitioners are required to provide diagnostic or other medical information to other entities that furnish services ordered by the physician or practitioner. Physicians and practitioners will be required to provide diagnosis or other medical information to the entity furnishing the service at the time the service is ordered when the Secretary (or fiscal agent of the Secretary) requires such information in order for payment to be made. For example, physicians and practitioners will now be required to provide diagnosis or other medical information at the time the service is ordered to the entity furnishing the service when a Local Medical Review Policy (LMRP) exists requiring such diagnosis or other medical information from the entity performing the service.

Temporary Restoration of Coverage for Portable EKG Equipment Transportation
Section 4559 of the BBA of 1997 restores payment as of January 1, 1998 for one year for procedure code R0076 (transportation of portable EKG to facility or location, per patient). Payment will be based upon payment methods in effect for such services as of December 31, 1996.

The procedure codes involved are 93000 (a 12-lead EKG with interpretation and report) or 93005 a 12-lead EKG, tracing only, without interpretation and report). When multiple patients receive services at the same site, the transportation payment amount must be prorated among all patients seen. These payments may be made only under the following circumstances:

Change in Payment Methodology and Amount for Nurse Practitioners, Physician Assistants, and Clinical Nurse Specialists
Payment may now be made for services furnished by nurse practitioners (NPs), physician assistants (PAs), and clinical nurse specialists (CNSs) in all settings permitted by State law, but only if no facility or other provider charges are aid in connection with the service. Payment would be equal to 80 percent of the lesser of the actua charge or 85 percent of the physician fee schedule. Payment for a PA's services may only be made to the PA's employer. Under certain circumstances, a PA as an independent contractor qualifies as an employment relationship where payment is made to the employer.

Payments for Drugs and Biologicals
Currently, drugs and biologicals not paid on a cost or prospective payment basis are paid based on the lower of the billed charge or the average wholesale rice (AWP) as reflected in sources such as the Red Book, Blue Book or Medispan. Examples of drugs that are paid on this basis are drugs furnished incident to a physician's service, drugs furnished by pharmacies under the durable medical equipment (DME) benefit, and drugs furnished by independent dialysis facilities that are not included in the end stage renal disease (ESRD) composite rate payment.

Effective January 1, 1998, drugs and biologicals not paid on a cost or prospective payment basis are paid at the lower of the billed charge or 95 percent of the average wholesale price (AWP). This change in payment allowance recognizes the fact that the average wholesale price is not a true discounted price and, therefore, does not reflect the cost to the physician or supplier furnishing the drug to the Medicare beneficiary. Part B deductible and coinsurance requirements apply.


Enforcement of Child Support Provisions of the Debt Collection Act of 1996
The Debt Collection Act of 1996 and Executive Order 13019 allow the collection of delinquent child sup ort payments to be offset from Federal payments. HCFA is working with the Administration for Chi an Families and the Department of Treasury to identify individuals delinquent in their child support obligations who receive Federal payments and to consider actions to withhold Federal payments, if appropriate. HCFA also plans to coordinate its efforts with the States, which have authority under recent welfare reform legislation to revoke licenses of health professionals who are delinquent in child support payments.

Medicare Fraud, Waste and Abuse
HCFA has made the fight against fraud, waste and abuse a high priority in Medicare program administration. Based on a scientific sampling of paid Medicare claims, a HCFA Chief Financial Officer (CFO) audit estimated approximately $23 billion in improper payments were made for fiscal year 1996. Most improper payments resulted from fraud, abuse, clerical errors, and a lack of appropriate documentation on the part of health care providers. Over the next year, Medicare contractors will be working with physicians and others in their respective provider communities to improve the accuracy of claim documentation. We would appreciate your full cooperation in addressing the problem of fraud, waste and abuse in Medicare and welcome any suggestions you have in this regard.