[Federal Register: November 2, 1998 (Volume 63, Number 211)]
[Rules and Regulations]
[Page 58813-58862]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02no98-16]
[[Page 58813]]
_______________________________________________________________________
Part II
Department of Health and Human Services
_______________________________________________________________________
Health Care Financing Administration
_______________________________________________________________________
42 CFR Part 405, et al.
Medicare Program; Revisions to Payment Policies and Adjustments to the
Relative Value Units Under the Physician Fee Schedule for Calendar Year
1999; Final Rule and Notice
[[Page 58814]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 405, 410, 413, 414, 415, 424, and 485
[HCFA-1006-FC]
RIN 0938-AI52
Medicare Program; Revisions to Payment Policies and Adjustments
to the Relative Value Units Under the Physician Fee Schedule for
Calendar Year 1999
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule with comment period.
-----------------------------------------------------------------------
SUMMARY: This final rule makes several policy changes affecting
Medicare Part B payment. The changes that relate to physicians'
services include: resource-based practice expense relative value units
(RVUs), medical direction rules for anesthesia services, and payment
for abnormal Pap smears. Also, we are rebasing the Medicare Economic
Index from a 1989 base year to a 1996 base year. Under the law, we are
required to develop a resource-based system for determining practice
expense RVUs. The Balanced Budget Act of 1997 (BBA) delayed, for 1
year, implementation of the resource-based practice expense RVUs until
January 1, 1999. Also, BBA revised our payment policy for nonphysician
practitioners, for outpatient rehabilitation services, and for drugs
and biologicals not paid on a cost or prospective payment basis. In
addition, BBA permits certain physicians and practitioners to opt out
of Medicare and furnish covered services to Medicare beneficiaries
through private contracts and permits payment for professional
consultations via interactive telecommunication systems. Furthermore,
we are finalizing the 1998 interim RVUs and are issuing interim RVUs
for new and revised codes for 1999. This final rule also announces the
calendar year 1999 Medicare physician fee schedule conversion factor
under the Medicare Supplementary Medical Insurance (Part B) program as
required by section 1848(d) of the Social Security Act. The 1999
Medicare physician fee schedule conversion factor is $34.7315.
DATES: Effective date: This rule this rule is effective January 1,
1999.
Applicability date: Part 405 subpart D is applicable for private
contract affidavits signed and private contracts entered into on or
after January 1, 1999.
This rule is a major rule as defined in Title 5, United States
Code, section 804(2). Pursuant to 5 U.S.C. section 801(a)(1)(A), we are
submitting a report to the Congress on this rule on October 30, 1998.
Comment date: We will accept comments on interim RVUs for selected
procedure codes identified in Addendum C and on interim practice
expense RVUs for all codes as shown in Addendum B. Comments will be
considered if we receive them at the appropriate address, as provided
below, no later than 5 p.m. on January 4, 1999.
ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: HCFA-1006-FC, P.O. Box 26688,
Baltimore, MD 21207-0488.
If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:
Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or
Room C5-14-03, 7500 Security Boulevard, Baltimore, MD 21244-1850.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code HCFA-1006-FC. Comments received timely will be available
for public inspection as they are received, generally beginning
approximately 3 weeks after publication of a document, in Room 443-G of
the Department's offices at 200 Independence Avenue, SW., Washington,
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.
(phone: (202) 690-7890).
FOR FURTHER INFORMATION CONTACT:
Roberta Epps, (410) 786-4503 (for issues related to outpatient
rehabilitation services).
Stephen Heffler, (410) 786-1211 (for issues related to the Medicare
Economic Index).
Anita Heygster, (410) 786-4486 (for issues related to private
contracts).
Jim Menas, (410) 786-4507 (for issues related to Pap smears and medical
direction for anesthesia services).
Robert Niemann, (410) 786-4569 (for issues related to the drugs and
biologicals policy).
Regina Walker-Wren, (410) 786-9160 (for issues related to physician
assistants, nurse practitioners, clinical nurse specialists, and
certified nurse-midwives).
Craig Dobyski, (410) 786-4584 (for issues related to
teleconsultations).
Stanley Weintraub, (410) 786-4498 (for issues related to practice
expense relative value units and all other issues).
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To assist readers in referencing sections contained in this
preamble, we are providing the following table of contents. Some of the
issues discussed in this preamble affect the payment policies but do
not require changes to the regulations in the Code of Federal
Regulations. Information on the regulation's impact appears throughout
the preamble and not exclusively in part IX.
Table of Contents
I. Background
A. Legislative History
B. Published Changes to the Fee Schedule
II. Specific Proposals for Calendar Year 1998; Response to Comments
A. Resource-Based Practice Expense Relative Value Units
1. Resource-Based Practice Expense Legislation
2. Proposed Methodology for Computing Practice Expense Relative
Value Units
3. Other Practice Expense Policies
[[Page 58815]]
4. Refinement of Practice Expense Relative Value Units
5. Reductions in Practice Expense Relative Value Units for
Multiple Procedures
6. Transition
B. Medical Direction for Anesthesia Services
C. Separate Payment for a Physician's Interpretation of an
Abnormal Papanicolaou Smear
D. Rebasing and Revising the Medicare Economic Index
III. Implementation of the Balanced Budget Act
A. Payment for Drugs and Biologicals
B. Private Contracting with Medicare Beneficiaries
C. Payment for Outpatient Rehabilitation Services
1. BBA 1997 Provisions Affecting Payment for Outpatient
Rehabilitation Services
a. Reasonable Cost-Based Payments
b. Prospective Payment System for Outpatient Rehabilitation
Services
(1) Overview
(2) Services Furnished by Skilled Nursing Facilities
(3) Services Furnished by Home Health Agencies
(4) Services Furnished by Comprehensive Outpatient
Rehabilitation Facilities
(5) Site-of-Service Differential
(6) Mandatory Assignment
2. Uniform Procedure Codes for Outpatient Rehabilitation
Services
3. Financial Limitation
a. Overview
b. Use of Modifiers to Track the Financial Limitation
c. Treatment of Services Exceeding the Financial Limitation
4. Qualified Therapists
5. Plan of Treatment
D. Payment for Services of Certain Nonphysician Practitioners
and Services Furnished Incident to their Professional Services
E. Payment for Teleconsultations in Rural Health Professional
Shortage Areas
IV. Refinement of Relative Value Units for Calendar Year 1999 and
Responses to Public Comments on Interim Relative Value Units for
1998
A. Summary of Issues Discussed Related to the Adjustment of
Relative Value Units
B. Process for Establishing Work Relative Value Units for the
1999 Fee Schedule
V. Physician Fee Schedule Update and Conversion Factor for Calendar
Year 1999
VI. Provisions of the Final Rule
VII. Collection of Information Requirements
VIII. Regulatory Impact Analysis
A. Regulatory Flexibility Act
B. Resource-Based Practice Expense Relative Value Units
C. Medical Direction for Anesthesia Services
D. Separate Payment for a Physician's Interpretation of an
Abnormal Papanicolaou Smear
E. Rebasing and Revising the Medicare Economic Index
F. Payment for Nurse Midwives' Services
G. BBA Provisions Included in This Proposed Rule
H. Impact on Beneficiaries
Addendum A--Explanation and Use of Addenda B and C
Addendum B--Relative Value Units (RVUs) and Related Information
Addendum C--Codes with Interim RVUs
In addition, because of the many organizations and terms to which
we refer by acronym in this final rule, we are listing these acronyms
and their corresponding terms in alphabetical order below:
AANA: American Association of Nurse Anesthetists
ABC: Activity based costing
ABN: Advance Beneficiary Notice
AHE: Average hourly earnings
AMA: American Medical Association
ANCC: American Nurses Credentialing Center
ASA: American Society of Anesthesiologists
ASOPA: American Society of Orthopedic Physician Assistants
AWP: Average wholesale price
BBA: Balanced Budget Act of 1997
BLS: Bureau of Labor Statistics
CAAHEP: Commission on Accreditation of Allied Health Education
Programs
CF: Conversion factor
CFR: Code of Federal Regulations
CMSAs: Consolidated Metropolitan Statistical Areas
CORF: Comprehensive outpatient rehabilitation facility
CPEPs: Clinical Practice Expert Panels
CPI: Consumer Price Index
CPI-U: Consumer Price Index for All Urban Consumers
CPS: Current Population Survey
CPT: [Physicians'] Current Procedural Terminology
CRNA: Certified Registered Nurse Anesthetist
DME: Durable medical equipment
DMEPOS: Durable medical equipment, prosthetics, orthotics, and
supplies
DRG: Diagnosis-related group
EAC: Estimated acquisition cost
ECI: Employment Cost Index
ES-202 Data: Bureau of Labor Statistics from State unemployment
insurance agencies
ESRD: End-stage renal disease
FDA: Food and Drug Administration
FMR: Fair market rental
FQHC: Federally qualified health center
GAAP: Generally accepted accounting principles
GAF: Geographic adjustment factor
GPCI: Geographic practice cost index
HCFA: Health Care Financing Administration
HCPAC: Health Care Professionals Advisory Committee
HCPCS: HCFA Common Procedure Coding System
HHA: Home health agency
HHS: [Department of] Health and Human Services
HMO: Health maintenance organization
HPSA: Health professional shortage area
HRSA: Health Resources and Services Administration
HUD: [Department of] Housing and Urban Development
IPLs: Independent Physiologic Laboratories
MedPAC: Medicare Payment Advisory Commission
MEI: Medicare Economic Index
MGMA: Medical Group Management Association
MSA: Metropolitan Statistical Area
MSA: Medicare Supplemental Insurance
MVPS: Medicare volume performance standard
NAIC: National Association of Insurance Commissioners
NBCOPA: National Board on Certification for Orthopedic Physician
Assistants
NCCPA: National Council on Certification of Physician Assistants
NPI: National provider identifier
OBRA: Omnibus Budget Reconciliation Act
OTIP: Occupational therapist in independent practice
PC: Professional component
PHS: Public Health Service
PMSA: Primary Metropolitan Statistical Area
PPI: Producer price index
PPS: Prospective payment system
PTIP: Physical therapist in independent practice
RBRVS: Resource Based Relative Value Scale
RHC: Rural health clinic
RUC: [AMA's Specialty Society] Relative [Value] Update Committee
RN: Registered nurse
RVU: Relative value unit
SMS: Socioeconomic Monitoring System
SNF: Skilled nursing facility
TC: Technical component
TEFRA: Tax Equity and Fiscal Responsibility Act
UPIN: Uniform provider identifier number
I. Background
A. Legislative History
Since January 1, 1992, Medicare has paid for physicians' services
under section 1848 of the Social Security Act (the Act), ``Payment for
Physicians' Services.'' This section contains three major elements: (1)
A fee schedule for the payment of physicians' services; (2) a
sustainable growth rate for the rates of increase in Medicare
expenditures for physicians' services; and (3) limits on the amounts
that nonparticipating physicians can charge beneficiaries. The Act
requires that payments under the fee schedule be based on national
uniform relative value units (RVUs) based on the resources used in
furnishing a service. Section 1848(c) of the Act requires that national
RVUs be established for physician work, practice expense, and
malpractice expense.
Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments
in RVUs because of changes resulting from a review of those RVUs may
not cause total physician fee schedule payments to differ by more than
$20 million from what they would have been had the adjustments not been
made. If this tolerance is exceeded, we must make adjustments to the
conversion factors (CFs) to preserve budget neutrality.
[[Page 58816]]
B. Published Changes to the Fee Schedule
In the June 5, 1998, proposed rule (63 FR 30820), we listed all of
the final rules published through October 31, 1997 relating to the
updates to the RVUs and revisions to payment policies under the
physician fee schedule. In the June 5, 1998 proposed rule (63 FR
30818), we discussed several policy options affecting Medicare payment
for physicians' services including resource-based practice expense
RVUs, medical direction rules for anesthesia services, and payment for
abnormal Pap smears. Also, we discussed the rebasing of the Medicare
Economic Index from a 1989 base year to a 1996 base year. Further,
based on BBA, we proposed revising our payment policy for nonphysician
practitioners, for outpatient rehabilitation services, and for drugs
and biologicals not paid on a cost or prospective payment basis. In
addition, based on BBA, we discussed implementing new payment policies
for certain physicians and practitioners who opt out of Medicare and
furnish covered services to Medicare beneficiaries through private
contracts. And finally, based on BBA, we discussed teleconsultation
services.
This final rule affects the regulations set forth at 42 CFR part
405, which consists of regulations on Federal health insurance for the
aged and disabled; part 410, which consists of regulations on
supplementary medical insurance benefits; part 414, which consists of
regulations on the payment for Part B medical and other health
services; part 415, which pertains to services furnished by physicians
in providers, supervising physicians in teaching settings, and
residents in certain settings; part 424, which pertains to the
conditions for Medicare payment; and part 485, which pertains to
conditions of participation: specialized providers.
II. Specific Proposals for Calendar Year 1998; Response to Comments
In response to the publication of the June 5, 1998 proposed rule,
we received approximately 14,000 comments. We received comments from
individual physicians, health care workers, and professional
associations and societies. The majority of the comments addressed the
proposal related to the resource-based practice expense policy.
The proposed rule discussed policies that affect the number of RVUs
on which payment for certain services would be based. Certain changes
implemented through this final rule are subject to the $20 million
limitation on annual adjustments contained in section
1848(c)(2)(B)(ii)(II) of the Act.
After reviewing the comments and determining the policies we will
implement, we have estimated the costs and savings of these policies
and added those costs and savings to the estimated costs associated
with any other changes in RVUs for 1999. We discuss in detail the
effects of these changes in the Regulatory Impact Analysis (section
IX).
For the convenience of the reader, the headings for the policy
issues in this section correspond to the headings used in the June 5,
1998 proposed rule. More detailed background information for each issue
can be found in the June 5, 1998 proposed rule.
A. Resource-Based Practice Expense Relative Value Units
1. Resource-Based Practice Expense Legislation
Section 121 of the Social Security Act Amendments of 1994 (Public
Law 103-432), enacted on October 31, 1994, required us to develop a
methodology for determining resource-based practice expense RVUs for
each physician's service that would be effective for services furnished
in 1998. In developing the methodology, we were required to consider
the staff, equipment, and supplies used in providing medical and
surgical services in various settings.
The legislation specifically required that, in implementing the new
system of practice expense RVUs, we apply the same budget-neutrality
provisions that we apply to other adjustments under the physician fee
schedule.
On August 5, 1997, the President signed the BBA into law. Section
4505(a) of BBA delayed the effective date of the resource-based
practice expense RVU system until January 1, 1999. In addition, BBA
provided for the following revisions in the requirements to change from
a charge-based practice expense RVU system to a resource-based method.
Instead of paying for all services entirely under a resource-based
system in 1999, section 4505(b) of BBA provided for a 4-year transition
period. The practice expense RVUs for the year 1999 will be the product
of 75 percent of charge-based RVUs (1998) and 25 percent of the
resource-based RVUs. For the year 2000, the percentages will be 50
percent charge-based and 50 percent resource-based. For the year 2001,
the percentages will be 25 percent charge-based and 75 percent
resource-based. For subsequent years, the RVUs will be totally
resource-based.
Section 4505(e) of BBA provided that, for 1998, the practice
expense RVUs be adjusted for certain services in anticipation of the
implementation of resource-based practice expenses beginning in 1999.
Practice expense RVUs for office visits were increased.
For other services whose practice expense RVUs (determined for
1998) exceeded 110 percent of the work RVUs and were provided less than
75 percent of the time in an office setting, the 1998 practice expense
RVUs were reduced to a number equal to 110 percent of the work RVUs.
This limitation did not apply to services that had a proposed resource-
based practice expense RVU in the June 5, 1998 proposed rule that was
an increase from its 1997 practice expense RVU.
The total of the reductions under this provision was less than the
statutory maximum of $390 million. The procedure codes affected and the
final RVUs for 1998 were published in the October 31, 1997 final rule
(62 FR 59103).
Section 4505(d)(2) of BBA required that the Secretary transmit a
report to the Congress by March 1, 1998, including a presentation of
data to be used in developing the practice expense RVUs and an
explanation of the methodology. A report was submitted to the Congress
in early March 1998. Section 4505(d)(3) required that a proposed rule
be published by May 1, 1998, with a 90-day comment period. For the
transition to begin on January 1, 1999, a final rule must be published
by October 30, 1998.
BBA also required that we develop new resource-based practice
expense RVUs. In developing these new practice expense RVUs, section
4505(d)(1) required us to--
<bullet> Utilize, to the maximum extent practicable, generally
accepted accounting principles that recognize all staff, equipment,
supplies, and expenses, not just those that can be tied to specific
procedures, and use actual data on equipment utilization and other key
assumptions;
<bullet> Consult with organizations representing physicians
regarding the methodology and data to be used; and
<bullet> Develop a refinement process to be used during each of the
four years of the transition period.
2. Proposed Methodology for Computing Practice Expense Relative Value
Units
(See Addendum B in the June 5, 1998 proposed rule (63 FR 30888) for a
detailed technical description of the proposed methodology.)
In the June 5, 1998 proposed rule (63 FR 30827), we proposed a
methodology
[[Page 58817]]
for computing resource-based practice expense RVUs that uses the two
significant sources of actual practice expense data we have available:
the Clinical Practice Expert Panel (CPEP) data and the American Medical
Association's (AMA's) Socioeconomic Monitoring System (SMS) data. This
methodology is based on an assumption that current aggregate specialty
practice costs are a reasonable way to establish initial estimates of
relative resource costs of physicians' services across specialties. It
then allocates these aggregate specialty practice costs to specific
procedures and, thus, can be seen as a ``top-down'' approach.
Practice Expense Cost Pools
We used actual practice expense data by specialty, derived from the
1995 through 1997 SMS survey data, to create six cost pools:
administrative labor, clinical labor, medical supplies, medical
equipment, office supplies, and all other expenses. There were three
steps in the creation of the cost pools.
Step 1: We used the AMA's SMS survey of actual cost data to
determine practice expenses per hour by cost category. The practice
expenses per hour for each physician respondent's practice was
calculated as the practice expenses for the practice divided by the
total number of hours spent in patient care activities by the
physicians in the practice. The practice expenses per hour for the
specialty are an average of the practice expenses per hour for the
respondent physicians in that specialty.
Step 2: We determined the total number of physician hours, by
specialty, spent treating Medicare patients. This was calculated from
physician time data for each procedure code and the Medicare claims
data. The primary sources for the physician time data were surveys
submitted to the AMA's Specialty Society Relative Value Update
Committee (RUC) and surveys done by Harvard for the initial
establishment of the work RVUs.
Step 3: We then calculated the practice expense pools by specialty
and by cost category by multiplying the practice expenses per hour for
each category by the total physician hours.
Cost Allocation Methodology
For each specialty, we separated the six practice expense pools
into two groups and used a different allocation basis for each group.
<bullet> For group one, which includes clinical labor, medical
supplies, and medical equipment, we used the CPEP data as the
allocation basis. The CPEP data for clinical labor, medical supplies,
and medical equipment were used to allocate the clinical labor, medical
supplies, and medical equipment cost pools, respectively.
<bullet> For group two, which includes administrative labor, office
expenses, and all other expenses, a combination of the group one cost
allocations and the physician fee schedule work RVUs were used to
allocate the cost pools.
<bullet> For procedures performed by more than one specialty, the
final procedure code allocation was a weighted average of allocations
for the specialties that perform the procedure, with the weights being
the frequency with which each specialty performs the procedure on
Medicare patients.
Other Methodological Issues
Professional and Technical Component Services
Using the methodology described above, the professional and
technical components of the resource-based practice expense RVUs do not
necessarily sum to the global resource-based practice expense RVUs
since specialties with different practice expenses per hour provide the
components of these services in different proportions. We made two
adjustments to the methodology, depending on the specific HCFA Common
Procedure Coding System (HCPCS) code, so that the professional and
technical component practice expense RVUs for a service sum to the
global practice expense RVUs.
Practice Expenses per Hour Adjustments and Specialty Crosswalks
Since many specialties identified in our claims data did not
correspond exactly to the specialties included in the practice expenses
tables from the SMS survey data, it was necessary to crosswalk these
specialties to the most appropriate SMS specialty category. (See Table
3 in the June 5, 1998 proposed rule (63 FR 30833) for a listing of all
proposed crosswalks.)
We also made the following adjustments to the practice expense per
hour data:
<bullet> We set the medical materials and supplies practice
expenses per hour for the specialties of ``Oncology'' and ``Allergy and
Immunology'' equal to the medical materials and supplies practice
expenses per hour for ``All Physicians,'' stating that we make separate
payment for the drugs furnished by these specialties.
<bullet> We based the administrative payroll, office, and other
practice expenses per hour for the specialties of ``Physical Therapy''
and ``Occupational Therapy'' on data used to develop the salary
equivalency guidelines for these specialties. We set the remaining
practice expense per hour categories equal to the ``All Physicians''
practice expenses per hour from the SMS survey data.
<bullet> Due to uncertainty concerning the appropriate crosswalk
and time data for the nonphysician specialty ``Audiologist,'' we
derived the resource-based practice expense RVUs for codes performed by
audiologists from the practice expenses per hour of the other
specialties that perform these codes.
<bullet> Because we believed that the use of the average practice
expenses per hour should create the appropriate practice expense pool
for radiology, we did not attempt to differentiate the practice
expenses per hour for radiologists according to who owned the
equipment.
Time Associated With the Work Relative Value Units
The time data resulting from the refinement of the work RVUs have
been, on the average, 25 percent greater than the time data obtained by
the Harvard study for the same services. We increased the Harvard time
data in order to ensure consistency between these data sources.
For services such as radiology, dialysis, and physical therapy, and
for many procedures performed by independent physiological laboratories
and the nonphysician specialties of clinical psychologist and
psychologist (independent billing), we calculated estimated total
physician times for these services based on work RVUs, maximum clinical
staff time for each service as shown in the CPEP data, or the judgment
of our clinical staff.
We calculated the time for Current Procedural Terminology (CPT)
codes 00100 through 01996 using the base and time units from the
anesthesia fee schedule and the Medicare allowed claims data.
We received the following comments on our proposed methodology to
calculate resource-based practice expense RVUs:
Top-Down Methodology
Comment: Most of the physician specialty societies commenting on
our proposed general methodology supported the use of the top-down
approach as the most reasonable methodology for developing resource-
based practice expense RVUs, and the most responsive approach to the
requirements of BBA. This was echoed by comments from several
nonphysician organizations, the Association of American Medical
Colleges, and the Medical Group Management
[[Page 58818]]
Association, as well as several hundred individual commenters.
These commenters supported the top-down method for a variety of
reasons:
<bullet> It reflects the relative values of physicians' actual
practice expenses.
<bullet> It uses the best available sources of aggregate practice
expense data.
<bullet> It recognizes specialty-specific indirect costs.
<bullet> It does not rely upon arbitrary, distorting data
adjustments such as ``linking'' and ``scaling.''
<bullet> It is conducive to refinement.
MedPAC also agreed that this approach is necessary, because of
limitations in the CPEP process and because the top-down approach
assures that all practice costs are reflected in the RVUs.
However, several organizations, mainly representing primary care
physicians and supported by comments from individual physicians,
opposed the use of a top-down methodology to develop practice expense
RVUs. They argued that the top-down approach is not resource-based but,
rather, rewards higher paid physicians who have spent more in the past,
regardless of the extent to which these expenditures contributed to
patient care. Thus, the commenters claimed that the top-down approach
perpetuates the inequities in the current charge-based practice expense
RVUs that the implementation of a resource-based practice expense
system was supposed to correct.
One commenter also claimed that the top-down approach is not
responsive to the requirements of BBA, as the methodology is not based
on generally accepted accounting principles. Further, the commenter
argued that this new proposal is not more responsive to the concerns of
the medical community in general but, rather, only benefits those
specialties whose income was projected to decline under the bottom-up
approach.
A specialty society representing clinical oncology opposed the top-
down methodology because--
<bullet> It does not actually measure appropriate input resource
costs and thus pays for inefficiencies;
<bullet> It overpays hospital-based and underpays office-based
services; and
<bullet> The RVUs for individual codes cannot be refined because of
the use of macro-specialty per hour costs.
There were several comments that expressed concern about the more
specific impacts of the methodology. A major primary care organization
pointed out that, under the 1997 proposed rule, an internist would have
had to provide only 15 midlevel established patient office visits to
obtain the practice expense reimbursement of a single coronary triple-
bypass graft, compared to 40 visits under our current proposal. One
organization opposed the use of the top-down approach because of the
estimated reduction in payments to radiology and radiation oncology.
Another commenter, representing pathologists, expressed concern that
because pathology received small gains under the bottom-up method, but
a 10 percent reduction under the top-down, there are possible flaws in
the top-down methodology.
A few of the above comments specifically recommended that we adopt
a new bottom-up approach that is responsive to the BBA, the General
Accounting Office (GAO), and the concerns of the medical community.
Another organization commented that both top-down and bottom-up
methodologies are inherently flawed, and that we should consider an
entirely new payment algorithm using type of practice. One of the major
primary care organizations concluded that the top-down methodology is
only a reasonable starting point that will need to be improved during
refinement in order to meet the original intent of improving practice-
expense payments for undervalued primary care and other office-based
services.
Response: As we stated in our proposed rule, BBA requires us to
``utilize, to the maximum extent practicable, generally accepted cost
accounting principles which recognize all staff, equipment, supplies,
and expenses, not just those which can be tied to specific
procedures****'' We still believe that the top-down methodology is more
responsive to this BBA requirement. By using aggregate specialty
practice costs as the basis for establishing the practice expense
pools, the top-down method recognizes all of a specialty's costs, not
just those linked to specific procedures.
We also believe that the other reasons outlined in the proposed
rule for preferring the top-down method are still valid. It answers
many of the criticisms and questions from the medical community and the
GAO regarding the bottom-up method's indirect practice expense
allocation method, treatment of administrative costs, and use of caps
and linking.
However, we agree that a possible weakness of the top-down approach
is that it may perpetuate historical inequities in the current charge-
based practice expense RVUs. More highly paid physicians would
presumably have more revenues that could subsequently be spent on their
practices. We believe this issue should be discussed during the
refinement process.
Comment: One major organization commented that we will need to
develop an alternative method for new and revised codes that are not
included in the SMS data because having multiple methods would lead to
questionable validity.
Response: It will not be necessary to develop an alternate
methodology for refinement of new and revised codes. Once direct inputs
are assigned to the new and revised codes, allocation to these codes
will follow the same methodology used for all other services. (See
Section II.A.4, Refinement of Practice Expense RVUs.)
Comment: Two major primary care organizations expressed concern
that we did not consult with the physician community about our
intention to abandon, rather than refine, our originally proposed
bottom-up approach, since they had assumed we would only be modifying
our original methodology. They commented that this is of greater
concern in light of BBA's requirement that we consult with physicians
regarding our methodology and of GAO's recommendation that we refine,
with no mention of replacing, the bottom-up method. One of the comments
stated, that as the GAO found the bottom-up method acceptable, their
society would like the GAO's assurance that the new method is sound.
Response: We believe we carried out the BBA requirement to consult
with physician organizations. There were extensive consultations with
physicians, including the validation panels, the cross specialty panel,
and the indirect cost symposium. During the course of each of these
meetings, physicians and others pointed out serious problems with the
bottom-up methodology. We have had two multispecialty meetings this
year to explain our proposed methodology and have also had numerous
meetings and discussions with many specialty societies. During all
these meetings we carefully listened to all points of view and to
suggestions for developing the new proposal. Following this lengthy
consultation process, we published our new proposal with a 90-day
comment period. This provided further opportunities for all interested
groups to review and comment on this proposal.
It is true that the GAO did not recommend that we totally replace
our bottom-up approach. It is our understanding that the GAO was not
asked to review alternative methods. In any case, their report did not
recommend against adopting a new methodology. Their report did point
out
[[Page 58819]]
several significant weaknesses in our original approach that we
believed were better responded to by adopting a top-down methodology.
Comment: One organization urged that we publish the practice-
expense RVUs three ways, using a top-down, a bottom-up, and a hybrid
approach that uses SMS data for indirect costs and CPEP data for direct
costs. The bottom-up and hybrid approaches should reflect the
recommendations previously received relating to scaling, linking, and
the treatment of administrative costs. This could provide a basis for
developing comments that compare the interim practice expense RVUs with
those derived from a modified bottom-up approach. The commenter stated
that we should be open to considering arguments for a change in the
interim practice expense RVUs based on a group's determination that the
values under the bottom-up approach were more accurate.
Response: We believe that we proposed the methodology for
developing resource-based practice expense RVUs that best responds to
the requirements of the Social Security Act Amendments of 1994 and BBA.
From a practical standpoint, it would be very difficult to deal with
the inconsistencies between RVUs for various services that have been
derived from totally different methodologies.
SMS Data
Comment: Almost all specialty society commenters, and many
individual commenters, raised questions concerning shortcomings in the
SMS data, though several commented that SMS is the most appropriate
data source to use in developing specialty-specific practice expense
RVUs. As we noted in the proposed rule, the AMA itself pointed out that
the survey had not been designed to support the development of practice
expense RVUs. The AMA also stated that the sample size, the response
rate, and the fact that data was collected on the physician level,
rather than the practice level, raised methodological issues. Many
commenters echoed these concerns, and many raised what they saw as
further general methodological problems:
<bullet> MedPAC expressed concern about three types of potential
errors in the SMS data: the sampling error and nonresponse error
originally identified in our proposed rule and measurement error. Some
of this measurement error could occur because the survey measures
physician-level rather than practice-level costs, as noted above. In
addition, there could be measurement error by using a self-reported
survey if no mechanism exists to verify the information provided.
MedPAC suggested that we could reduce these errors through
additional data collection, perhaps implementing a subsample of SMS
survey participants, through an analysis of nonresponse error that
compares respondents with nonrespondents, through AMA's plans to do a
practice-level survey every other year, and through considering
methods, other than actual audits, to verify survey responses.
<bullet> Several of the smaller specialties, such as maxillofacial,
pediatric, vascular and thoracic surgeons, cardiology and gynecology
subspecialties, geriatricians, and pulmonologists expressed concern
with the validity and reliability of SMS data for those specialty and
subspecialty groups not adequately represented in the SMS survey. A
commenter also stated that academic and hospital-based specialties,
such as critical care and neonatology, were not appropriately
represented. Many specialty societies requested that we consider
practice expense data obtained by under-represented specialty and
subspecialty groups.
<bullet> Several nonphysician specialties, though supporting the
use of SMS data, raised the need to modify the survey to include
nonphysicians in the future. A commenter stated that, because
nonphysicians were not represented in the SMS survey, we have been
forced to make an educated guess about which specialties they most
resemble. Another commenter pointed out that the SMS data contains no
information about osteopathic physicians.
<bullet> Several specialties, regardless of their overall sample
size, expressed concerns about the combining together of subspecialties
with differing practice costs. For example, organizations representing
cardiologists commented that it is not known how many in their sample
were providing evaluation and management services, as opposed to
performing equipment intensive procedures that have much higher costs.
Two specialty societies representing nuclear physicians, along with
several hundred individual commenters, objected to the small sample of
this subspecialty, with its high costs related to the use of
radiopharmaceuticals, being combined with radiologists into a single
practice expense pool. The comments recommended that we increase
nuclear medicine's practice expense RVUs by 20 percent.
Similarly, a vascular surgery organization objected to being
combined with cardiothoracic surgeons, who made up 75 percent of the
sample and whose practice style differs substantially from vascular
surgeons. An organization representing pediatrics expressed concern
that pediatric subspecialties were grouped together with their adult
counterparts, such as gastroenterology. The AMA commented on this point
that it plans refinements for future surveys to enhance the utility of
the data.
<bullet> Several commenters noted that the survey consisted of
physician-owned practices, despite the trend toward more physicians
working as employees, resulting in a possible bias toward solo or small
group practices. For example, one commenter stated that the majority of
emergency room physicians now work as employees or under contract.
Another commenter asserted that the majority of pediatricians list
their status as ``employed.'' The AMA commented, in this regard, that a
key refinement to the SMS survey will be the development of a practice-
level survey to complement the current process.
<bullet> One commenter questioned our assumption that physician
respondents to SMS share practice expenses equally with all other
physician owners in the practice, since there is no data to show that
this is the prevalent method.
<bullet> An organization representing nurses commented that issues
related to changes in acuity and case mix in ambulatory care are not
being addressed, particularly as they pertain to the increased
professionalization of clinical staff types. The organization argued
that there is a need to incorporate into the survey process a clearer
distinction between the types of clinical staff that are employed based
on specialty practice.
<bullet> Concerns were raised by some commenters that the SMS data
did not always include the actual costs of a given specialty. Several
organizations representing radiologists, radiation oncologists, and
cardiologists commented that the methodology employed by the SMS survey
consistently underestimated the actual costs of equipment.
Organizations representing emergency room physicians, supported by the
comment from the AMA, argued that the significant costs of both stand-
by time and uncompensated care are not reflected in the SMS data and
that these costs need to be recognized.
A gastroenterology specialty society asserted that the SMS data
grossly understated actual expenses when compared to its own study. Two
commenters stated that costs for home visits, such as travel expenses
and insurance, are not adequately represented in the data. One
organization commented that the SMS
[[Page 58820]]
data fails to adequately incorporate resources, including billing,
nursing time, and transportation costs for audiologists utilized in
settings such as skilled nursing facilities.
One commenter stated that the added costs for compliance with
federal initiatives, such as anti-fraud and abuse efforts and the new
evaluation and management documentation guidelines, are not yet
reflected in the SMS data. These costs should be recognized during the
refinement process and included in future surveys.
<bullet> On the other hand, several commenters argued that costs
were included in the SMS data that should be excluded because they are
paid for separately from the physician fee schedule. One commenter
pointed to separately reimbursable supplies and drugs, and another to
the costs of taking physician staff into the hospital, as examples of
costs included in SMS that could lead to a double payment by Medicare.
A society representing vascular surgeons commented that the technical
component of noninvasive vascular laboratory testing falls into this
``gray zone.''
<bullet> A national specialty society commented that the AMA
analysis of the ``zero'' responses by specialty by cost categories
(that is, those cost categories where respondents indicated there were
no costs) shows that a significant percentage of pathologists'
responses for direct cost categories are zero as compared to the
``zero'' response rates for all physicians. The comment requested that
the SMS pathology data be cleared of all ``zero'' responses for all
cost categories, not just for the total cost category, prior to the
calculation of mean costs. For the purpose of calculating practice
expense per hour for pathology, the society said, we should only use
data from pathologists who incur a particular cost.
<bullet> There were a number of comments concerning the SMS data on
the specialty-specific physician patient care hours, which is one of
the variables used to compute the practice expense per hour for each
specialty:
<bullet> Many specialty societies stated their concern that in the
calculation of the specialty-specific practice expense per hour,
specialties working the longest hours are disadvantaged. One commenter
pointed out that practice expense is not uniformly distributed over the
course of a given day; there are less costs when patient care takes
place after, rather than during, office hours.
Another commenter argued that our approach assumes that all of the
patient care hours in the SMS survey are reflected in our claims data.
However, the commenter stated, much time spent in patient care
activities is not billable, such as the involvement of transplant
surgeons in patient care after the initial assessments but prior to the
actual transplants.
One specialty society stated that hospital-based physicians' hours
of work are probably overstated, as they will include total time spent
in the facility and not just hours of providing patient services. One
commenter questioned both the accuracy of the SMS data on hours worked
per week, as well as our assumption that the level of practice expense
incurred increases proportionally with the hours spent in patient care.
An organization stated that physician reports of number of hours are
less reliable than the reports of costs and are prone to overstatement.
For these reasons, five specialty societies recommended using a
standardized work week, usually a 40-hour week, for all specialties.
<bullet> Many other specialty groups argued equally vehemently
against any standardization of the patient care hours. One group
commented that subjective adjustments to the SMS data, especially those
which reallocate practice expenses among specialties, should be
avoided. The comment added that suggestions that a standardized 40-hour
work week be imposed on the data should be rejected because the
proposal is driven by an arbitrary, subjective presumption that cross-
specialty practice expense variations are ``too large.''
Another group argued that, as many physicians work more than a 40-
hour week, such an adjustment would introduce additional error into the
data and distort the relationship between different specialties'
practice expenses per hour.
<bullet> Three organizations were concerned about the advantage
given to specialties that use nonphysician practitioners who are not
reimbursable. In such cases, the physician would incur practice expense
costs, but the time of practitioners would not be included in the
physician patient care hours in the denominator of the practice expense
per hour calculation.
On the other hand, another commenter stated that we should not
adjust the SMS data for midlevel practitioners, such as optometrists or
audiologists, as physician practices employing midlevel practitioners
are likely to be more complex than a physician-only operation.
<bullet> One specialty society commented that the demographics of
the SMS survey are not clear, as there are no assurances that the
sample is not biased towards one particular area of the country and
does not exclude some areas.
Response: We believe that most of the above comments identified
important areas for needed future improvement in our data collection
efforts on aggregate specialty-specific practice expense. However,
although the SMS survey was not initially intended to be used to
develop practice expense RVUs, we believe it is the best available
source of data on actual multispecialty practice costs that allows us
to recognize all staff, equipment, supplies, and expenses, not just
those that can be tied to specific procedures. Many specialties
supported this.
For example, a specialty society commented, ``As with any complex
database, the AMA SMS database is not perfect. It is, however, the best
available source of data for aggregate practice expenses.'' The Medical
Group Management Association (MGMA) stated in its comment that, ``The
SMS survey data is the most appropriate and only primary data set in
existence to determine specialty specific costs pools.''
We also need to point out that many of the weaknesses in the SMS
data could well be found in any other survey, whether undertaken by us,
some other national group, or a medical specialty society. Problems
with sample size and response rate have plagued other previous attempts
to gather reliable data on practice expenses. Problems with measurement
error may be a serious impediment for survey data that is collected
with the purpose of influencing the level of a given specialty's
practice expense pool. In fact, we believe one advantage of the current
SMS data is that they were collected before the 1997 and 1998 proposed
rules were published.
We recognize that some specialties are under-represented or not
appropriately represented in the SMS data and some are not included at
all. We also acknowledge that additional data may need to be obtained
and some adjustments made. One of our most important tasks during the
immediate refinement period will be to work with the AMA and the
medical community to consider possible ways to improve the
representativeness of the aggregate specialty-specific data so that
sampling error is decreased. As part of the refinement, we will also
need to develop strategies to eliminate as many sources of nonresponse
and measurement error as possible. (For further information on our
refinement efforts to improve the accuracy of our
[[Page 58821]]
data, see Section II.A.4, Refinement of Practice Expense RVUs.)
As indicated earlier, we believe an advantage of the SMS data we
used is that it was collected prior to the proposed rule. In fact, it
was collected prior to the original proposal in 1997 that was delayed
by BBA and that would have resulted in large redistributions among
specialties.
We are very concerned, though, about the potential biases that may
exist in any subsequent survey data collected by the SMS process or
other surveys. We especially believe there is a problem in using data
collected and submitted to us by individual specialties. We believe it
is more appropriate to use data collected at the same time by an
independent surveyor for a wide variety of specialties that both gain
and lose under the proposal.
Further, now that it is widely known how these survey data are
being used, every specialty has an incentive to ensure that their data
are as high as possible in future surveys. We agree with MedPAC that it
may not be possible for Medicare to audit these data and that it is
essential that alternatives be established by SMS and others. Perhaps
specialty data that significantly changes in a future survey should be
selectively audited by SMS through an independent auditor or other
appropriate entity before being considered for use by us. We will
consult with physician groups and others about this during the
refinement process.
Comment: One national organization suggested the use of MGMA survey
data either as a supplement or alternative to SMS in the future.
Response: We do not believe that the MGMA survey could currently be
used as an alternative to SMS. As we noted in our proposed rule, due to
selective sampling and low response rate, this survey is not
representative of the population of physicians and cannot be used to
derive code-specific RVUs. This view is based on consultations with
MGMA representatives. However, we do believe that this survey data can
be used as one way to validate the general accuracy of the SMS data. We
have analyzed the MGMA data and have concluded that, in general, it
supports the relative specialty-specific ranking of the practice
expense per hour data derived from the SMS survey.
Comment: One specialty society recommended using median, instead of
mean, values to calculate each specialty's practice expense per hour.
This comment argued that the use of medians would eliminate outliers
and is statistically more appropriate.
However, three other organizations specifically commented
supporting our decision to use mean SMS data rather than median data.
These comments asserted that, particularly with a small sample, use of
the median would obscure any major differences in practice costs within
a specialty.
Response: We will continue to calculate the practice expenses per
hour by using the mean values for each specialty, at least for the
purposes of this final rule. This is another issue that can be
revisited during the refinement period.
Comment: Organizations representing emergency room physicians, as
well as several hundred individual commenters, claimed that the SMS
data seriously under-represented the true practice costs of emergency
care. The commenters stated that the SMS data, as noted above, did not
include costs of uncompensated care, much of it mandated under the
Federal Emergency Medical Treatment and Active Labor Act (Public Law
99-272), nor stand-by expenses.
In addition, the comments argued, the SMS data failed to capture a
representative cross-section of their types of practice arrangements;
the SMS survey focused on physician owners, but the majority of
emergency room physicians work as employees or under contract.
Therefore, one commenter asserted, SMS did not include the largest
single expense for most emergency physicians: the costs associated with
employment by practice management firms, which can total between 30-40
percent of the physician's fee.
One of the specialty societies included with its comments the
results of a study it commissioned, which showed that the mean practice
expense per hour for emergency physicians was $27.33, more than double
the $13 per hour based on SMS, even without including uncompensated
care. If we are not willing at this time to substitute this survey data
for that from the SMS, the organization recommended, with support from
a comment from the AMA, that we crosswalk emergency medicine to the
practice expense per hour for ``All Physicians,'' which is $67.50.
Response: Though many specialties must deal with the issue of
uncompensated care, we do agree that it may pose a particular problem
for emergency physicians, who are obligated under law to treat any
patient regardless of the patient's ability or willingness to pay for
treatment. Therefore, the amount of patient care hours spent on
uncompensated care could be significantly higher for emergency medicine
than for any other specialty. These issues require further examination.
In the meantime, we will make an adjustment in our calculation of the
practice expense per hour for emergency medicine by using the ``All
Physicians'' practice expense per hour to calculate the administrative
labor and other expenses cost pool. We will continue to calculate the
clinical labor, supply, equipment, and office cost pools using the SMS-
derived data, as it seems unlikely that, as a hospital-based specialty,
emergency medicine's costs for these categories would approximate those
of the average physician.
Comment: Many commenters argued that the reductions published in
the June 5, 1998, NPRM for services without work RVUs were
inappropriate. The commenters represented a wide spectrum of
specialties including radiology, radiation oncology, cardiology,
independent physiological and other laboratories, psychology,
audiology, dermatology, and others. These comments focused on the fact
that AMA does not survey some of the entities that provide these
services. They argued that the CPEP data are flawed and the indirect
allocation methodology is biased.
Response: Although it is true that the AMA does not survey the
entities that provide some of these services, this does not necessarily
mean that these services are inadequately represented in the SMS data.
If these services (or in the case of technical component services, the
associated global services) are provided in the practices of physician
owners surveyed by the SMS in the same proportion as they are reflected
in our claims data, the practice expense per hour calculations and the
practice expense pools are reasonable.
If the CPEP data accurately contain the direct cost inputs for
these services, then the direct practice expense pool is being
allocated appropriately. With regard to the indirect allocation
methodology, we are modifying it to increase the weight of the direct
costs in the allocation, as discussed elsewhere.
However, the possibility exists that inaccuracies in the CPEP data
for these services are causing the substantial reductions seen in the
NPRM. Therefore, because we are not altering the CPEP at this time, as
an interim solution until the CPEP data for these services have been
validated, we have created a practice expense pool for all services
without work RVUs regardless of the specialty that provides them. We
allocated this practice expense pool to procedure codes using the
current practice expense relative value units.
[[Page 58822]]
While we are not convinced by the comments that were received to
date regarding a bias in the SMS survey data against these services, we
acknowledge those concerns and will examine this issue during the
refinement process.
Comment: The College of American Pathologists (CAP) requested that
patient care time included in the SMS data that is spent in autopsies
and supervision of technicians and paraprofessionals be excluded from
the patient care hours used to calculate the practice expense per hour
for pathology services. The commenter stated that these are Part A
services for which pathologists rarely incur any direct costs. The AMA
supported these adjustments and estimated the percentage of total
pathology patient care hours attributable to autopsy and supervision
services at 6 and 15 percent, respectively.
CAP also asked that some portion of the patient care hours category
of ``personally performing nonsurgical laboratory procedures including
reports'' be eliminated for 1999 when determining pathologists' total
patient care hours, as the SMS data includes both Part A and Part B
services. CAP stated that we should work with the CAP and the AMA to
determine the appropriate adjustment.
Response: Since pathologists have more Part A reimbursement than
any other specialty, we will decrease the number of patient care hours
by 6 percent for autopsies and 15 percent for supervision services.
However, until we have more information about the appropriate
adjustment for ``personally performing non-surgical laboratory
procedures including reports,'' the hours for those services cannot be
eliminated from our calculations. This point, as well as the general
issue of nonbillable hours, should be revisited during refinement.
Comment: Many specialty societies have commented on specific
problems with the SMS data that affect their own specialty and have
requested that we supplement or replace the SMS data with data provided
with their comments.
Response: There is not sufficient time before publication of the
final rule to begin to validate either the methodology or findings of
the submitted data. Since changes in any specialty's practice expense
per hour would have an impact on other specialties, we do not believe
it would be equitable to make any sweeping changes without the adequate
review that the refinement process can achieve. In addition, we stated
in our proposed rule that, for those larger specialties included in the
SMS survey, ``we are unlikely to make any changes in the final
rule****'' Therefore, we will continue to use the SMS-derived practice
expense per hour for these specialties, but will ensure that all of the
submitted data will be considered during the refinement process.
CPEP Data
Comment: Though one major specialty society commented that the CPEP
data, in general, is relatively sound, many comments pointed out
problems with the CPEP process and with the data derived from that
process:
<bullet> One group commented that the CPEPs did not have adequate
representation from practice managers; that there was no uniform policy
dealing with issues such as duplication of time or efficiencies that
might result from performing more than one task at a time; and that
there was inadequate time allotted for CPEPs to meet.
<bullet> Several subspecialties pointed out that they were not
included in the CPEP process and that this could have led to the
undervaluing of their services.
<bullet> Several commenters recommended that we use the CPEP data
as validated and refined by the validation panels.
<bullet> One organization commented that the CPEP data are flawed
since only 200 codes were reviewed by validation panels.
<bullet> One primary care group argued that we should not abandon
edits and modifications to raw CPEP data, as many codes are performed
by more than one specialty, and inaccuracies in the CPEP data can
affect several specialties.
<bullet> Two organizations commented that the CPEPs used what is
now obsolete salary and benefits data, at least for sonographers and
vascular technologists. One of these comments pointed out that for some
codes, a different cost was computed for the same equipment. Another
specialty society recommended that a review of prices and quantities
for supplies and equipment be included as part of the refinement
process.
<bullet> Two commenters were concerned that the CPEP data include
expenses that can be billed separately. A primary care specialty
society argued that we should edit out all direct inputs for services
to hospital patients. The comment mentioned that since these services
are paid for outside of the practice expense RVUs, failure to exclude
these inputs can distort relativity across categories of services such
as surgical services and office visits.
<bullet> One commenter clarified that the costs of therapy aides
are a part of practice expense and should be reflected in the CPEP
data, while the services of therapy assistants are included in the work
RVUs.
Response: We are aware that the raw CPEP data we have used in our
proposed methodology need further review. We also share many of the
concerns raised by those commenting on the issue. However, we believe
that the CPEP resource estimates, which were developed by practitioners
representing all the major specialties, are the best procedure level
data available at this time.
Under our top-down methodology, the CPEP inputs are used solely to
allocate each specialty's practice expense pool to the procedures
performed by that specialty. We have always believed that the relative
input estimates within families of codes for each specialty's CPEP data
were generally appropriate. In addition, the most contentious CPEP
values were the varying estimates for the administrative staff times,
and these values are not utilized in our top-down approach.
We chose not to apply the edits, caps, or linking that had
originally been proposed in our 1997 proposed rule as part of our
bottom-up methodology. These edits had met with severe criticism from
the medical community and were questioned by the GAO. We also did not
use the revised inputs from the validation panels we held in October
1997, as these panels only came to consensus on about 200 codes, and we
were not convinced that all of the revised values were correct.
However, we know that there is much needed improvement in the CPEP
data, and the identification and correction of any CPEP errors whether
in staff times, supplies, equipment, or pricing will be a major focus
of our refinement process.
Comment: One specialty society commented that we erred in not
incorporating increases in staff time recommended by validation panels.
Partly as a result, the practice expense RVUs for gastroenterologists'
out-of-office billing, scheduling, and record keeping are inadequate.
Another commenter stated that there were discrepancies in the
administrative data for skilled nursing facility services, with
subsequent visit codes being assigned only half of the billing time of
initial visits. A third commenter requested that we standardize the
administrative staff types according to the validation panels'
recommendations. Three commenters stated that we do not account for the
costs of maintaining an office full-time when the physician is
providing services out of the office.
[[Page 58823]]
Response: As stated above, under our proposed methodology, CPEP
administrative staff times have no effect on the practice expense RVUs
calculated for any code. The costs of maintaining an office while the
physician is providing services in a facility should be captured in the
SMS cost data and, thus, are a part of each specialty's practice
expense pool. As these would be indirect costs, they would be included
in the practice expense for each service by use of our allocation
methodology, which utilizes both directs costs and the physician work
RVUs.
Comment: Almost 30 specialty societies submitted specific CPT code-
level changes for the CPEP input data for clinical and administrative
labor time, supplies, and equipment for just under 3000 CPT codes. In
addition, many commenters included lists of codes with practice expense
RVUs that were considered anomalous, either within a code family, or in
relation to comparable codes. We also received comments from several
organizations with recommendations for revised crosswalks for those
codes not valued by the CPEPs, as well as recommended in-office inputs
for some codes that are now being done in the office, but were only
given practice expense RVUs for the facility setting.
Response: We had intended to make the CPEP revisions requested by a
given specialty as part of the final rule if the recommendations
appeared reasonable and if there would be no significant impact on any
other specialty. However, given the huge volume of recommended
revisions--over a third of the codes in the fee schedule would be
affected--acceptance of the recommended changes across the board would
almost certainly have a spill-over impact on many subspecialties and
between sites-of-service.
We believe it would be more responsible and fair to allow the
medical specialties to participate collectively in the needed revisions
as part of the refinement process. The deferral of the CPEP revisions
is in no way a reflection on the effort and thought that the commenters
obviously expended in arriving at their recommendations. All the code-
specific comments referred to above will be considered at the start of
the refinement period. (See Section II.A.4, Refinement of Practice
Expense RVUs)
Comment: Many organizations, representing both surgical and primary
care specialties, expressed concern that we averaged CPEP data for the
same procedures valued by more than one CPEP. Different rationales were
offered for this concern:
<bullet> Averaging could have disturbed the relative rankings of
codes within CPEPs.
<bullet> Straight averaging significantly overstated the costs of
evaluation and management services.
<bullet> Averaging CPEP costs altered practice expense
relationships within the evaluation and management family of services,
particularly with respect to emergency department evaluation and
management codes.
<bullet> The inclusion of estimates from those not performing the
procedures, including nonphysicians, could have distorted the values
for those services.
Likewise, different solutions were offered to answer the concerns:
<bullet> One specialty society recommended that we link the CPEP
data rather than relying on straight averages.
<bullet> Two organizations recommended using frequency-weighted
averages.
<bullet> Five groups recommended that the CPEP costs for redundant
codes be based on the inputs from the dominant specialty's CPEP panel.
Response: As we are making no other changes in the CPEP data for
this final rule, we will continue to use straight averaging for the
redundant CPEP codes for the purposes of this final rule. This issue
will be considered further during refinement.
Comment: Two commenters requested the inclusion in practice expense
of the procedure-related supplies which are brought into a skilled
nursing facility (SNF). One of these commenters made the same request
for home visits.
Response: Home visits are to be paid using the non-facility RVUs.
Therefore, any supplies that would be used are already included in the
payment. As for the SNF setting, this is an issue for refinement. We
would need more information about the supplies and why the SNF is not
responsible for providing them.
Comment: The American College of Surgeons sent a list of new
crosswalked codes where CPEP data had inadvertently been duplicated in
our database.
Response: We thank the commenter for pointing out this discrepancy,
and these duplications have been deleted.
Physician Time
Comment: One major specialty society recommended that efforts be
undertaken to move toward greater consistency in physician time data.
The commenter was concerned that since these data are derived from
eight different sources using different methodologies, our inflation of
the Harvard time data raises even more concern about consistency.
Three major organizations, two representing primary care and the
other a surgical specialty, recommended that we use the unadjusted
Harvard and RUC survey data. One reason given was the implication for
the work RVUs of any proposed revisions to the time data. The RUC
commented that, while the RUC physician time data may be greater than
Harvard time data for the same codes, it may be incorrect to assume
that all Harvard time data should be increased. The RUC and several
other organizations requested that we provide a description of the
methodology we used to make adjustments to the data in both the RUC and
Harvard physician time databases so they can comment on the validity of
the changes.
Response: The physician time data used for the development of the
practice expense pools are based on the Harvard resource-based RVUs
study and RUC survey data that were developed as part of the refinement
of the work RVUs. Both sets of data were based on physician surveys.
However, the RUC data, gathered in the process of refining the work
values of many CPT codes, are more current and, on average, exceeded
the original Harvard values by 25 percent. As a matter of consistency
and fairness to those services not yet refined by the RUC, we increased
the Harvard time data in proportion to the increases for related
services. A detailed description of the methodology we employed to make
all adjustments in physician time will be placed on the HCFA Homepage.
We still believe this adjustment is appropriate and we will
continue to use the adjusted values in our calculations for this final
rule. However, as the time values attributed to each procedure play an
important role in the determination of each specialty's practice
expense pool, we believe that ensuring the increased accuracy and
consistency of physician time data should be addressed as part of the
refinement of the practice expense RVUs.
Comment: Three surgical specialty societies commented that
evaluation and management times have been artificially inflated due to
rounding. A small increase in time would disproportionately inflate
high volume procedures that take little time.
Response: In our proposed rule, we expressed concern that
imprecision in the time estimates for any high volume services that
have relatively little time associated with them may potentially bias
the practice expense methodology in favor of the specialties that
perform these services. We stated at that time that this issue should
be examined as
[[Page 58824]]
part of the refinement of the resource-based practice expense RVUs.
Comment: There were several other comments regarding the accuracy
of the physician time data:
<bullet> The RUC acknowledged that some of the RUC physician time
data may not be absolutely precise.
<bullet> One specialty society, as well as the AMA, pointed out
that there are some problems with the accuracy of the physician time
data for psychotherapy services. For example, the times assigned to
psychotherapy codes that include evaluation and management services are
equal to and, in some cases, less than the psychotherapy codes that do
not include these services.
<bullet> One commenter stated that the physician time data, as
computed in the Harvard studies, are not current and are likely to be
inappropriate for use in computing practice expense RVUs.
<bullet> The American College of Surgeons commented that physician
time for pediatric surgery codes is based on erroneously low physician
time data from the original Harvard study, rather than the time data
from the special study of pediatric services performed by the same
Harvard study team for the American Pediatric Surgical Association in
1992. The latter data were used as the basis for the work RVUs assigned
to 48 pediatric surgical services.
<bullet> A surgical specialty society commented that the physician
time does not compensate its members for longer hours and cited
examples of nonbillable time, such as standby time for cardiac
catheterization and supervision of residents and interns. The society
suggested that this be considered during refinement.
<bullet> One commenter stated that travel time for home visits is
not included in either the work or practice expense RVUs. The commenter
suggested that travel time for house calls should be equal to the work
equivalent of the lowest office service times 3, for an average of 15
minutes. Further, a modifier should be used to cover instances where
travel exceeds the average.
<bullet> The American Society of Transplant Surgeons identified
physician times for several services that it believes are inaccurate
and recommended adjusted times for these services.
Response: As stated above, we will ensure that all identified
anomalies and inaccuracies in the physician time data are considered as
part of the refinement process.
Comment: The American College of Radiology commented that for our
top-down approach we had used a level three office visit (99213) as a
benchmark for estimating physician time for radiology codes. They
suggested that it would be more appropriate to use the intravenous
pyelography procedure (CPT 74400) instead of the office visit used in
our methodology.
Response: Although we agree that 99213 may be an inappropriate
benchmark since it is not often performed by radiologists, we are not
convinced that the average work per unit time of codes on the radiology
fee schedule is equivalent to CPT 74400. Instead, we are using the
weighted average work per unit time for CPT 71010 and 71020 as the
benchmark. These two services represent over approximately one-third of
the total allowed services in the radiology fee schedule, while CPT
74400 represents less than two-tenths of one percent. We will work with
the medical community to develop time estimates for radiology
procedures that will make the imputation of time from the work
estimates unnecessary.
Comments: The American Occupational Therapy Association commented
that the practice expense pool for occupational therapy codes was
understated because the time values of 15 minutes that we arbitrarily
assigned were too low. They included a list of time values we should
use for each code.
The American Hospital Association also objected to the reductions
in times for outpatient rehabilitation codes and urged the use of the
actual surveyed times for all procedure codes in the range 97001
through 97770.
Response: We believe that the time of 15 minutes we assigned to
these codes is appropriate and does not lead to an underestimation of
the practice expense pool for outpatient rehabilitation services. The
outpatient rehabilitation codes in this range are timed codes and are
billed in 15 minute increments. Also, we have been told by some
physical therapy associations that at times, some of the 15 minute
period time may be performed by therapy aides or assistants. (Note: We
plan to review this issue during a future five-year review of work
RVUs.) Finally, it is common for these timed codes to be billed in
multiple units during one therapy session. Thus, any therapist's work
prior to or after the visit is spread across more than one unit, rather
than applied to each unit.
Crosswalk Issues
Comment: The American Academy of Maxillofacial Prosthetics (AAMP)
and the American College of Prosthodontists commented that crosswalking
is not valid for maxillofacial prosthetic codes since this specialty
does not correspond to any other medical specialty included in the SMS
data and its practice expense values are much higher than other medical
specialties in the SMS survey. AAMP submitted several studies from its
own organization and from the American Dental Association, as well as
two studies published in professional journals that report the results
of polls of prosthodontic practitioners, including information on
overhead expenses. The AAMP recommended that this data be used to
calculate its practice expense per hour.
Response: We agree that maxillofacial prosthetics does not
correspond closely with any other medical specialty. It also is not a
separately-identified specialty in either the SMS survey or the
Medicare claims database.
Though the AAMP submitted survey data compiled by both its own
organization and the American Dental Association, the format,
definitions, and methodology of these surveys were not consistent with
those of the SMS survey. For example, the 1993 AAMP survey did not
survey practice expense, but rather the ``percent overhead of gross
collections for 1992.'' The American Dental Association surveys counted
dentist shareholder and employee dentist income as practice expense in
many tabulations.
Because of these methodological differences from the SMS data, we
are not able at this time to use the information in the submitted
surveys to calculate a comparable practice expense per hour for
maxillofacial prosthetics.
For this final rule we will create a practice expense pool for the
maxillofacial prosthetic codes (CPT 21076 through 21087) and crosswalk
this pool to the practice expense per hour for ``All Physicians.'' We
had imputed physician times for these services in our proposed rule.
However, we are now using the physician times utilized in calculating
the work RVUs for the same services. In addition, until the CPEP data
for these codes can be validated, we will allocate the practice expense
pool to the specific services using the current RVUs. We hope to work
with the specialty society as part of the refinement process in order
to develop a reliable method of deriving accurate practice expense RVUs
for maxillofacial prosthetics.
Comment: The American Optometric Association (AOA) disagreed with
our crosswalk of optometry to the average practice expense per hour for
``All Physicians,'' that results in a practice expense per hour of
$67.50. The commenter stated that AOA understands that the crosswalk
decision
[[Page 58825]]
was based, at least in part, on the 1997 survey conducted by AOA which
had been provided to us. This survey has been conducted regularly since
1990 and was included with the comment, along with a study commissioned
by the AOA entitled ``Results of the First National Census of
Optometrists.'' Using data from this survey and study, AOA computed an
$89.53 practice expense per hour for optometry, significantly higher
than the average for ``All Physicians.''
Response: As in the above request, the data submitted by AOA are
not easily comparable to the SMS data. For example, the AOA calculation
used medians rather than means, and retirement and fringe benefits were
not counted as median net income, but rather as practice expense. It is
therefore not possible, without further information, consultation, and
analysis, for us to calculate a practice expense per hour that would be
comparable with that of other specialties. During the refinement period
we will be working with specialties not represented in the SMS survey
to identify the data needed to enable us to determine accurate practice
expense RVUs for their services.
Comment: Although generally supporting the crosswalk to General
Internal Medicine, the American Chiropractic Association (ACA)
submitted data from the 1997 survey results of ACA's biannual survey of
the chiropractic profession. This survey shows considerably lower
direct patient care hours than SMS shows for General Internists.
Therefore, the ACA requested that we use its data to calculate the
practice expense per hour for Doctors of Chiropractic, stating that we
should accept specialty societies' data over SMS data if they were
collected in a comparable manner.
Response: The survey submitted by the commenter indicated that the
patient care hours worked by chiropractors are significantly lower than
those of general internists to whom chiropractors' practice expense per
hour is crosswalked. However, the hours of direct patient care a week
shown in the survey were defined more narrowly than in the SMS data.
For example, the 29 hours of patient care a week calculated in the
submitted survey did not include the hours spent for documentation,
administration, and billing, activities that we have considered to be
included in the direct patient care hours for other specialties. In
addition, there are insufficient details in the survey for us to
determine its comparability to the SMS data and we will maintain the
crosswalk for chiropractors for this final rule. We do intend, however,
to revisit this issue during the refinement process.
Comment: The American Podiatric Medical Association, Inc. (APMA)
objected to its crosswalk to general surgery because it believes that
there is little similarity between the two specialties based on site-
of-service and types of services provided. General surgery services are
typically performed in the facility setting, while the high volume
podiatry services are almost entirely done in the office. In addition,
the comment stated that podiatrists work fewer hours than general
surgeons.
The comment also included the results from APMA's 1996 and 1998
surveys of podiatric practice, as well copies of the surveys
themselves. According to the comment, these surveys show that the
actual practice expense per hour for podiatry is $91.50 and APMA
recommends that we use this data in place of our proposed crosswalk.
The American Academy of Orthopaedic Surgeons also disagreed with
the crosswalk for podiatry, but recommended that podiatry be
crosswalked to orthopaedic surgery in the short run, as 70 percent of
the codes billed by podiatrists are those that are shared with
orthopaedic surgery.
Response: Because of significant methodological differences between
the submitted surveys and the SMS data (for example, only gross and net
incomes are surveyed) we are not able at this time to calculate a
practice expense per hour in total, let alone for each of the different
cost pools.
However, we are persuaded that the crosswalk to general surgery is
not appropriate for the reasons cited in the comment, and we are
changing the crosswalk to ``All Physicians.'' We will be working with
all specialties not represented in the SMS data to ensure that we
obtain comparable information to calculate their practice expenses per
hour.
Comment: The Joint Council of Allergy, Asthma, and Immunology
stated that, in calculating the allergists' practice expense per hour,
we reduced the supply category practice expense per hour to that of
``All Physicians,'' because we believed that we made a separate payment
for the drugs used. However, this is not true for immunotherapy drugs
provided by allergists, as the cost of these drugs is included in the
practice expense RVUs. Therefore an adjustment needs to be made.
Response: The commenter is correct and the adjustment has been made
to the medical supplies practice expense per hour.
Comment: The American Society of Clinical Oncology commented that
since the SMS supply cost data for chemotherapy codes included the
costs of expensive chemotherapy drugs, which are paid for separately,
we used the lower supply costs for ``All Physicians'' for their supply
cost pool. The commenter argued that this fails to recognize that, in
addition to the cost of the drugs, chemotherapy administration has
extra supply costs in excess of that for ``All Physicians.'' Also,
although chemotherapy drugs are generally among the costliest drugs,
the cost of drugs was probably included in other specialties' supply
costs as well, and all specialties should be treated in the same
manner.
The Association of Community Cancer Centers, the Society of
Gynecologic Oncologists, and the American Society of Hematology also
disagreed with our adjustment for drug costs, as did the AMA, which
called our method of correcting for the double counting of drugs
inequitable and imprecise. The American Society of Hematology
recommended increasing the supply per hour costs to 125 percent of the
``All Physicians'' level.
Response: It is true that other specialties may have some drug
costs included in their SMS supply cost data, but we believe that the
total costs for chemotherapy drugs are far greater than are the drug
costs included for any other specialty. Failure to make an adjustment
for these high drug costs would lead to a gross distortion in the
supply cost pool for oncology.
We also are not convinced that the other supply costs for
oncologists would necessarily exceed that of ``All Physicians,'' and we
will continue to crosswalk oncology's supply costs to that category's
practice expense per hour. We do agree that during refinement we need
to consider development of a methodology for removing separately
billable supplies and services from the SMS data so that the Medicare
program avoids making duplicate payments. We also will work with the
oncology specialty to ensure that their practice expense per hour for
the supply category adequately reflects the actual costs of other
oncology supplies.
Comment: The American Association of Oral and Maxillofacial
Surgeons objected to the crosswalk of oral surgery and maxillofacial
surgery to the practice expense per hour of ``All Physicians.'' They
recommended a crosswalk to either otolaryngology or plastic surgery, as
most of the medical procedures billed
[[Page 58826]]
by oral and maxillofacial surgeons can be crosswalked to these two
specialties. The commenter argued that because of their significantly
higher practice expenses, oral and maxillofacial surgery should not be
in the same practice expense pool as manipulative therapists and
optometrists, as this dilutes the practice expenses for these surgical
services. In addition, the 1996 Harvard Study grouped oral and
maxillofacial surgery under otolaryngology and plastic surgery.
Response: We do not currently have sufficient data to make such a
change in our crosswalk. This is an issue that can be addressed during
the refinement period.
Comment: The American College of Cardiology and the American
Society of Echocardiography disagreed with the crosswalk of Independent
Physiologic Laboratories (IPLs) to ``All Physicians.'' The comment
recommended that IPLs' practice expense per hour be crosswalked to
cardiologists, as 60 percent of IPL billings are in the 93000 series
and for the 13 highest volume IPL codes, cardiologists account for 40
percent of claims. The Society of Vascular Technology/Society of
Diagnostic Medical Sonographers also expressed concern that our
crosswalk of IPLs did not adequately recognize their costs and
recommended that we use the figure of $176 per hour based on the
studies cited in the comment.
Response: As discussed above, we will be creating a separate
practice expense pool for all services without physician work, which
will include those technical component services done by IPLs and by
cardiologists.
Comment: The Society of Gynecologic Oncologists requested that we
consider using multiple crosswalks to determine practice expense per
hour for specialties that provide interdisciplinary care. The comment
stated that the true reflection of practice expense per hour for a
gynecologic oncologist is a hybrid of the practice expense per hour for
the specialties of obstetrics and gynecology and oncology.
Response: It is not clear whether this is desirable or what data
would be used to weight such a split between more than one specialty.
Many physicians belong to more than one specialty or subspecialty. This
is another issue that can be discussed during the refinement period.
Comment: The American Geriatrics Society disagreed with our
crosswalk of geriatrics to the General Internal Medicine practice
expense per hour. The comment stated that geriatricians typically have
higher costs than internists because of the need for more office space
and more health care professionals on staff. Since many geriatricians
are family physicians, geriatrics should be cross-walked to family
practice.
Response: We believe that geriatricians are typically more like
internists than family practitioners, so for the final rule we will not
change the crosswalk. However, we are open to receiving data that would
demonstrate that a crosswalk to family practice would be more
appropriate.
However, we would note that geriatrics is a relatively small
specialty and the services performed by them are frequently done by
other specialties. Thus, changes in the practice expense per hour data
for geriatricians would not likely have a significant impact on the
RVUs for services they perform.
Comment: One commenter made recommendations for revisions or
additions to our proposed crosswalks for several nursing
subspecialties. Another specialty society commented that under the
physician fee schedule we have chosen to pay nonphysician practitioners
a percentage of the physician reimbursement, and crosswalking to
specialties with higher practice expense per hour rates than general
internal medicine or general surgery is not logical or reasonable.
Another organization also recommended that data from nurse
practitioners and physician assistants be excluded from the practice
expense pool calculations.
Response: We will further consider appropriate crosswalks for
nursing subspecialties during the refinement period.
Comment: The American Hospital Association and the American
Occupational Therapy Association recommended that we crosswalk all of
the practice expense pools for outpatient rehabilitation services to
the ``All Physicians'' practice expense category, rather than using the
salary equivalency guidelines for the administrative, office, and other
pool.
Response: We believe that using the ``All Physicians'' practice
expense per hour for the administrative, office, and other pool would
considerably overstate the actual practice expense for occupational
therapy. We have carefully examined outpatient therapy practice costs
for the development of the salary equivalency guidelines, and believe
that these better approximate the actual expenses for this cost pool.
We will continue to use the salary equivalency guidelines to calculate
this portion of the practice expense pool for occupational therapy for
this final rule.
Comment: The American Speech-Language Hearing Association commented
that it is not appropriate to use the practice expense per hour data
from physicians that perform audiology tests and it submitted a 1993
survey, ``Audiology Services--Scale of Relative Work,'' as part of its
comments.
Response: As we stated above, we are creating a single practice
expense pool for all services, such as audiology, that have no work
RVUs. This practice expense pool, created by using the average clinical
staff time per procedure from the CPEP data and the ``All Physicians''
practice expense per hour, raises practice expense RVUs for audiology
services relative to those previously proposed. However, during the
refinement process we will be considering all data submitted on any of
these services, including the study submitted with the above comment.
Calculation of Practice Expense Pools--Other Issues
Comment: Several organizations commented on potential problems with
the Medicare claims data, which are used as one component of the
specialty-specific practice expense pool calculation.
<bullet> Many commenters were concerned about reliance on Medicare
claims data to determine the size of each specialty's practice expense
pool. The comments claimed that to the extent that the Medicare
population is not representative of the general population, there is a
bias against specialties whose patient population does not match
Medicare's. Several organizations, representing the gamut of medical
specialties, urged us to work during the refinement period with
organizations for whom we have no, or inadequate, historical claims
utilization information and to acquire nationally representative claims
data that include Medicare, Medicaid, and private payer data.
One of these commenters recommended that, if this is not feasible,
we should conduct sensitivity analyses to explore the influence
Medicare service utilization patterns may have on private payers. The
specialty-specific utilization data are crucial for the final step of
volume-weighted averaging that brings the individual specialty scales
onto one scale, particularly when involving services performed very
frequently by specialties that see relatively few Medicare patients.
For example, the comment argued, to the extent that the cost
estimates for evaluation and management (E&M) services provided by
obstetricians and gynecologists and pediatricians differ
[[Page 58827]]
significantly from those of specialties that account for the bulk of
E&M services provided to Medicare patients, the use of an all-payer
claims database would probably yield different RVUs for E&M services.
<bullet> Several surgical specialties urged that we clean the
Medicare claims data to eliminate obvious errors, such as data showing
a sometimes significant number of nonsurgeons or physician assistants
performing complex surgeries that can only be performed by surgical
specialties. This misreporting can decrease a specialty's practice
expense pool and should either be reassigned or excluded during
refinement.
One of the commenters recommended that Medicare claims data be
reviewed for the existence of a second listed surgical specialty
identifier. In addition, physician assistants' claims should use the -
AS modifier, and calculations should use only the time that is assigned
to the intraoperative period.
<bullet> Three specialty organizations commented that many
physicians' self-designated specialties are incorrectly classified in
our claims data. For example, many cardiologists and geriatricians may
bill as internists, which may affect the respective practice expense
pools. Until these data become more accurate, one of the commenters
recommended that the specialty practice expense pools be recalculated
on an annual basis.
<bullet> An organization representing transplant surgeons commented
that, as transplant surgery is not a designated specialty in the
Medicare claims database, many transplant surgeons designate themselves
as general surgeons, who have the lowest practice expense per hour of
any surgical specialty. The comment argued that this has led to a
significant underestimation of the costs associated with transplant
surgery.
Response: We would be interested in receiving any reliable national
utilization data on the procedure code level though, to date, we are
not aware of the existence of such a data source. We plan during the
refinement period to work with the medical community in order to
pinpoint problems in the Medicare claims data, to develop strategies to
improve their accuracy, and, if possible, to find reliable supplemental
data for those specialties not appropriately represented in the
Medicare database.
Comment: One organization commented that the Medicare frequency
numbers for occupational therapy codes will be understated because BBA
requires that all outpatient therapy services be paid under the
Medicare Physician Fee Schedule beginning January 1, 1999.
Response: We disagree. We have not included estimates for
frequencies of expected services of outpatient therapy services in
computing the practice expense RVUs. BBA specified that we pay for
these services using the physician fee schedule. BBA did not
incorporate these services into the fee schedule.
Comment: Many organizations representing radiation oncology, as
well as numerous individual commenters, argued that we erroneously
combined the SMS radiation oncology survey data with that of radiology.
The commenters argued that these two specialties should be dealt with
separately, as radiation oncology utilizes different codes and has
considerably higher costs than radiology.
Response: We had combined radiation oncology and radiology together
into one practice expense pool because of the small sample of radiation
oncologists in the SMS data. However, we now agree with the commenters
that these are two different specialties with differing practice costs.
Therefore, we have separated them into two separate practice expense
cost pools in order to calculate the practice expense per hour for each
of the specialties. For radiology, excluding radiation oncology, the
total practice expense per hour is $55.90. This is comprised of $17.90
for nonphysician payroll per hour ($9.70 for clerical payroll), $12.80
for office expense, $4.50 for supply expenses, $7.70 for equipment
expense, and $12.90 for other expenses. For radiation oncology, the
total practice expense per hour is $68.30. This is comprised of $23.70
for nonphysician payroll per hour ($9.20 for clerical payroll), $11.30
for office expense, $6.20 for supplies expense, $11.00 for equipment
expense, and $16.20 for other expenses.
Allocation of Practice Expense Pools to Codes
Comment: Several organizations commented on our use of work RVUs as
part of the allocation formula for indirect practice expense costs:
<bullet> A primary care specialty group stated that we should not
allocate the indirect practice expenses using the work RVUs, since
there is no reason to believe that the costs of providing the service,
such as the cost of utilities, would vary by the intensity, where the
costs would vary by time. We should, therefore, use time rather than
work in our indirect allocation.
Another primary care organization commented that using work as one
allocator for indirect expenses inappropriately gives surgical
procedures with higher work RVUs substantially higher administrative
costs for billing activities than is given to evaluation and management
services. We should develop a standardized method to address
administrative staff costs.
<bullet> Five other organizations argued that allocating indirect
costs based on a combination of direct costs and physician work RVUs is
inappropriate and treats unfairly chemotherapy and radiation oncology
services as well as other technical component services, since they
typically are assigned no work RVUs. Various recommendations were made
by these commenters to rectify what they see as discrimination against
these technical component services:
+ Indirect costs should be based on direct costs.
+ Physician time or clinical staff time should be used instead of
work.
+ We could allocate 50 percent of the indirect costs based on
direct costs and 50 percent based on physician work or time.
+ As an alternative for chemotherapy services, work could be
imputed by using the work to time ratio for other hematology or
evaluation and management services.
One commenter recommended that we vary the indirect cost allocation
methodology in recognition of the practice patterns of particular
specialties.
<bullet> One accounting organization commented that the use of work
REUS is arbitrary and argued for the use of total dollars actually
spent to perform the procedures, not indirect splits, suggesting the
use of Activity Based Costing as a preferable methodology.
Response: In this final rule, we will use an allocation method for
the final rule that is basically similar to our proposed allocation
method. It is widely recognized by accountants and others that there is
no single best method of allocating indirect expenses to individual
services. If we used physician time as an allocator of indirect
expenses, we would be using the same values, whose accuracy have
already been questioned by some commenters, both to create the practice
expense pools and to allocate these pools to individual services. If we
used only direct costs, we would be giving full weight to CPEP values
that have not yet been refined. We agree that the use of physician work
as an allocator is not preferable in the long term. It likely provides
maximum advantage to hospital-based services in which the
[[Page 58828]]
physician incurs relatively few direct costs.
For this final rule, we are making a technical change to the
allocation method for indirect costs by using direct costs and the work
REUS scaled using the Medicare conversion factor instead of a factor
calculated using the physician time data. Because of questions raised
by commenters concerning the time data adjustments, we believe that it
is more appropriate to convert the work REUS into dollars using the
Medicare conversion factor (expressed in 1995 dollars, consistent with
the AMA SMS survey data). This will give somewhat less weight to work
while, at the same time, avoiding a major methodological change until
it has been examined further. We intend to work with the medical
community during refinement so that we ensure that our allocation
methodology is both appropriate and equitable.
Comment: Many major specialty societies, both primary care and
surgical, commented that we should not apply a different methodology
for allocating the practice expense pools to the radiology codes than
we do to all other codes. One commenter argued that multiplying the
current charge-based practice expense RVUs for radiology codes by some
percentage cannot yield a resource-based system.
Organizations representing urologists, pulmonologists,
cardiologists, and ophthalmologists commented that the uniform
reductions made in the radiology codes to maintain relative values
assumed that all radiology services are done only by radiologists, when
many of these procedures are performed by these other specialties. A
commenter stated that decisions regarding the practice expense values
for radiology codes done predominantly by other specialists should not
be made by one specialty. These organizations recommended that the
practice expense RVUs for their codes be established using the
allocation methodology used for all other services.
One specialty society, representing diagnostic vascular testing,
commented that the use of the existing radiology relatives to allocate
practice expense to the code level results in significantly larger
decreases in the technical component than in the professional component
of their services. The commenter recommended that if we continue to use
the radiology relatives, then we should reduce the professional
components of the codes more than the technical components because
practice expenses are greater for the technical component than for the
professional component.
The AMA supported the use of the radiology relative values for
actual radiology services, but recommended that this methodology should
be applied only to services that are performed predominantly by
radiologists.
The American College of Radiology endorsed the radiology relativity
of the radiology RVUs without exception, and they would oppose the
exclusion of individual radiology procedures since this is inconsistent
with the concept of radiology relative values. They argued that
maintaining the relativity of the radiology fee schedule--
<bullet> Is consistent with generally accepted accounting
principles because it is based on surveys and physician panels;
<bullet> Is widely accepted;
<bullet> Solves rank order anomalies caused by raw CPEP data;
<bullet> Simplifies the derivation of the professional component,
technical component, and global practice expense RVUs;
<bullet> Is mandated by law, as the Omnibus Budget Reconciliation
Act of 1989 stated that for radiology services ``the Secretary shall
base the relative values on the relative values developed under section
1395m(b)(1)(A)****''; and
<bullet> They also argue that we have recognized and honored the
statutory obligation to maintain the relationships in the radiology
relative value scale.
Another national organization representing diagnostic imaging
services also suggested keeping the radiology fee schedule as the
allocator for radiology, rather than the direct costs from the CPEP
data, as there would be even greater reductions on codes we allocated
using the CPEP relatives.
Response: Because the majority of specialties that perform
radiology services object to the use of the current practice expense
RVUs for radiology services, we cannot continue to use these RVUs.
However, since we are not making changes to the CPEP data for this
final rule and since the American College of Radiology has not had
sufficient opportunity to comment on the CPEP data because of our
proposed use of the current radiology RVUs, we are using the current
radiology RVUs to allocate the direct cost pools of the specialty
radiology until such time as the CPEP data for radiology services have
been validated. We will not use the current radiology RVUs for any
other specialty.
It should be noted that radiology services or components of
radiology services that lack work RVUs are handled as described in the
section on services without work RVUs. This alters the impact of using
the current radiology RVUs for the specialty radiology since we set the
global portion of a radiology service equal to the sum of the technical
and professional components.
Comment: One specialty society commented that, for one important
high volume pathology service, the proposed total professional
component practice expense RVU payment would be $11.37, approximately
$2 short of the administrative labor costs alone. The commenter wanted
more information on how our method splits administrative costs between
the professional and technical components. The commenter requested that
we provide a data set of the RVUs for administrative labor, office
expenses, and other expenses that result from our allocation method,
with a break-out of the professional and technical component RVUs for
services that have both components, so that the appropriateness of the
allocation method can be evaluated.
Response: Our methodology was described in the proposal, and we
also provided additional detailed data files that we used to develop
the proposed values. We will try to make additional data available if
the request is further specified.
Comment: The American College of Cardiology expressed concern that,
though it might be necessary to weight average the allocation to codes
according to the practice expense per hour of the different specialties
performing the service, this defeats the intent of Congress to
recognize actual costs and could also lead to negative incentives. The
commenter suggested that this is an issue that we and the specialties
should pursue.
The American Society of Echocardiography more specifically
commented that we should not include in the calculations for
cardiovascular diagnostic tests the even more unrepresentative data for
internists coding for these procedures. The society maintained that
because of the low equipment costs for internists, this blend dilutes
the RVUs allocated to these codes.
Response: The statute is very specific that Medicare is not to pay
specialty differentials. Therefore, weight averaging of the CPEP inputs
among specialties that do a service seems appropriate.
Other Issues
Comment: Many commenters, representing a broad spectrum of
specialties, expressed concern that reductions in payment for specific
services could have a negative impact on access to care. Many of these
[[Page 58829]]
commenters recommended that we monitor access and quality of care
issues that may arise as a result of the implementation of a resource-
based practice expense system.
Response: Maintaining access to high quality health care for
Medicare beneficiaries is, and will continue to be, a high priority,
and we will monitor available relevant data. However, we do not
anticipate that the implementation of resource-based practice expense
RVUs should lead to any major impediments to access to care. Any
impacts of this new system are being transitioned in over a 4-year
period, during which we will be refining both the practice expense per
hour data and the direct cost inputs. We will be working closely with
the medical community during this refinement period, and we are
confident that we will achieve a resource-based practice expense system
that will maintain our beneficiaries' access to the best possible
medical care.
Comment: One commenter was concerned about how the monthly
capitated payment for end-stage renal disease (ESRD) services was
handled under the top-down approach. The commenter argued that, though
the ``building block'' process used for the work RVUs for these
services does not translate perfectly for practice expense values, this
approach should still be utilized to calculate the practice expense
RVUs. In addition, the commenter questioned our choice of CPT 99213, a
mid-level office visit, to calculate physician time for ESRD services.
Response: We allocated the practice expense pool to ESRD services
using the CPEP inputs, as we did for almost all other services. We also
believe that the intensity of an average evaluation and management
service provides a reasonable estimate of physician time. These issues
can be further analyzed during refinement.
Comment: Two commenters noted that costs associated with the
supervision of diagnostic tests were not included in the technical
component amounts.
Response: In separate carrier manual instructions, we are revising
the level of physician supervision required for many diagnostic
services. For example, we are changing the requirements for most
ultrasound procedures from personal or direct supervision to general
supervision. We believe the required supervision for any remaining
services that are at the personal supervision level are generally
already reflected in the work RVUs. Therefore, we do not believe that
there are additional costs for physician supervision.
Comment: One commenter indicated that there will be a marked
increase in the volume of services paid under the physician fee
schedule as a result of BBA changes in payment for outpatient therapy
services. The commenter maintained that this increase should not
adversely affect future budget neutrality adjustments.
Response: Although payment for these outpatient therapy services
are based on payment amounts contained in the physician fee schedule,
these services are not included as part of the fee schedule pool for
budget neutrality calculations.
Comment: One commenter argued that the budget neutrality adjustment
is inappropriately applied because it does not recognize the savings
provided by the elimination of the facility payments for endoscopic
procedures that will move to the office setting.
Response: The statute specifies that there shall be budget
neutrality for physician fee schedule services. The budget neutrality
adjustment does not take into account payments to facilities.
Comment: Two commenters suggested that any fiscal adjustments made
to comply with BBA should be reflected in the conversion factor, or
other ratio, rather than be included in the calculation of the practice
expense RVUs, so that other payer reimbursement would not be affected.
Response: We do not completely understand these comments, but we
believe the request is consistent with our practice of making budget-
neutrality adjustments on the conversion factor.
Comment: Several commenters requested additional impact analyses
such as--
<bullet> Comparison of actual practice expense by specialty with
expected practice expense payments, both by amount and by percent, for
both our proposed practice expense payments and the current fee
schedule practice expense RVUs;
<bullet> Comparison of impacts by geographic area, including rural
and urban impacts;
<bullet> Analysis of impacts on hospital, academic, and community-
based physicians;
<bullet> Analysis of total Medicare and non-Medicare impact using
national claims case mix data; and
<bullet> An analysis that would demonstrate to other payers the
degree to which our proposed payment rates are less than actual
practice costs.
Response: We lack the data to provide some of the requested
analyses. For example, we do not have national claims case mix data and
are unaware of the existence of such data. With regard to rural and
urban impacts, in the June 5, 1998 proposed rule we discussed the
limitations of such analyses given the structure of the Medicare
payment localities. We are unsure what the commenters are specifically
requesting on the issue of actual costs since we have based the
resource-based practice expense RVUs on the best available source of
multi-specialty actual cost data: the SMS survey. Cost analyses at the
individual practice level are problematic since, for example, we do not
have physician cost reports, but we are open to concrete suggestions on
how to perform such analyses. We also note that the Medicare public use
files are an excellent source of data for commenters who wish to
perform additional analyses that they believe are possible with the
data sources available to us.
Comment: One commenter requested that we make clear to Medicare
contractors that hospital-based pathologists who incur technical
component costs for nonhospital patients can be paid for both the
technical and professional components.
Response: This is a long-standing policy, and we are not aware of
any general problems in this regard. However, we would be willing to
discuss the issue with individual carriers if the commenter provides
more specific information.
Comment: One commenter recommended that we recalibrate the
allocation of RVUs to the pools for physician work, practice expense
and malpractice, as this allocation has remained constant since the
resource-based relative value scale was implemented in 1992.
Response: We are recalibrating the allocation this year to match
the Medicare Economic Index (MEI) weights. For example, work goes from
54.2 percent of the total to 54.5 percent, the practice expense portion
goes from 41.0 percent to 42.3 percent, and the malpractice portion
goes from 4.8 percent to 3.2 percent. (See Section II.D, ``Rebasing and
Revising the Medicare Economic Index.'') In order to prevent the work
RVUs from changing as a result of this, we are altering only the
practice expense and malpractice RVUs. The changes to the practice
expense and malpractice RVUs due to this are offset by an adjustment to
the conversion factor.
Comment: One commenter recommended that we should limit the
magnitude of the changes in physician payments resulting from the shift
to resource-based payment for practice
[[Page 58830]]
expenses by imposing some reasonable limit on payment increases and
decreases for individual services. The commenter maintains that section
1848(c)(4) of the Act, which authorizes the Secretary of Health and
Human Services to, ``establish ancillary policies, as may be necessary
to implement this section,'' provides statutory authority on which to
base such a policy. The comment pointed out that we invoked this
section in 1991 with reference to the transition to resource-based
payment for physician work.
Response: We believe that Congress intended the transition period
to be the mechanism by which we would mitigate the impacts of any
changes in payment brought about by the shift to resource-based
practice expense. Therefore, we believe it would be inappropriate for
us to impose further limits on payment increases or decreases.
Comment: One commenter maintained that the proposal violates both
the Regulatory Flexibility Act and the Paperwork Reduction Act of 1980
because the adequate filings required in both of these Acts did not
accompany the proposal. Additionally, the commenter stated that we did
not cite any evidence to support its contention that a Regulatory
Impact Statement is not required.
Response: We had included a Paperwork Reduction Act (PRA) section
in HCFA-1006-P that meets the requirements of the PRA of 1980.
One commenter stated that we do not cite any evidence in either of
our proposals to support our contention that no regulatory impact
statement is required. There may be some confusion about the purpose of
an impact statement and the difference between a regulatory impact
statement and a regulatory impact analysis (RIA). A regulatory impact
statement is a brief rational on why an analysis was not conducted. An
RIA is a complete analysis based on recent available data and is more
extensive.
An RIA was conducted in the proposed rule of June 5, 1998 (63 FR
30866). Absent this analysis, we would be required to furnish an impact
statement. Therefore, there is no violation of either the RIA or
Regulatory Flexibility Act requirements.
3. Other Practice Expense Policies
Site-of-Service Payment Differential
As part of the resource-based practice expense initiative, we are
replacing the current policy that systematically reduces the practice
expense RVU by 50 percent for certain procedures performed in
facilities with a policy that would generally identify two different
levels (facility and nonfacility) of practice expense RVUs for each
procedure code depending on the site-of-service.
Some services, by the nature of their codes, are performed only in
certain settings and will have only one level of practice expense RVU
per code. Many of these are evaluation and management codes with code
descriptions specific as to the site of service. Other services, such
as most major surgical services with a 90-day global period, are
performed entirely or almost entirely in the hospital, and we are
generally providing a practice expense RVU only for the out-of-office
or facility setting.
In the majority of cases, however, we will provide both facility
and nonfacility practice expense RVUs. The higher nonfacility practice
expense RVUs are generally used to calculate payments for services
performed in a physician's office and for services furnished to a
patient in the patient's home, or facility or institution other than a
hospital, skilled nursing facility (SNF), or ambulatory surgical center
(ASC). For these services, the physician typically bears the cost of
resources, such as labor, medical supplies, and medical equipment
associated with the physician's service.
The lower facility practice expense RVUs generally are used to
calculate payments for physicians' services furnished to hospital, SNF,
and ASC patients. The costs for nonphysicians' services and other
items, including medical equipment and supplies, are typically borne by
the hospital, by the SNF, or the ASC.
We received the following comments on our site-of-service payment
differential proposal.
Comment: We received several comments concerning the
appropriateness of our site-of-service proposal:
<bullet> Several specialty groups commented that they agreed with
eliminating the site-of-service differential and replacing it with two
levels of payment.
<bullet> A national specialty society representing
gastroenterologists, as well as several hundred individual commenters,
strongly opposed the elimination of the current site-of-service
differential and replacement of it with the facility and nonfacility
resource-based practice expense RVUs. The comments argued that we
should not have established different practice expense RVUs for
facility and nonfacility settings for gastrointestinal endoscopy codes
43234 through 45385 because:
<bullet> It is unsafe to do these procedures in the office and will
thus jeopardize patient safety;
<bullet> It creates an incentive to provide care in the
inappropriate office setting; and
<bullet> It is not authorized by legislation, is against the intent
of BBA to have different payment levels for different settings, and is
likely to result in legal challenge.
The commenter recommended that we drop the office and out-of-office
differential in practice expense payment.
<bullet> One organization commented that our site-of-service
proposal will exacerbate the ability to subsidize uncompensated care
and suggested exempting teaching physicians from the new site-of-
service provision. It also suggested that HCFA should also monitor the
effects of the site-of-service policy.
<bullet> The AMA, the American Hospital Association, and three
other organizations commented that payment differentials should not
provide an incentive for physicians and patients to choose one site
over another. Some physician groups are concerned that the differential
will accelerate the shift of some services from facility to nonfacility
settings at the expense of patient safety. They asserted that claims
data on changes in place of service should be made available and this
issue should be one focus of refinement efforts.
Response: We believe that, to the extent that the differing RVUs
for in-office and out-of-office services reflect the relative
differences in practice costs for performing those services, we have
not created incentives to provide services in inappropriate settings.
We are required by both the Social Security Act Amendments of 1994 and
BBA to develop resource-based practice expense RVUs, based on
physicians' actual costs. All of our data indicate that physicians'
practice expenses are higher in the office, where the physician must
incur all the costs of staff, equipment, and supplies, than in a
facility that provides and is paid separately for these resources. As
the facility and nonfacility costs to the physician can vary by a
considerable amount, we believe that adopting a single average payment
for both sites would consistently underpay in-office procedures, and
overpay those performed in a facility and would thus be inherently
inequitable, not resource-based, and contrary to the intent of the law.
Furthermore, we are not aware of any studies showing that codes 43234
through 45385 are being unsafely performed in offices. We have complete
[[Page 58831]]
confidence that physicians will continue to exercise their best
clinical judgment as to the most appropriate setting for their
patients.
Comment: One specialty society stated its support for the proposed
change in the site-of-service payment, as long as it does not result in
nonpayment for services actually provided. For example, there are no
practice expense RVUs for emergenc