DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services 42 CFR Parts 405, 410, 411, 414, 425, and 495 [CMS-1631-FC]

RIN 0938-AS40

Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule and Other Revisions to Part B for CY 2016

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

ACTION: Final rule with comment period.

SUMMARY: This major final rule with comment period addresses changes to the physician fee schedule, and other Medicare Part B payment policies to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services, as well as changes in the statute.

DATES: Effective date:  The provisions of this final rule with comment period are effective on

January 1, 2016, except the definition of “ownership or investment interest” in §411.362(a), which has an effective date of January 1, 2017.

Comment date:  To be assured consideration, comments must be received at one of the addresses

provided below, no later than 5 p.m. on December 29, 2015.  (See the SUPPLEMENTARY INFORMATION section of this final rule with comment period for a list of provisions open for comment.)

ADDRESSES:  In commenting, please refer to file code CMS-1631-FC.  Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (please choose only one of the ways

listed):

1. Electronically. You may submit electronic comments on this regulation to

www.regulations.gov.  Follow the instructions for “submitting a comment.”

2. By regular mail. You may mail written comments to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention:  CMS-1631-FC,

P.O. Box 8013,

Baltimore, MD 21244-8013.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments to the following

address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention:  CMS-1631-FC,

Mail Stop C4-26-05, 7500 Security Boulevard,

Baltimore, MD 21244-1850.

4. By hand or courier. If you prefer, you may deliver (by hand or courier) your

written comments before the close of the comment period to either of the following addresses:

1. For delivery in Washington, DC– Centers for Medicare & Medicaid Services, Department of Health and Human Services,

Room 445-G, Hubert H. Humphrey Building,

200 Independence Avenue, SW.,

Washington, DC  20201

(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp- in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

1. For delivery in Baltimore, MD– Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard,

Baltimore, MD 21244-1850.

If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members.

Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

FOR FURTHER INFORMATION CONTACT:

Donta Henson, (410) 786-1947 for issues related to pathology and ophthalmology services or any physician payment issues not identified below.

Abdihakin Abdi, (410) 786-4735, for issues related to portable X-ray transportation fees. Gail Addis, (410) 786-4522, for issues related to the refinement panel.

Lindsey Baldwin, (410) 786-1694, for issues related to valuation of moderate sedation and colonoscopy services.

Jessica Bruton, (410) 786-5991, for issues related to potentially misvalued code lists. Roberta Epps, (410) 786-4503, for issues related to PAMA section 218(a) policy.

Ken Marsalek, (410) 786–4502, for issues related to telehealth services.

Ann Marshall, (410) 786-3059, for issues related to advance care planning, and for primary care and care management services.

Geri Mondowney, (410) 786–4584, for issues related to geographic practice cost indices, malpractice RVUs, target, and phase-in provisions.

Chava Sheffield, (410) 786–2298, for issues related to the practice expense methodology, impacts, and conversion factor.

Michael Soracoe, (410) 786-6312, for issues related to the practice expense methodology and the valuation and coding of the global surgical packages.

Regina Walker-Wren, (410) 786-9160, for issues related to the “incident to” proposals. Pamela West, (410) 786-2302, for issues related to therapy caps.

Emily Yoder, (410) 786-1804, for issues related to valuation of radiation treatment services.

Amy Gruber, (410) 786-1542, for issues related to ambulance payment policy.

Corinne Axelrod, (410) 786-5620, for issues related to rural health clinics or federally qualified health centers and payment to grandfathered tribal FQHCs.

Simone Dennis, (410) 786-8409, for issues related to rural health clinics HCPCS reporting.

Edmund Kasaitis (410) 786-0477, for issues related to Part B drugs, biologicals, and biosimilars.

Alesia Hovatter, (410) 786-6861, for issues related to Physician Compare.

Deborah Krauss, (410) 786-5264 and Alexandra Mugge, (410) 786-4457, for issues related to the physician quality reporting system and the merit-based incentive payment system.

Alexandra Mugge, (410) 786-4457, for issues related to EHR Incentive Program.

Sarah Arceo, (410) 786-2356 or Patrice Holtz, (410786-5663 for issues related to EHR Incentive Program-Comprehensive Primary Care (CPC) initiative and Medicare EHR Incentive Program aligned reporting.

Rabia Khan or Terri Postma, (410) 786-8084 or ACO@cms.hhs.gov, for issues related to Medicare Shared Savings Program.

Kimberly Spalding Bush, (410) 786-3232, or Sabrina Ahmed (410) 786-7499, for issues related to value-based Payment Modifier and Physician Feedback Program.

Frederick Grabau, (410) 786-0206, for issues related to changes to opt-out regulations.

Lisa Ohrin Wilson (410) 786-8852, or Matthew Edgar (410) 786-0698, for issues related to physician self-referral updates.

Christiane LaBonte, (410) 786-7234, for issues related to Comprehensive Primary Care (CPC) initiative.

JoAnna Baldwin (410) 786-7205, or Sarah Fulton (410) 786-2749, for issues related to appropriate use criteria for advanced diagnostic imaging services.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:  All comments received before the close of the comment

period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received: http://www.regulations.gov.  Follow the search instructions on that website

to view public comments.

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard,

Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m.  To schedule an appointment to view public comments, phone 1-800-743-3951.

Provisions open for comment:  We will consider comments that are submitted as

indicated above in the “Dates” and “Addresses” sections on the following subject areas discussed in this final rule with comment period:  interim final work, practice expense (PE), and malpractice (MP) RVUs (including applicable work time, direct PE inputs, and MP crosswalks) for CY 2016; interim final new, revised, potentially misvalued HCPCS codes as indicated in the Preamble text and listed in Addendum C to this final rule with comment period; and the additions and deletions to the physician self-referral list of HCPCS/CPT codes found on tables 50 and 51.

Table of Contents

1. Executive Summary and Background

1. Executive Summary

1. Background

1. Provisions of the Final Rule with Comment Period for PFS

1. Determination of Practice Expense (PE) Relative Value Units (RVUs)

1. Determination of Malpractice Relative Value Units (RVUs)

1. Overview

2. Proposed Annual Update of MP RVUs

3. MP RVU Update for Anesthesia Services

4. MP RVU Methodology Refinements

5. CY 2016 Identification of Potentially Misvalued Services for Review

6. Valuing Services That Include Moderate Sedation as an Inherent Part of Furnishing the Procedure
7. Improving the Valuation and Coding of the Global Package

1. Elimination of the Refinement Panel

1. Improving Payment Accuracy for Primary Care and Care Management Services

1. Target for Relative Value Adjustments for Misvalued Services

1. Phase-in of Significant RVU Reductions

1. Changes for Computed Tomography (CT) under the Protecting Access to Medicare Act of 2014 (PAMA)
2. Valuation of Specific Codes

1. Background

2. Process for Valuing New, Revised, and Potentially Misvalued Codes

3. Methodology for Establishing Work RVUs

4. Methodology for Establishing the Direct PE Inputs Used to Develop PE RVUs

5. Methodology for Establishing Malpractice RVUs

6. CY 2016 Valuation of Specific Codes

1. Lower GI Endoscopy Services

1. Radiation Treatment and Related Image Guidance Services

1. Advance Care Planning Services

1. Valuation of Other Codes for CY 2016

7. Direct PE Input-Only Recommendations

8. CY 2015 Interim Final Codes

9. CY 2016 Interim Final Codes

1. Medicare Telehealth Services

1. Incident to Proposals: Billing Physician as the Supervising Physician and Ancillary Personnel Requirements
2. Portable X-ray: Billing of the Transportation Fee

1. Technical Correction: Waiver of Deductible for Anesthesia Services Furnished on the

Same Date as a Planned Screening Colorectal Cancer Test

1. Therapy Caps

• Other Provisions of the Final Rule with Comment Period

1. Provisions Associated with the Ambulance Fee Schedule

1. Chronic Care Management (CCM) Services for Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs)
2. Healthcare Common Procedure Coding System (HCPCS) Coding for Rural Health Clinics (RHCs)
3. Payment to Grandfathered Tribal FQHCs That Were Provider-Based Clinics on or Before April 7, 2000
4. Part B Drugs—Biosimilars

1. Productivity Adjustment for the Ambulance, Clinical Laboratory, and DMEPOS Fee Schedules
2. Appropriate Use Criteria for Advanced Diagnostic Imaging Services

1. Physician Compare Website

1. Physician Payment, Efficiency, and Quality Improvements – Physician Quality Reporting System
2. Electronic Clinical Quality Measures (eCQM) and Certification Criteria and Electronic Health Record (EHR) Incentive Program— Comprehensive Primary Care (CPC) Initiative and Medicare Meaningful Use Aligned Reporting
3. Discussion and Acknowledgement of Public Comments Received on the Potential Expansion of the Comprehensive Primary Care (CPC) Initiative
4. Medicare Shared Savings Program

1. Value-Based Payment Modifier and Physician Feedback Program

1. Physician Self-Referral Updates

1. Private Contracting/Opt-Out

P:  Physician Self-Referral Prohibition: Annual Update to the List of CPT/HCPCS

Codes

1. . Collection of Information Requirements

1. Response to Comments

1. Waiver of Proposed Rulemaking and Waiver of Delay in Effective Date

• egulatory Impact Analysis

Acronyms

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

AAA               Abdominal aortic aneurysms

ACO               Accountable care organization AMA                        American Medical Association ASC                        Ambulatory surgical center

ATA                 American Telehealth Association

ATRA             American Taxpayer Relief Act (Pub. L. 112-240) AWV                        Annual wellness visit

BBA                Balanced Budget Act of 1997 (Pub. L. 105-33)

BBRA             [Medicare, Medicaid and State Child Health Insurance Program] Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)

CAD               Coronary artery disease

CAH               Critical access hospital CBSA                        Core-Based Statistical Area

CCM               Chronic care management CEHRT                        Certified EHR technology CF                        Conversion factor

CG-CAHPS     Clinician and Group Consumer Assessment of Healthcare Providers and Systems CLFS                        Clinical Laboratory Fee Schedule

CNM               Certified nurse-midwife

CP                   Clinical psychologist

CPC                Comprehensive Primary Care

CPEP              Clinical Practice Expert Panel

CPT                 [Physicians] Current Procedural Terminology (CPT codes, descriptions and other data only are copyright 2014 American Medical Association.  All rights reserved.)

CQM               Clinical quality measure

CSW               Clinical social worker

CT                   Computed tomography

CY                  Calendar year

DFAR             Defense Federal Acquisition Regulations DHS                        Designated health services

DM                  Diabetes mellitus

DSMT             Diabetes self-management training eCQM                        Electronic clinical quality measures EHR                        Electronic health record

E/M                 Evaluation and management

EP                    Eligible professional

eRx                  Electronic prescribing

ESRD              End-stage renal disease

FAR                Federal Acquisition Regulations

FFS                 Fee-for-service

FQHC             Federally qualified health center FR                        Federal Register

GAF                Geographic adjustment factor GAO                        Government Accountability Office GPCI                        Geographic practice cost index

GPO                Group purchasing organization GPRO                        Group practice reporting option GTR                        Genetic Testing Registry

HCPCS           Healthcare Common Procedure Coding System HHS                        [Department of] Health and Human Services HOPD                        Hospital outpatient department

HPSA              Health professional shortage area IDTF                        Independent diagnostic testing facility IPPE                        Initial preventive physical exam

IPPS                 Inpatient Prospective Payment System IQR                        Inpatient Quality Reporting

ISO                 Insurance service office

IT                     Information technology

IWPUT           Intensity of work per unit of time LCD                        Local coverage determination

MA                  Medicare Advantage

MAC               Medicare Administrative Contractor

MAP               Measure Applications Partnership

MAPCP          Multi-payer Advanced Primary Care Practice MAV                        Measure application validity [process]

MCP                Monthly capitation payment

MedPAC         Medicare Payment Advisory Commission MEI                        Medicare Economic Index

MFP                Multi-Factor Productivity

MIPPA             Medicare Improvements for Patients and Providers Act (Pub. L. 110-275)

MMA              Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Pub. L. 108-173, enacted on December 8, 2003)

MP                  Malpractice

MPPR             Multiple procedure payment reduction MRA                        Magnetic resonance angiography MRI                        Magnetic resonance imaging

MSA               Metropolitan Statistical Areas MSPB                        Medicare Spending per Beneficiary MU                        Meaningful use

NCD               National coverage determination

NCQDIS         National Coalition of Quality Diagnostic Imaging Services NP                        Nurse practitioner

NPI                 National Provider Identifier

NPP                 Nonphysician practitioner

NQS                National Quality Strategy OACT                        CMS’s Office of the Actuary

OBRA ‘89       Omnibus Budget Reconciliation Act of 1989 (Pub. L. 101-239)

OBRA ’90       Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101- 508) OES                        Occupational Employment Statistics

OMB               Office of Management and Budget OPPS                        Outpatient prospective payment system OT                        Occupational therapy

PA                   Physician assistant

PAMA            Protecting Access to Medicare Act of 2014 (Pub. L. 113-93) PC                        Professional component

PCIP               Primary Care Incentive Payment

PE                   Practice expense

PE/HR             Practice expense per hour

PEAC               Practice Expense Advisory Committee

PECOS           Provider Enrollment, Chain, and Ownership System PFS                        Physician Fee Schedule

PLI                  Professional Liability Insurance

PMA               Premarket approval

PQRS              Physician Quality Reporting System

PPIS                Physician Practice Expense Information Survey PT                        Physical therapy

PY                   Performance year

QCDR             Qualified clinical data registry QRUR                        Quality and Resources Use Report RBRVS                        Resource-based relative value scale RFA                        Regulatory Flexibility Act

RHC                Rural health clinic

RIA                 Regulatory impact analysis

RUC                American Medical Association/Specialty Society Relative (Value) Update Committee

RUCA             Rural Urban Commuting Area RVU                        Relative value unit

SBA                Small Business Administration

SGR                Sustainable growth rate

SIM                 State Innovation Model

SLP                  Speech-language pathology

SMS                Socioeconomic Monitoring System SNF                        Skilled nursing facility

TAP                 Technical Advisory Panel

TC                    Technical component

TIN                 Tax identification number

UAF                Update adjustment factor

UPIN              Unique Physician Identification Number USPSTF                        United States Preventive Services Task Force VBP                        Value-based purchasing

VM                  Value-Based Payment Modifier

Addenda Available Only Through the Internet on the CMS Website

The PFS Addenda along with other supporting documents and tables referenced in this final rule with comment period are available through the Internet on the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-

Federal-Regulation-Notices.html.  Click on the link on the left side of the screen titled, ‘‘PFS

Federal Regulations Notices’’ for a chronological list of PFS Federal Register and other related

documents.  For the CY 2016 PFS Final Rule with Comment Period, refer to item

CMS-1631-FC.  Readers who experience any problems accessing any of the Addenda or other documents referenced in this rule and posted on the CMS website identified above should contact Donta Henson at (410) 786-1947.

CPT (Current Procedural Terminology) Copyright Notice

Throughout this final rule with comment period, we use CPT codes and descriptions to refer to a variety of services. We note that CPT codes and descriptions are copyright 2015 American Medical Association.  All Rights Reserved.  CPT is a registered trademark of the American Medical Association (AMA).  Applicable Federal Acquisition Regulations (FAR) and Defense Federal Acquisition Regulations (DFAR) apply.

I.    Executive Summary and Background

• Executive Summary

1. Purpose

This major final rule with comment period revises payment polices under the Medicare Physician Fee Schedule (PFS) and makes other policy changes related to Medicare Part B payment.  These changes are applicable to services furnished in CY 2016.

2. Summary of the Major Provisions

The Social Security Act (the Act) requires us to establish payments under the PFS based on national uniform relative value units (RVUs) that account for the relative resources used in furnishing a service.  The Act requires that RVUs be established for three categories of resources:  work, practice expense (PE); and malpractice (MP) expense; and, that we establish by regulation each year’s payment amounts for all physicians’ services paid under the PFS, incorporating geographic adjustments to reflect the variations in the costs of furnishing services in different geographic areas.  In this major final rule with comment period, we establish RVUs for CY 2016 for the PFS, and other Medicare Part B payment policies, to ensure that our

payment systems are updated to reflect changes in medical practice and the relative value of services, as well as changes in the statute.  In addition, this final rule with comment period includes discussions and proposals regarding:

• Potentially Misvalued PFS

• Telehealth

• Advance Care

• Establishing Values for New, Revised, and Misvalued

• Target for Relative Value Adjustments for Misvalued

• Phase-in of Significant RVU

• “Incident to”

• Portable X-ray Transportation

• Updating the Ambulance Fee Schedule

• Changes in Geographic Area Delineations for Ambulance Payment.

• Chronic Care Management Services for RHCs and

• HCPCS Coding for

• Payment to Grandfathered Tribal FQHCs that were Provider-Based Clinics on or before April 7, 2000.
• Payment for Biosimilars under Medicare Part

• Physician Compare

• Physician Quality Reporting

• Medicare Shared Savings

• Electronic Health Record (EHR) Incentive Program.

• Value-Based Payment Modifier and the Physician Feedback

3. Summary of Costs and Benefits

The Act requires that annual adjustments to PFS RVUs may not cause annual estimated expenditures to differ by more than $20 million from what they would have been had the adjustments not been made.  If adjustments to RVUs would cause expenditures to change by more than $20 million, we must make adjustments to preserve budget neutrality.  These adjustments can affect the distribution of Medicare expenditures across specialties.  In addition, several changes in this final rule with comment period will affect the specialty distribution of Medicare expenditures.  When considering the combined impact of work, PE, and MP RVU changes, the projected payment impacts are small for most specialties; however, the impact is larger for a few specialties.

We have determined that this major final rule with comment period is economically significant.  For a detailed discussion of the economic impacts, see section VII. of this final rule with comment period.

1. Background

Since January 1, 1992, Medicare has paid for physicians’ services under section 1848 of the Act, “Payment for Physicians’ Services.”  The system relies on national relative values that are established for work, PE, and MP, which are adjusted for geographic cost variations.  These values are multiplied by a conversion factor (CF) to convert the RVUs into payment rates.  The concepts and methodology underlying the PFS were enacted as part of the Omnibus Budget Reconciliation Act of 1989 (Pub. L. 101-239, enacted on December 19, 1989) (OBRA ’89), and the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508, enacted on November 5, 1990) (OBRA ’90).  The final rule published on November 25, 1991 (56 FR 59502) set forth the first fee schedule used for payment for physicians’ services.

We note that throughout this major final rule with comment period, unless otherwise noted, the term “practitioner” is used to describe both physicians and nonphysician practitioners

(NPPs) who are permitted to bill Medicare under the PFS for services furnished to Medicare beneficiaries.

1. Development of the Relative Values

1. Work RVUs

The work RVUs established for the initial fee schedule, which was implemented on January 1, 1992, were developed with extensive input from the physician community. A research team at the Harvard School of Public Health developed the original work RVUs for most codes under a cooperative agreement with the Department of Health and Human Services (HHS).  In constructing the code-specific vignettes used in determining the original physician work RVUs, Harvard worked with panels of experts, both inside and outside the federal government, and obtained input from numerous physician specialty groups.

As specified in section 1848(c)(1)(A) of the Act, the work component of physicians’ services means the portion of the resources used in furnishing the service that reflects physician time and intensity.  We establish work RVUs for new, revised and potentially misvalued codes based on our review of information that generally includes, but is not limited to, recommendations received from the American Medical Association/Specialty Society Relative Value Update Committee (RUC), the Health Care Professionals Advisory Committee (HCPAC), the Medicare Payment Advisory Commission (MedPAC), and other public commenters; medical literature and comparative databases; as well as a comparison of the work for other codes within the Medicare PFS, and consultation with other physicians and health care professionals within CMS and the federal government.  We also assess the methodology and data used to develop the recommendations submitted to us by the RUC and other public commenters, and the rationale for their recommendations.

1. Practice Expense RVUs

Initially, only the work RVUs were resource-based, and the PE and MP RVUs were based on average allowable charges.  Section 121 of the Social Security Act Amendments

of 1994 (Pub. L. 103-432, enacted on October 31, 1994), amended section 1848(c)(2)(C)(ii) of the Act and required us to develop resource-based PE RVUs for each physicians’ service beginning in 1998.  We were required to consider general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising PEs. The PE RVUs continue to represent the portion of these resources involved in furnishing PFS services.

Originally, the resource-based method was to be used beginning in 1998, but section 4505(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33, enacted on August 5, 1997) (BBA) delayed implementation of the resource-based PE RVU system until January 1, 1999.  In addition, section 4505(b) of the BBA provided for a 4-year transition period from the

charge-based PE RVUs to the resource-based PE RVUs.

We established the resource-based PE RVUs for each physicians’ service in a final rule, published on November 2, 1998 (63 FR 58814), effective for services furnished in CY 1999.

Based on the requirement to transition to a resource-based system for PE over a 4-year period, payment rates were not fully based upon resource-based PE RVUs until CY 2002.  This resource-based system was based on two significant sources of actual PE data:  the Clinical Practice Expert Panel (CPEP) data and the AMA’s Socioeconomic Monitoring System (SMS) data.  (These data sources are described in greater detail in the CY 2012 final rule with comment period (76 FR 73033).)

Separate PE RVUs are established for services furnished in facility settings, such as a hospital outpatient department (HOPD) or an ambulatory surgical center (ASC), and in nonfacility settings, such as a physician’s office.  The nonfacility RVUs reflect all of the direct and indirect PEs involved in furnishing a service described by a particular HCPCS code.  The difference, if any, in these PE RVUs generally results in a higher payment in the nonfacility

setting because in the facility settings some costs are borne by the facility.  Medicare’s payment to the facility (such as the outpatient prospective payment system (OPPS) payment to the HOPD) would reflect costs typically incurred by the facility.  Thus, payment associated with those facility resources is not made under the PFS.

Section 212 of the Balanced Budget Refinement Act of 1999 (Pub. L. 106-113, enacted on November 29, 1999) (BBRA) directed the Secretary of Health and Human Services (the Secretary) to establish a process under which we accept and use, to the maximum extent practicable and consistent with sound data practices, data collected or developed by entities and organizations to supplement the data we normally collect in determining the PE component.  On May 3, 2000, we published the interim final rule (65 FR 25664) that set forth the criteria for the submission of these supplemental PE survey data.  The criteria were modified in response to comments received, and published in the Federal Register (65 FR 65376) as part of a November 1, 2000 final rule. The PFS final rules published in 2001 and 2003, respectively,

(66 FR 55246 and 68 FR 63196) extended the period during which we would accept these supplemental data through March 1, 2005.

In the CY 2007 PFS final rule with comment period (71 FR 69624), we revised the methodology for calculating direct PE RVUs from the top-down to the bottom-up methodology beginning in CY 2007.  We adopted a 4-year transition to the new PE RVUs. This transition was completed for CY 2010.  In the CY 2010 PFS final rule with comment period, we updated the practice expense per hour (PE/HR) data that are used in the calculation of PE RVUs for most specialties (74 FR 61749).  In CY 2010, we began a 4-year transition to the new PE RVUs using the updated PE/HR data, which was completed for CY 2013.

1. Malpractice RVUs

Section 4505(f) of the BBA amended section 1848(c) of the Act to require that we implement resource-based MP RVUs for services furnished on or after CY 2000. The

resource-based MP RVUs were implemented in the PFS final rule with comment period published November 2, 1999 (64 FR 59380).  The MP RVUs are based on commercial and physician-owned insurers’ malpractice insurance premium data from all the states, the District of Columbia, and Puerto Rico.  For more information on MP RVUs, see section II.B.2. of this final rule with comment period.

1. Refinements to the RVUs

Section 1848(c)(2)(B)(i) of the Act requires that we review RVUs no less often than every 5 years. Prior to CY 2013, we conducted periodic reviews of work RVUs and PE RVUs independently.  We completed five-year reviews of work RVUs that were effective for calendar years 1997, 2002, 2007, and 2012.

Although refinements to the direct PE inputs initially relied heavily on input from the RUC Practice Expense Advisory Committee (PEAC), the shifts to the bottom-up PE methodology in CY 2007 and to the use of the updated PE/HR data in CY 2010 have resulted in significant refinements to the PE RVUs in recent years.

In the CY 2012 PFS final rule with comment period (76 FR 73057), we finalized a proposal to consolidate reviews of work and PE RVUs under section 1848(c)(2)(B) of the Act and reviews of potentially misvalued codes under section 1848(c)(2)(K) of the Act into one annual process.

In addition to the five-year reviews, beginning for CY 2009, CMS, and the RUC have identified and reviewed a number of potentially misvalued codes on an annual basis based on various identification screens.  This annual review of work and PE RVUs for potentially misvalued codes was supplemented by the amendments to section 1848 of the Act, as enacted by section 3134 of the Affordable Care Act, which requires the agency to periodically identify, review and adjust values for potentially misvalued codes.

1. Application of Budget Neutrality to Adjustments of RVUs

As described in section VI.C. of this final rule with comment period, in accordance with section 1848(c)(2)(B)(ii)(II) of the Act, if revisions to the RVUs cause expenditures for the year to change by more than $20 million, we make adjustments to ensure that expenditures did not increase or decrease by more than $20 million.

2. Calculation of Payments Based on RVUs

To calculate the payment for each service, the components of the fee schedule (work, PE, and MP RVUs) are adjusted by geographic practice cost indices (GPCIs) to reflect the variations in the costs of furnishing the services. The GPCIs reflect the relative costs of work, PE, and MP in an area compared to the national average costs for each component.

We received several comments regarding GPCIs that are not within the scope of proposals in the CY 2016 PFS proposed rule. Many of these commenters requested adjustments to GPCI values for the Puerto Rico payment locality.  These commenters contend that the data used to calculate GPCIs do not accurately reflect the cost of medical practice in Puerto Rico. We have addressed some of these issues in response to specific comments in prior rulemaking, such as the CY 2014 PFS final rule with comment period (78 FR 74380 through 74391), and will further take comments into account when we next propose to update GPCIs.                                                                                                  However, we also note that we anticipate proposing updated GPCIs during CY 2017 rulemaking, and in the context of that update, we will consider the concerns expressed by commenters and others regarding the GPCIs for the Puerto Rico locality.

RVUs are converted to dollar amounts through the application of a CF, which is calculated based on a statutory formula by CMS’s Office of the Actuary (OACT). The formula for calculating the Medicare fee schedule payment amount for a given service and fee schedule area can be expressed as:

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

3. Separate Fee Schedule Methodology for Anesthesia Services

Section 1848(b)(2)(B) of the Act specifies that the fee schedule amounts for anesthesia services are to be based on a uniform relative value guide, with appropriate adjustment of an anesthesia conversion factor, in a manner to assure that fee schedule amounts for anesthesia services are consistent with those for other services of comparable value. Therefore, there is a separate fee schedule methodology for anesthesia services.  Specifically, we establish a separate conversion factor for anesthesia services and we utilize the uniform relative value guide, or base units, as well as time units, to calculate the fee schedule amounts for anesthesia services. Since anesthesia services are not valued using RVUs, a separate methodology for locality adjustments is also necessary.  This involves an adjustment to the national anesthesia CF for each payment locality.

4. Most Recent Changes to the Fee Schedule

Section 220(d) of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113– 93, enacted on April 1, 2014) added a new subparagraph (O) to section 1848(c)(2) of the Act to establish an annual target for reductions in PFS expenditures resulting from adjustments to relative values of misvalued codes.  If the estimated net reduction in expenditures for a year is equal to or greater than the target for that year, the provision specifies that reduced expenditures attributable to such adjustments shall be redistributed in a budget-neutral manner within the PFS. The provision specifies that the amount by which such reduced expenditures exceed the target for a given year shall be treated as a reduction in expenditures for the subsequent year for purposes of determining whether the target for the subsequent year has been met.  The provision also specifies that an amount equal to the difference between the target and the estimated net reduction in expenditures, called the target recapture amount, shall not be taken into account

when applying the budget neutrality requirements specified in section 1848(c)(2)(B)(ii)(II) of the Act.  The PAMA amendments originally made the target provisions applicable for CYs 2017 through 2020 and set the target for reduced expenditures at 0.5 percent of estimated expenditures under the PFS for each of those 4 years.

Subsequently, section 202 of the Achieving a Better Life Experience Act of 2014 (ABLE) (Division B of Pub. L. 113-295, enacted December 19, 2014) accelerated the application of the target , amending section 1848(c)(2)(O) of the Act to specify that target provisions apply for CYs 2016, 2017, and 2018; and setting a 1 percent target for reduced expenditures for CY 2016 and a 0.5 percent target for CYs 2017 and 2018.  The implementation of the target legislation is discussed in section II.E. of this final rule with comment period.

Section 1848(c)(7) of the Act, as added by section 220(e) of the PAMA, specified that for services that are not new or revised codes, if the total RVUs for a service for a year would otherwise be decreased by an estimated 20 percent or more as compared to the total RVUs for the previous year, the applicable adjustments in work, PE, and MP RVUs shall be phased in over a 2-year period. Section 220(e) of the PAMA required the phase-in of RVU reductions of 20 percent or more to begin for 2017. Section 1848(c)(7) of the Act was later amended by section 202 of the ABLE Act to require instead that the phase-in must begin in CY 2016.  The implementation of the phase-in legislation is discussed in section II.F. of this final rule with comment period.

Section 218(a) of the PAMA added a new section 1834(p) of the Act. Section 1834(p) of the Act requires for certain computed tomography (CT) services reductions in payment for the technical component (TC) (and the TC of the global fee) of the PFS service and in the hospital OPPS payment (5 percent in 2016, and 15 percent in 2017 and subsequent years). The CT services that are subject to the payment reduction are services  identified as of January 1, 2014 by HCPCS codes 70450-70498, 71250-71275, 72125-72133, 72191-72194, 73200-73206,

73700-73706, 74150-74178, 74261-74263, and 75571-75574, and succeeding codes, that are furnished using equipment that does not meet each of the attributes of the National Electrical Manufacturers Association (NEMA) Standard XR-29-2013, entitled “Standard Attributes on CT Equipment Related to Dose Optimization and Management.” The implementation of the amendments made by section 218(a) of the PAMA is discussed in section II.G. of this final rule with comment period.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, enacted on April 16, 2015) makes several changes to the statute, including but not limited to:

• Repealing the sustainable growth rate (SGR) update methodology for physicians’
• Revising the PFS update for 2015 and subsequent

• Requiring that we establish a Merit-based Incentive Payment System (MIPS) under which MIPS eligible professionals (initially including physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists) receive annual payment adjustments (increases or decreases) based on their performance in a prior These and other MACRA provisions are discussions in various sections of this final rule with comment period. Please refer to the table of contents for the location of the various MACRA provision discussions.

II.    Provisions of the Final Rule with Comment Period for PFS

• Determination of Practice Expense (PE) Relative Value Units (RVUs)

1. Overview

Practice expense (PE) is the portion of the resources used in furnishing a service that reflects the general categories of physician and practitioner expenses, such as office rent and personnel wages, but excluding malpractice expenses, as specified in section 1848(c)(1)(B) of the Act.  As required by section 1848(c)(2)(C)(ii) of the Act, we use a resource-based system for determining PE RVUs for each physicians’ service. We develop PE RVUs by considering the direct and indirect practice resources involved in furnishing each service.  Direct expense categories include clinical labor, medical supplies, and medical equipment.  Indirect expenses include administrative labor, office expense, and all other expenses.  The sections that follow provide more detailed information about the methodology for translating the resources involved in furnishing each service into service-specific PE RVUs.  We refer readers to the CY 2010 PFS final rule with comment period (74 FR 61743 through 61748) for a more detailed explanation of the PE methodology.

2. Practice Expense Methodology

1. Direct Practice Expense

We determine the direct PE for a specific service by adding the costs of the direct resources (that is, the clinical staff, medical supplies, and medical equipment) typically involved with furnishing that service. The costs of the resources are calculated using the refined direct PE inputs assigned to each CPT code in our PE database, which are generally based on our review of recommendations received from the RUC and those provided in response to public comment periods.  For a detailed explanation of the direct PE methodology, including examples, we refer readers to the Five-Year Review of Work Relative Value Units under the PFS and Proposed

Changes to the Practice Expense Methodology proposed notice (71 FR 37242) and the CY 2007 PFS final rule with comment period (71 FR 69629).

Comment:  Several commenters requested that CMS include pharmacists as active

qualified health care providers for purposes of calculating physician PE direct costs.  The commenters stated that there are a number of ongoing Center for Medicare and Medicaid Innovation (CMMI)  initiatives in which pharmacists are making substantial contributions to redesigning healthcare delivery and financing.  The commenters insisted that pharmacists need to be included in the calculation of direct PE expenses as an element of the clinical labor variable relating to physician services, to ensure optimal medication therapy outcomes for beneficiaries, and the absence of these pharmacists negatively impacts the health care system.

Response:  The direct PE input database contains the service-level costs in clinical labor

based on the typical service furnished to Medicare beneficiaries.  Commenters did not suggest that the labor costs of pharmacists are a typical resource cost in furnishing any particular physicians’ service.  When such costs are typically incurred in furnishing such services, we do not have any standing policies that would prohibit the inclusion of the costs in the direct PE input database used to develop PE RVUs for individual services, to the extent that inclusion of such costs would not lead to duplicative payments.  Therefore, we welcome more detailed information regarding the typical clinical labor costs involving pharmacists for particular PFS services. We note, however, that in many of the CMMI initiatives, payment is provided for care management and care coordination services, including services provided by pharmacists. As such, we encourage commenters to provide information about the inclusion of additional clinical labor costs for specific services described by HCPCS codes for which payment is made under the PFS, as opposed to clinical labor costs that may be typical only under certain initiatives.

1. Indirect Practice Expense per Hour Data

We use survey data on indirect PEs incurred per hour worked in developing the indirect portion of the PE RVUs.  Prior to CY 2010, we primarily used the practice expense per hour (PE/HR) by specialty that was obtained from the AMA’s Socioeconomic Monitoring Surveys (SMS).  The AMA administered a new survey in CY 2007 and CY 2008, the Physician Practice Expense Information Survey (PPIS). The PPIS is a multispecialty, nationally representative, PE survey of both physicians and nonphysician practitioners (NPPs) paid under the PFS using a survey instrument and methods highly consistent with those used for the SMS and the supplemental surveys.  The PPIS gathered information from 3,656 respondents across 51 physician specialty and health care professional groups. We believe the PPIS is the most comprehensive source of PE survey information available.  We used the PPIS data to update the PE/HR data for the CY 2010 PFS for almost all of the Medicare-recognized specialties that participated in the survey.

When we began using the PPIS data in CY 2010, we did not change the PE RVU methodology itself or the manner in which the PE/HR data are used in that methodology. We only updated the PE/HR data based on the new survey.  Furthermore, as we explained in the CY 2010 PFS final rule with comment period (74 FR 61751), because of the magnitude of payment reductions for some specialties resulting from the use of the PPIS data, we transitioned its use over a 4-year period from the previous PE RVUs to the PE RVUs developed using the

new PPIS data.  As provided in the CY 2010 PFS final rule with comment period (74 FR 61751), the transition to the PPIS data was complete for CY 2013. Therefore, PE RVUs from CY 2013 forward are developed based entirely on the PPIS data, except as noted in this section.

Section 1848(c)(2)(H)(i) of the Act requires us to use the medical oncology supplemental survey data submitted in 2003 for oncology drug administration services. Therefore, the PE/HR for medical oncology, hematology, and hematology/oncology reflects the continued use of these supplemental survey data.

Supplemental survey data on independent labs from the College of American Pathologists were implemented for payments beginning in CY 2005.  Supplemental survey data from the National Coalition of Quality Diagnostic Imaging Services (NCQDIS), representing independent diagnostic testing facilities (IDTFs), were blended with supplementary survey data from the American College of Radiology (ACR) and implemented for payments beginning in CY 2007. Neither IDTFs, nor independent labs, participated in the PPIS.  Therefore, we continue to use the PE/HR that was developed from their supplemental survey data.

Consistent with our past practice, the previous indirect PE/HR values from the supplemental surveys for these specialties were updated to CY 2006 using the MEI to put them on a comparable basis with the PPIS data.

We also do not use the PPIS data for reproductive endocrinology and spine surgery since these specialties currently are not separately recognized by Medicare, nor do we have a method to blend the PPIS data with Medicare-recognized specialty data.

Previously, we established PE/HR values for various specialties without SMS or supplemental survey data by crosswalking them to other similar specialties to estimate a proxy PE/HR.  For specialties that were part of the PPIS for which we previously used a crosswalked PE/HR, we instead used the PPIS-based PE/HR.  We continue previous crosswalks for specialties that did not participate in the PPIS. However, beginning in CY 2010 we changed the PE/HR crosswalk for portable X-ray suppliers from radiology to IDTF, a more appropriate crosswalk because these specialties are more similar to each other for work time.

For registered dietician services, the resource-based PE RVUs have been calculated in accordance with the final policy that crosswalks the specialty to the “All Physicians” PE/HR data, as adopted in the CY 2010 PFS final rule with comment period (74 FR 61752) and discussed in more detail in the CY 2011 PFS final rule with comment period (75 FR 73183).

For CY 2016, we have incorporated the available utilization data for interventional cardiology, which became a recognized Medicare specialty during 2014.  We proposed to use a proxy PE/HR value for interventional cardiology, as there are no PPIS data for this specialty, by crosswalking the PE/HR for from Cardiology, since the specialties furnish similar services in the Medicare claims data.  The change is reflected in the “PE/HR” file available on the CMS website under the supporting data files for the CY 2016 PFS proposed rule at http://www.cms.gov/Medicare/Medicare-Fee-for-Service- Payment/PhysicianFeeSched/index.html.

Comment:  One commenter expressed support for the new proposal to use a proxy PE per

hour for interventional cardiology by crosswalking to the PE/HR for cardiology.

Response:  We appreciate the commenter’s support and are finalizing the crosswalk as

proposed.

1. Allocation of PE to Services

To establish PE RVUs for specific services, it is necessary to establish the direct and indirect PE associated with each service.

• Direct Costs

The relative relationship between the direct cost portions of the PE RVUs for any two services is determined by the relative relationship between the sum of the direct cost resources (that is, the clinical staff, medical supplies, and medical equipment) typically involved with furnishing each of the services.  The costs of these resources are calculated from the refined direct PE inputs in our PE database. For example, if one service has a direct cost sum of $400 from our PE database and another service has a direct cost sum of

$200, the direct portion of the PE RVUs of the first service would be twice as much as the direct portion of the PE RVUs for the second service.

• Indirect Costs

Section II.A.2.b. of this final rule with comment period describes the current data sources for specialty-specific indirect costs used in our PE calculations.  We allocated the indirect costs to the code level on the basis of the direct costs specifically associated with a code and the greater of either the clinical labor costs or the work RVUs.  We also incorporated the survey data described earlier in the PE/HR discussion.  The general approach to developing the indirect portion of the PE RVUs is as follows:

• For a given service, we used the direct portion of the PE RVUs calculated as previously described and the average percentage that direct costs represent of total costs (based on survey data) across the specialties that furnish the service to determine an initial indirect That is, the initial indirect allocator is calculated so that the direct costs equal the average percentage of direct costs of those specialties furnishing the service.  For example, if the direct portion of the PE RVUs for a given service is 2.00 and direct costs, on average, represented 25 percent of total costs for the specialties that furnished the service, the initial indirect allocator would be calculated so that it equals 75 percent of the total PE RVUs.  Thus, in this example, the initial indirect allocator would equal 6.00, resulting in a total PE RVUs of 8.00 (2.00 is 25 percent of 8.00 and 6.00 is 75 percent of 8.00).

• Next, we added the greater of the work RVUs or clinical labor portion of the direct portion of the PE RVUs to this initial indirect In our example, if this service had work RVUs of 4.00 and the clinical labor portion of the direct PE RVUs was 1.50, we would add 4.00 (since the 4.00 work RVUs are greater than the 1.50 clinical labor portion) to the initial indirect allocator of 6.00 to get an indirect allocator of 10.00.  In the absence of any further use of the survey data, the relative relationship between the indirect cost portions of the PE RVUs for any two services would be determined by the

relative relationship between these indirect cost allocators.  For example, if one service had an indirect cost allocator of 10.00 and another service had an indirect cost allocator of 5.00, the indirect portion of the PE RVUs of the first service would be twice as great as the indirect portion of the PE RVUs for the second service.

• Next, we incorporated the specialty-specific indirect PE/HR data into the In our example, if, based on the survey data, the average indirect cost of the specialties furnishing the first service with an allocator of 10.00 was half of the average indirect cost of the specialties furnishing the second service with an indirect allocator of 5.00, the indirect portion of the PE RVUs of the first service would be equal to that of the second service.
• Facility and Nonfacility Costs

For procedures that can be furnished in a physician’s office, as well as in a hospital or other facility setting, we establish two PE RVUs:  facility; and nonfacility.  The methodology for calculating PE RVUs is the same for both the facility and nonfacility RVUs, but is applied independently to yield two separate PE RVUs. Because in calculating the PE RVUs for services furnished in a facility, we do not include resources that would generally not be provided by physicians when furnishing the service in a facility, the facility PE RVUs are generally lower than the nonfacility PE RVUs.

Medicare makes a separate payment to the facility for its costs of furnishing a service.

• Services with Technical Components (TCs) and Professional Components (PCs)

Diagnostic services are generally comprised of two components: a professional component (PC) and a technical component (TC).  The PC and TC may be furnished independently or by different providers, or they may be furnished together as a “global” service. When services have separately billable PC and TC components, the payment for the global

service equals the sum of the payment for the TC and PC.  To achieve this we use a weighted average of the ratio of indirect to direct costs across all the specialties that furnish the global service, TCs, and PCs; that is, we apply the same weighted average indirect percentage factor to allocate indirect expenses to the global service, PCs, and TCs for a service. (The direct PE RVUs for the TC and PC sum to the global.)

• PE RVU Methodology

For a more detailed description of the PE RVU methodology, we refer readers to the CY 2010 PFS final rule with comment period (74 FR 61745 through 61746).

• ) Setup File

First, we create a setup file for the PE methodology.  The setup file contains the direct cost inputs, the utilization for each procedure code at the specialty and facility/nonfacility place of service level, and the specialty-specific PE/HR data calculated from the surveys.

• Calculate the Direct Cost PE RVUs Sum the costs of each direct

Step 1:  Sum the direct costs of the inputs for each service.  Apply a scaling adjustment to

the direct inputs.

Step 2: Calculate the aggregate pool of direct PE costs for the current year. Under our

current methodology, we first multiply the current year’s conversion factor by the product of the current year’s PE RVUs and utilization for each service to arrive at the aggregate pool of total PE costs (Step 2a).  We then calculate the average direct percentage of the current pool of PE RVUs (using a weighted average of the survey data for the specialties that furnish each service (Step 2b).) We then multiply the result of 2a by the result of 2b to arrive at the aggregate pool of direct PE costs for the current year.

For CY 2016, we proposed a technical improvement to step 2a of this calculation.  In place of the step 2a calculation described above, we proposed to set the aggregate pool of

PE costs equal to the product of the ratio of the current aggregate PE RVUs to current aggregate work RVUs and the proposed aggregate work RVUs.  Historically, in allowing the current PE RVUs to determine the size of the base PE pool in the PE methodology, we have assumed that the relationship of PE RVUs to work RVUs is constant from year to year.  Since this is not ordinarily the case, by not considering the proposed aggregate work RVUs in determining the size of the base PE pool, we have introduced some minor instability from year to year in the relative shares of work, PE, and MP RVUs. Although this modification would result in greater stability in the relationship among the work and PE RVU components in the aggregate, we do not anticipate it will affect the distribution of PE RVUs across specialties.  The PE RVUs in addendum B of this final rule with comment period reflect this refinement to the PE methodology.

We did not receive any comments on this proposed refinement of the methodology. Therefore, we are finalizing this refinement as proposed.

Step 3: Calculate the aggregate pool of direct PE costs for use in ratesetting. This is the

product of the aggregate direct costs for all services from Step 1 and the utilization data for that service.

Step 4: Using the results of Step 2 and Step 3, calculate a direct PE scaling adjustment to

ensure that the aggregate pool of direct PE costs calculated in Step 3 does not vary from the aggregate pool of direct PE costs for the current year. Apply the scaling factor to the direct costs for each service (as calculated in Step 1).

Step 5: Convert the results of Step 4 to an RVU scale for each service.  To do this, divide

the results of Step 4 by the CF.  Note that the actual value of the CF used in this calculation does not influence the final direct cost PE RVUs, as long as the same CF is used in Step 2 and Step 5.  Different CFs will result in different direct PE scaling factors,

but this has no effect on the final direct cost PE RVUs since changes in the CFs and changes in the associated direct scaling factors offset one another.

• ) Create the Indirect Cost PE RVUs Create indirect

Step 6:  Based on the survey data, calculate direct and indirect PE percentages for each

physician specialty.

Step 7:  Calculate direct and indirect PE percentages at the service level by taking a

weighted average of the results of Step 6 for the specialties that furnish the service. Note that for services with TCs and PCs, the direct and indirect percentages for a given service do not vary by the PC, TC, and global service.

Historically, we have used the specialties that furnish the service in the most recent full year of Medicare claims data (crosswalked to the current year set of codes) to determine which specialties furnish individual procedures.  For example, for CY 2015 ratesetting, we used the mix of specialties that furnished the services in the CY 2013 claims data to determine the specialty mix assigned to each code. Although we believe that there are clear advantages to using the most recent available data in making these determinations, we have also found that using a single year of data contributes to greater year-to-year instability in PE RVUs for individual codes and often creates extreme, annual fluctuations for low-volume services, as well as delayed fluctuations for some services described by new codes once claims data for those codes becomes available.

We believe that using an average of the three most recent years of available data may increase stability of PE RVUs and mitigate code-level fluctuations for both the full range of PFS codes, and for new and low-volume codes in particular. Therefore, we proposed to refine this step of the PE methodology to use an average of the 3 most recent years of available Medicare claims data to determine the specialty mix assigned to each code.

The PE RVUs in Addendum B of the CMS website reflect this refinement to the PE methodology.

Comment: We received several comments supporting this proposed refinement of

the methodology.  Several commenters also urged us to override the utilization data for low-volume codes using a recommended list of expected specialty or dominant specialty, consistent with our previous approach.

Response:  We appreciate the support for the use of the 3-year average of claims

utilization for purposes of determining the specialty mix for individual service.  As we stated in our proposal, we believe that the 3-year average will mitigate the need to use dominant or expected specialty instead of the claims data.  However, we also understand that the hypothesis will be tested as soon as a new year of claims data is incorporated into the PFS ratesetting methodology.  Because we anticipate incorporating CY 2015 claims data for use in CY 2017 ratesetting, we believe that the proposed PE RVUs associated with the CY 2017 PFS proposed rule will provide the best opportunity to determine whether service-level overrides of claims data are necessary.  Therefore, we are finalizing the policy as proposed for CY 2016 but will seek comment on the proposed CY 2017 PFS rates and whether or not the incorporation a new year of utilization data mitigates the need for service-level overrides.  At that time, we would reconsider whether or not to use a claims-based approach (dominant specialty) or stakeholder-recommended approach (expected specialty) in the development of PE RVUs for low-volume codes.

Step 8:  Calculate the service level allocators for the indirect PEs based on

the percentages calculated in Step 7.  The indirect PEs are allocated based on the three components:  the direct PE RVUs; the clinical labor PE RVUs; and the work RVUs.

For most services the indirect allocator is: indirect PE percentage * (direct PE RVUs/direct percentage) + work RVUs.

There are two situations where this formula is modified:

• If the service is a global service (that is, a service with global, professional, and technical components), then the indirect PE allocator is: indirect percentage (direct PE RVUs/direct percentage) + clinical labor PE RVUs + work
• If the clinical labor PE RVUs exceed the work RVUs (and the service is not a global service), then the indirect allocator is: indirect PE percentage (direct

PE RVUs/direct percentage) + clinical labor PE RVUs.

(Note:  For global services, the indirect PE allocator is based on both the work RVUs and

the clinical labor PE RVUs.  We do this to recognize that, for the PC service, indirect PEs will be allocated using the work RVUs, and for the TC service, indirect PEs will be allocated using the direct PE RVUs and the clinical labor PE RVUs. This also allows the global component RVUs to equal the sum of the PC and TC RVUs.)

For presentation purposes in the examples in Table 1, the formulas were divided into two parts for each service.

• The first part does not vary by service and is the indirect percentage (direct PE RVUs/direct percentage).
• The second part is either the work RVU, clinical labor PE RVU, or both depending on whether the service is a global service and whether the clinical PE RVUs exceed the work RVUs (as described earlier in this step).

Apply a scaling adjustment to the indirect allocators.

Step 9:  Calculate the current aggregate pool of indirect PE RVUs by multiplying the

result of step 2a (as calculated with the proposed change) by the average indirect PE percentage from the survey data.

Step 10:  Calculate an aggregate pool of indirect PE RVUs for all PFS services by adding

the product of the indirect PE allocators for a service from Step 8 and the utilization data for that service.

Step 11: Using the results of Step 9 and Step 10, calculate an indirect PE adjustment so

that the aggregate indirect allocation does not exceed the available aggregate indirect PE RVUs and apply it to indirect allocators calculated in Step 8.

Calculate the indirect practice cost index.

Step 12: Using the results of Step 11, calculate aggregate pools of specialty-specific

adjusted indirect PE allocators for all PFS services for a specialty by adding the product of the adjusted indirect PE allocator for each service and the utilization data for that service.

Step 13:  Using the specialty-specific indirect PE/HR data, calculate specialty-specific

aggregate pools of indirect PE for all PFS services for that specialty by adding the product of the indirect PE/HR for the specialty, the work time for the service, and the specialty’s utilization for the service across all services furnished by the specialty.

Step 14: Using the results of Step 12 and Step 13, calculate the specialty-specific indirect

PE scaling factors.

Step 15:  Using the results of Step 14, calculate an indirect practice cost index at the

specialty level by dividing each specialty-specific indirect scaling factor by the average indirect scaling factor for the entire PFS.

Step 16:  Calculate the indirect practice cost index at the service level to ensure the

capture of all indirect costs.  Calculate a weighted average of the practice cost index values for the specialties that furnish the service. (Note: For services with TCs and PCs,

we calculate the indirect practice cost index across the global service, PCs, and TCs.

Under this method, the indirect practice cost index for a given service (for example, echocardiogram) does not vary by the PC, TC, and global service.)

Step 17:  Apply the service level indirect practice cost index calculated in Step 16 to the

service level adjusted indirect allocators calculated in Step 11 to get the indirect PE RVUs.

• Calculate the Final PE RVUs

Step 18: Add the direct PE RVUs from Step 6 to the indirect PE RVUs from Step 17 and

apply the final PE budget neutrality (BN) adjustment.  The final PE BN adjustment is calculated by comparing the results of Step 18 to the proposed aggregate work RVUs scaled by the ratio of current aggregate PE and work RVUs, consistent with the proposed changes in Steps 2 and 9.  This final BN adjustment is required to redistribute RVUs from step 18 to all PE RVUs in the PFS, and because certain specialties are excluded from the PE RVU calculation for ratesetting purposes, but we note that all specialties are included for purposes of calculating the final BN adjustment.  (See “Specialties excluded from ratesetting calculation” later in this section.)

• ) Setup File Information

• Specialties excluded from ratesetting calculation: For the purposes of calculating the

PE RVUs, we exclude certain specialties, such as certain nonphysician practitioners paid at a percentage of the PFS and low-volume specialties, from the calculation.  These specialties are included for the purposes of calculating the BN adjustment.  They are displayed in Table 1.

TABLE 1:  Specialties Excluded from Ratesetting Calculation

• Crosswalk certain low volume physician specialties: Crosswalk the utilization of

certain specialties with relatively low PFS utilization to the associated specialties.

• Physical therapy utilization: Crosswalk the utilization associated with all physical

therapy services to the specialty of physical therapy.

• Identify professional and technical services not identified under the usual TC and 26

modifiers:  Flag the services that are PC and TC services but do not use TC and 26

modifiers (for example, electrocardiograms).  This flag associates the PC and TC with the associated global code for use in creating the indirect PE RVUs. For example, the

professional service, CPT code 93010 (Electrocardiogram, routine ECG with at least 12 leads; interpretation and report only), is associated with the global service, CPT code 93000 (Electrocardiogram, routine ECG with at least 12 leads; with interpretation and report).

• Payment modifiers: Payment modifiers are accounted for in the creation of the file consistent

with current payment policy as implemented in claims processing.  For example, services billed with the assistant at surgery modifier are paid 16 percent of the PFS amount for that service; therefore, the utilization file is modified to only account for 16 percent of any service that contains the assistant at surgery modifier.  Similarly, for those services to which volume adjustments are made to account for the payment modifiers, time adjustments are applied as well. For time adjustments to surgical services, the intraoperative portion in the work time file is used; where it is not present, the intraoperative percentage from the payment files used by contractors to process Medicare claims is used instead.  Where neither is available, we use the payment adjustment ratio to adjust the time accordingly. Table 2 details the manner in which the modifiers are applied.

TABLE 2:  Application of Payment Modifiers to Utilization Files

We also make adjustments to volume and time that correspond to other payment rules, including special multiple procedure endoscopy rules and multiple procedure payment reductions (MPPRs).  We note that section 1848(c)(2)(B)(v) of the Act exempts certain reduced payments for multiple imaging procedures and multiple therapy services from the BN calculation under section 1848(c)(2)(B)(ii)(II) of the Act.  These MPPRs are not included in the development of the RVUs.

For anesthesia services, we do not apply adjustments to volume since we use the average allowed charge when simulating RVUs; therefore, the RVUs as calculated already reflect the payments as adjusted by modifiers, and no volume adjustments are necessary.

However, a time adjustment of 33 percent is made only for medical direction of two to four cases since that is the only situation where a single practitioner is involved with multiple beneficiaries concurrently, so that counting each service without regard to the overlap with other services would overstate the amount of time spent by the practitioner furnishing these services.

• Work RVUs: The setup file contains the work RVUs from this final rule with

comment period.

The following is a summary of the comments we received regarding PE RVU methodology.

Comment:  We received several comments in response to our proposal to use the 3 most

recent years of Medicare claims data to determine the specialty mix assigned to each code.  All commenters broadly supported the proposal to use a 3-year average to increase stability of PE RVUs and mitigate code-level fluctuations.  Some commenters, including the RUC, also stated that for codes which are very low volume in the Medicare population, the dominant specialty(ies) should be assigned.  These commenters stressed that CMS should continue to utilize the expertise of the RUC when making these assignments.

Response:  For services that are newly created or very low volume, we will continue to

explore different methods to ensure the utilization of the most accurate specialty mix.

• Equipment Cost Per Minute

The equipment cost per minute is calculated as:

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

equipment)))) + maintenance)

Where:

minutes per year = maximum minutes per year if usage were continuous (that is, usage = 1); generally 150,000 minutes.

usage = variable, see discussion below.

price = price of the particular piece of equipment.

life of equipment = useful life of the particular piece of equipment. maintenance = factor for maintenance; 0.05.

interest rate = variable, see discussion below.

Usage:  We currently use an equipment utilization rate assumption of 50 percent for most

equipment, with the exception of expensive diagnostic imaging equipment, for which we use a 90 percent assumption as required by section 1848(b)(4)(C) of the Act. We also direct the reader to section II.H.6.b of this final rule with comment period for a discussion of our change in the utilization rate assumption for the linear accelerator used in furnishing radiation treatment services.

Maintenance: This factor for maintenance was proposed and finalized during rulemaking

for CY 1998 PFS (62 FR 33164).  Several stakeholders have suggested that this maintenance factor assumption should be variable, similar to other assumptions in the equipment cost per minute calculation.  In CY 2015 rulemaking, we solicited comments regarding the availability of reliable data on maintenance costs that vary for particular equipment items.  We received several comments about variable maintenance costs, and in reviewing the information offered in those comments, it is clear that the relationship between maintenance costs and the price of equipment is not necessarily uniform across equipment.  After reviewing the comments received, we have been unable to identify a systematic way of varying the maintenance cost assumption relative to the price or useful life of equipment.  Therefore, to accommodate a variable, as opposed to a standard, maintenance rate within the equipment cost per minute calculation, we believe we would have to gather and maintain valid data on the maintenance costs for each equipment item in the direct PE input database, much like we do for price and useful life.

Given our longstanding difficulties in acquiring accurate pricing information for equipment items, we solicited comments on whether adding another item-specific financial variable for equipment costs will be likely to increase the accuracy of PE RVUs across the PFS.  We noted that most of the information for maintenance costs we have received is for capital equipment, and for the most part, this information has been limited

to single invoices.  Like the invoices for the equipment items themselves, we do not believe that very small numbers of voluntarily submitted invoices are likely to reflect typical costs for all of the same reasons we have discussed in previous rulemaking. We noted that some commenters submitted high-level summary data from informal surveys but we currently have no means to validate that data.  Therefore, we continue to seek a source of publicly available data on actual maintenance costs for medical equipment to improve the accuracy of the equipment costs used in developing PE RVUs.

Comment: Many commenters stated that the current 5 percent equipment maintenance

factor does not account for expensive maintenance contracts on pieces of highly technical equipment.  Most commenters were supportive of the idea of adding an item-specific maintenance variable for equipment costs, which they stated would likely increase the accuracy of the PE RVUs across the PFS.  These commenters stated that specialty societies and other stakeholders should be allowed to provide documentation to CMS, as they currently do for pricing new supplies and equipment, to apply for an increase in maintenance costs. Other commenters requested that if a fixed maintenance factor remains in place, it should be increased from 5 percent to 10 percent.  One commenter expressed concern that CMS would entertain making a change in this aspect of the equipment cost per minute formula based on a few invoices when a change would impact every service in the fee schedule. The commenter expressed concerns with the possibility that CMS might adopt a variable maintenance factor based on the submission of individual invoices. Another commenter stated that without a systematic data collection methodology for determining maintenance factors, they had concerns that any invoices CMS received might not accurately capture the true costs of equipment maintenance.

Although most commenters were supportive of adopting a variable maintenance factor for equipment items, commenters also stated that they were unaware of any publicly available data source containing this information.  One commenter agreed that there is no comprehensive

data source for the maintenance information and therefore it would be difficult to implement a variable maintenance formula.  Multiple other commenters concurred that they were unaware of any such public dataset.  Several commenters encouraged CMS to work with stakeholders to define service contracts/maintenance contracts, collect data on their associated costs and update the equipment maintenance adjustment factor as necessary.

Response:  We appreciate the submission of extensive comments regarding the subject of

equipment maintenance factor. We agree with commenters that we do not believe the annual maintenance factor for all equipment is exactly 5 percent, and we concur that the current rate likely understates the true cost of maintaining some equipment. We also believe it likely overstates the maintenance costs for other equipment. However, in the absence of publicly available datasets regarding equipment maintenance costs or another systematic data collection methodology for determining maintenance factor, we do not believe that we have sufficient information at present to adopt a variable maintenance factor for equipment cost per minute pricing.  While we believe that these costs ideally should be incorporated into the PE methodology, we also have serious concerns about the problems that result from incorporating anecdotal data based solely on voluntarily submitted pricing information.  In establishing prices for equipment and supplies, in many cases we have found that the submitted invoices often overstate the costs for individual items relative to publically available prices.  We believe that the incentives related to voluntarily submitted limited invoices for maintenance costs would likely produce information subject to similar limitations. However, in contrast to prices, where we have identified no feasible alternative, our alternative for determining maintenance rates is a

long-established default maintenance rate.  We also note that the amount of costs for maintenance under the current methodology is directly proportional to the equipment prices, largely determined by the voluntarily submitted invoices for particular equipment items.

Therefore, we believe that absent an auditable, robust data source, using anecdotal data for

maintenance costs is likely to compound the current problems of pricing equipment costs accurately, not increase accuracy.

We will continue to investigate potential avenues for determining equipment maintenance costs across a broad range of equipment items.

Interest Rate:  In the CY 2013 final rule with comment period (77 FR 68902), we

updated the interest rates used in developing an equipment cost per minute calculation. The interest rate was based on the Small Business Administration (SBA) maximum interest rates for different categories of loan size (equipment cost) and maturity (useful life).  The interest rates are listed in Table 3.  (See 77 FR 68902 for a thorough discussion of this issue.) We did not propose any changes to these interest rates for CY 2016.

TABLE 3:  SBA Maximum Interest Rates

TABLE 4:  Calculation of PE RVUs under Methodology for Selected Codes

1. Changes to Direct PE Inputs for Specific Services

This section focusses on specific PE inputs that we addressed in the proposed rule. The direct PE inputs are included in the CY 2016 direct PE input database, which is available on the CMS website under downloads for the CY 2016 PFS final rule with comment period at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-

Federal-Regulation-Notices.html.

• PE Inputs for Digital Imaging Services

Prior to CY 2015 rulemaking, the RUC provided a recommendation regarding the PE inputs for digital imaging services.  Specifically, the RUC recommended that we remove supply and equipment items associated with film technology from a list of codes since these items are no longer typical resource inputs. The RUC also recommended that the Picture Archiving and Communication System (PACS) equipment be included for these imaging services since these items are now typically used in furnishing imaging services. However, since we did not receive any invoices for the PACS system, we were unable to determine the appropriate pricing to use for the inputs. For CY 2015, we proposed, and finalized our proposal, to remove the film supply and equipment items, and to create a new equipment item as a proxy for the PACS workstation as a direct expense. We used the current price associated with ED021 (computer, desktop, w- monitor) to price the new item, ED050 (PACS Workstation Proxy), pending receipt of invoices to facilitate pricing specific to the PACS workstation.

Subsequent to establishing payment rates for CY 2015, we received information from several stakeholders regarding pricing for items related to the digital acquisition and storage of images.  Some of these stakeholders submitted information that included prices for items clearly categorized as indirect costs within the established PE methodology and equivalent to the storage mechanisms for film.  Additionally, some of the invoices we received included other products (like training and maintenance costs) in addition to the equipment items, and there was no

distinction on these invoices between the prices for the equipment items themselves and the related services.  However, we did receive invoices from one stakeholder that facilitated a proposed price update for the PACS workstation.  Therefore, we proposed to update the price for the PACS workstation to $5,557 from the current price of $2,501 since the latter price was based on the proxy item and the former based on submitted invoices.  The PE RVUs in Addendum B on the CMS website reflect the updated price.

In addition to the workstation used by the clinical staff acquiring the images and furnishing the TC of the services, a stakeholder also submitted more detailed information regarding a workstation used by the practitioner interpreting the image in furnishing the PC of many of these services.

As we stated in the CY 2015 final rule with comment period (79 FR 67563), we generally believe that workstations used by these practitioners are more accurately considered indirect costs associated with the PC of the service.  However, we understand that the professional workstations for interpretation of digital images are similar in principle to some of the previous film inputs incorporated into the global and technical components of the codes.  Given that many of these services are reported globally in the nonfacility setting, we believe it may be appropriate to include these costs as direct inputs for the associated HCPCS codes. Based on our established methodology, these costs would be incorporated into the PE RVUs of the global and technical component of the HCPCS code.

We solicited comments on whether including the professional workstation as a direct PE input for these codes would be appropriate, given that the resulting PE RVUs would be assigned to the global and technical components of the codes.

Comment:  Many commenters supported the equipment price increase to $5,557 for the

PACS workstation. Commenters stated that this is a more accurate amount than the current price of $2,501.  However, many commenters, including the RUC, stated that this price did not capture

the appropriate pricing for the PC of the PACS workstation. One commenter expressed concerns with the method that CMS employed to establish the proposed price for the PACS workstation, disregarded the invoices and accompanying explanations submitted by several stakeholders and instead relying on the information submitted by a single group.

Response:  We acknowledge and appreciate that several stakeholders provided

information intended to facilitate our pricing of the equipment related to PACS. However, much of that submitted information included costs that are considered indirect PE under the established methodology. We considered all of the submitted information and used the submitted prices that were consistent with the principles established under the PE methodology.

Comment:  Many commenters, including the RUC, stated that the proposed price did not

capture the appropriate pricing for the PC of the PACS workstation.  Several commenters indicated that the professional workstation was a direct PE item due to the fact that it is used for individual studies (one at a time) in the non-facility setting, and its use involves a bi-directional exchange between a technologist and a radiologist while the TC is being provided.  These commenters also suggested that the professional PACS workstation was a direct proxy for the film alternators, film processors, and view-boxes previously considered direct PE inputs for many of these services prior to the film to digital conversion.  Several commenters suggested that the true cost of the PACS workstation was significantly higher than the proposed $5,557 due to these professional expenses.

Response:  We appreciate the extensive feedback regarding the potential addition of a PC

to the PACS workstation. We agree that the costs of the professional workstation may be analogous to costs previously incorporated as direct PE inputs for these services. Therefore, we are seeking comments and recommendations from stakeholders, including the RUC, regarding which codes would require the professional PACS workstation and for how many minutes the professional equipment workstation would be used relative to the work time or clinical labor

tasks associated with individual codes.  We would address any such recommendations in future rulemaking.

Comment:  One commenter stated that the CMS’ attempt to analogize elements of a

PACS workstation to the historic inputs associated with film technology was inherently flawed. This commenter stated that CMS should not characterize critical elements of the PACS workstation as indirect costs because film technology is fundamentally distinct from digital technology.  The commenter indicated that the PACS workstation requires specific software to function, and the costs associated with training, maintenance, and warranties for the PACS workstation have not been factored into the cost of the equipment.  The commenter suggested that not including these as direct costs reflects a mistaken assumption that a PACS workstation has functionality for non-imaging services, such as patient scheduling, billing, or electronic medical records capability.

Response:  We believe that maintaining consistent treatment of PE costs is of central

importance in the resource-based relative value system.  Since the PE RVUs for individual services are relative to all other PFS services, we believe that we must categorize typical costs for individual services into the direct and indirect categories using the same definitions that apply to all PFS services. We believe it would be inconsistent with cost-based relative value principles to change the definition of those categories for particular procedures or tests, even when technology changes.  Centralized record keeping systems, containing clinical or billing information are considered indirect expenses across the PFS.  Due to technological changes, some of these systems are well-integrated into equipment items with clinical functionality, while others remain completely distinct.  In pricing and categorizing these costs, we have aimed to separate these costs where possible and believe we have maintained relativity among PFS services to the greatest extent possible. We remind commenters that indirect PE RVUs are included for every nationally priced PFS service and that these RVUs contribute to payment for

each and every service.  We also note that over time, indirect costs change as direct costs change. For example, changes in technology might result in particular items using more or less office space, or using more or less electricity.  We do not believe it would be appropriate to redefine indirect costs as direct costs whenever we have reason to believe that indirect costs have changed due to changes in technology.  Instead, we acknowledge that indirect costs change over time for all those who are paid through the Medicare PFS, making it even more important to follow the established principles of relativity in establishing direct PE inputs.

After consideration of comments received, we are finalizing our proposal to update the price for the PACS workstation to $5,557 from the current price of $2,501.

As we noted in the proposed rule, one commenter expressed concern about the changes in direct PE inputs for CPT code 76377, (3D radiographic procedure with computerized image

post-processing), that were proposed and finalized in CY 2015 rulemaking as part of the film to digital change. Based on a recommendation from the RUC, we removed the input called “computer workstation, 3D reconstruction CT-MR” from the direct PE input database and assigned the associated minutes to the proxy for the PACS workstation.  Therefore, we sought comment from stakeholders, including the RUC, about whether or not the PACS workstation used in imaging codes is the same workstation that is used in the post-processing described by CPT code 76377, or if a more specific workstation should be incorporated in the direct PE input database.

Comment: Multiple commenters indicated that CPT code 76377 requires image post-

processing on an independent workstation.  Commenters stated that the “computer workstation, 3D reconstruction CT-MR” equipment (ED014), which was removed by the RUC from the equipment list for this procedure, is separate from the PACS workstation and performs a different function.  The commenters requested that ED014 be restored to the equipment inputs for CPT code 76377 and assigned 38 minutes of equipment time.  The commenters also

suggested that the PACS workstation should remain as a separate direct PE expense as well, since there are additional PACS related activities specific to the 3-D images after they have been created on the computer workstation.

Response:  We appreciate the additional information regarding the use of the 3D

reconstruction computer workstation for CPT code 76377. After consideration of comments received, we agree that the “computer workstation, 3D reconstruction CT-MR” equipment (ED014) should be restored to the equipment list and assigned to CPT code 76377 with an equipment time of 38 minutes.  However, we do not believe that the typical service for CPT code 76377 would also use the PACS workstation. Therefore, we substituted ED014 in place of the PACS workstation.

• Standardization of Clinical Labor Tasks

As we noted in PFS rulemaking for CY 2015, we continue to work on revisions to the direct PE input database to provide the number of clinical labor minutes assigned for each task for every code in the database instead of only including the number of clinical labor minutes for the pre-service, service, and post-service periods for each code.  In addition to increasing the transparency of the information used to set PE RVUs, this improvement would allow us to compare clinical labor times for activities associated with services across the PFS, which we believe is important to maintaining the relativity of the direct PE inputs. This information will facilitate the identification of the usual numbers of minutes for clinical labor tasks and the identification of exceptions to the usual values.  It will also allow for greater transparency and consistency in the assignment of equipment minutes based on clinical labor times.  Finally, we believe that the information can be useful in maintaining standard times for particular clinical labor tasks that can be applied consistently to many codes as they are valued over several years, similar in principle to the use of physician pre-service time packages. We believe such standards will provide greater consistency among codes that share the same clinical labor tasks and could

improve relativity of values among codes.  For example, as medical practice and technologies change over time, changes in the standards could be updated at once for all codes with the applicable clinical labor tasks, instead of waiting for individual codes to be reviewed.

Although this work is not yet complete, we anticipate completing it in the near future. In the following paragraphs, we address a series of issues related to clinical labor tasks, particularly relevant to services currently being reviewed under the misvalued code initiative

• ) Clinical Labor Tasks associated with Digital Imaging

In PFS rulemaking for CY 2015, we noted that the RUC recommendation regarding inputs for digital imaging services indicated that, as each code is reviewed under the misvalued code initiative, the clinical labor tasks associated with digital technology (instead of film) would need to be addressed. When we reviewed that recommendation, we did not have the capability of assigning standard clinical labor times for the hundreds of individual codes since the direct PE input database did not previously allow for comprehensive adjustments for clinical labor times based on particular clinical labor tasks.  Therefore, consistent with the recommendation, we proposed to remove film-based supply and equipment items but maintain clinical labor minutes that were assigned based on film technology.

As noted in the paragraphs above, we continue to improve the direct PE input database by specifying the minutes for each code associated with each clinical labor task.  Once completed, this work would allow adjustments to be made to minutes assigned to particular clinical labor tasks related to digital technology, consistent with the changes that were made to individual supply and equipment items.  In the meantime, we believe it would be appropriate to establish standard times for clinical labor tasks associated with all digital imaging for purposes of reviewing individual services at present, and for possible broad-based standardization once the changes to the database facilitate our ability to adjust time for existing services. Therefore, we solicited comments on the appropriate standard minutes for the clinical labor tasks associated

with services that use digital technology, which are listed in Table 5. We note that the application of any standardized times we adopt for clinical labor tasks to codes that are not being reviewed in this final rule would be considered for possible inclusion in future notice and comment rulemaking.

TABLE 5:  Clinical Labor Tasks Associated with Digital Technology

*This clinical labor task is listed as it appears on the “PE worksheets.” QC refers to quality control, which we understand to mean the verification of the image using the PACS workstation.

The following is a summary of the comments we received regarding whether these standard times accurately reflect the typical time it takes to perform these clinical labor tasks associated with digital imaging.

Comment:  Many commenters supported CMS’ efforts to recognize the advances in

digital technology and take them into account through updated RVUs. Several commenters agreed that the clinical labor tasks outlined in Table 5 reflected the PE Subcommittee’s film to digital workgroup recommendations. The commenters suggested that the staff types in the tasks should be made more generalized and less specific (such as technologist to clinical staff or radiologist to physician), and stated that specialty societies should be afforded the opportunity to request deviations (that is, increases) from the standard times.

Response: We believe that providing specific guidelines for the staff types associated

with these tasks will aid in determining the most accurate value for each service. We also agree

that specialties should be afforded the opportunity to request deviations from the standard times for unusual situations, when supported with the presentation of additional justification for the added time.

Comment: The RUC commented that it had not supported standard times for clinical

staff activities related to digital imaging in the past, as the RUC had recommended that the specialties should have an opportunity to determine the appropriate inputs at the individual distinct service level and there was too much variability across imaging modalities to propose standards. While the RUC continued to hold to its previous position on this subject, it also agreed that four of the five clinical labor activities proposed by CMS in Table 5 are representative across imaging and could appropriately be used as standard times. The one exception was the clinical labor task “Technologist QC’s images in PACS, checking for all images, reformats, and dose page”, in which the RUC stated the number of minutes would vary significantly depending on the procedure in question.  For example, a cardiac MR with hundreds of images would require more quality control time than a single view X-ray of the chest. The RUC recommended that this line item remain nonstandard, and that specialties should continue to have the opportunity to make a recommendation on the appropriate number of minutes based on clinical judgment.

Another commenter also supported standard clinical labor times for four out of the five tasks associated with digital technology, again excepting the activity “Technologist QC’s images in PACS, checking for all images, reformats, and dose page.”  This commenter stated that a survey of imaging providers had been conducted which suggested that the median time required to perform this clinical labor task was 10 minutes.  The commenter stated that CMS did not have any data to support its belief in the standard time of 2 minutes, and recommended considering the commenter’s data and information from other stakeholders regarding the appropriate standard minutes for the clinical labor tasks associated digital imaging.

Response: With regard to the activity “Technologist QC’s images in PACS, checking for

all images, reformats, and dose page”, we agree that this task may require a variable length of time depending on the number of images to be reviewed.  We believe that it may be appropriate to establish several different standard times for this clinical labor task for a low/medium/high quantity of images to be reviewed, in the same fashion that the clinical labor assigned to clean a surgical instrument package has two different standard times depending on the use of a basic pack (10 minutes) or a medium pack (30 minutes).  We are interested in soliciting public comment and feedback on this subject, with the anticipation of including a proposal in next year’s proposed rule.

After consideration of comments received, we are finalizing standard times for clinical labor tasks associated with digital imaging at 2 minutes for “Availability of prior images confirmed”, 2 minutes for “Patient clinical information and questionnaire reviewed by technologist, order from physician confirmed and exam protocoled by radiologist”, 2 minutes for “Review examination with interpreting MD”, and 1 minute for “Exam documents scanned into PACS. Exam completed in RIS system to generate billing process and to populate images into Radiologist work queue.” We are not finalizing a standard time for clinical labor task “Technologist QC’s images in PACS, checking for all images, reformats, and dose page” at this time, pending consideration of any additional public comment and future rulemaking, as described above.

• Pathology Clinical Labor Tasks

As with the clinical labor tasks associated with digital imaging, many of the specialized clinical labor tasks associated with pathology services do not have consistent times across those codes. In reviewing the recommendations for pathology services, we have not identified information that supports the judgment that the same tasks take significantly more or less time depending on

the individual service for which they are performed, especially given the specificity with which they are described.

Therefore, we developed standard times that we have used in finalizing direct PE inputs. These times are based on our review and assessment of the current times included for these clinical labor tasks in the direct PE input database.  We have listed these standard times in Table 6. For services reviewed for CY 2016, in cases where the RUC-recommended times differed from these standards, we have refined the time for those tasks to align with the values in Table 6. We solicited comments on whether these standard times accurately reflect the typical time it takes to perform these clinical labor tasks when furnishing pathology services.

TABLE 6:  Standard Times for Clinical Labor Tasks Associated with Pathology Services

Comment:  Many commenters stated that they did not support the standardization of

clinical labor activities across pathology services.  Commenters stated that a single standard time for each clinical labor task was infeasible due to the differences in batch size or number of blocks across different pathology procedures.  Several commenters indicated that it may be possible to standardize across codes with the same batch sizes, and urged CMS to consider pathology-specific details, such as batch size and block number, in the creation of any future standard times for clinical labor tasks.  One commenter stated that the CMS clinical labor times were uniformly too low, and that CMS did not provide enough information about how it arrived at these revised standard times.  The commenter provided five examples of inadequate labor times, and stated that CMS should provide stakeholders with information about the source of its data and why it rejected the RUC recommendations for these clinical labor tasks.

Response:  We appreciate the extensive feedback provided by commenters on the

standard times for clinical labor tasks associated with pathology services.  As we stated in the CY 2016 PFS proposed rule, we developed the proposed standard times based on our review and assessment of the current times included for these clinical labor tasks in the direct PE input database.  We believe that clinical labor tasks with the same work description are comparable across different pathology procedures.  We concur with commenters that accurate clinical labor

times for pathology codes may be dependent on the number of blocks or batch size typically used for each individual service.  However, we believe that it is possible to establish “per block” standards or standards varied by batch size assumptions for many clinical labor activities that will be comparable across a wide range of individual services. We have received detailed information regarding batch size and number of blocks during review of individual pathology services on an intermittent basis in the past.  We request regular submission of these details on the PE worksheets as part of the review process for pathology procedures, as a means to assist in the determination of the most accurate direct PE inputs. Were we to receive this information as part of standard recommendations, we would include these assumptions as part of the information open for comment in proposed revaluations. We are also seeking comment regarding how to best establish clinical labor standards for pathology services on a “per block”

or “per batch size” basis.

We also believe that many of the clinical labor activities that we discussed in Table 6 are tasks that do not depend on number of blocks or batch size.  Clinical labor activities such as “Clean room/equipment following procedure” and “Dispose of remaining specimens” would typically remain standard across different services without varying by block number or batch size, with the understanding of occasional allowance for additional time for clinical labor tasks of unusual difficulty.

After consideration of comments received, we are finalizing standard times for clinical labor tasks associated with pathology services at 4 minutes for “Accession specimen/prepare for examination”, 0.5 minutes for “Assemble and deliver slides with paperwork to pathologists”, 0.5 minutes for “Assemble other light microscopy slides, open nerve biopsy slides, and clinical history, and present to pathologist to prepare clinical pathologic interpretation”, 1 minute for “Clean room/equipment following procedure”, 1 minute for “Dispose of remaining specimens, spent chemicals/other consumables, and hazardous waste”, and 1 minute for “Prepare, pack and

transport specimens and records for in-house storage and external storage (where applicable).” We do not believe these activities would be dependent on number of blocks or batch size, and we believe that these values accurately reflect the typical time it takes to perform these clinical labor tasks. For the rest of the clinical labor tasks associated with pathology services, we are interested in soliciting further public comment and feedback on this subject as part of this final rule with comment period, with the anticipation of including a proposal in next year’s proposed rule.

• ) Clinical Labor Task: “Complete Botox Log”

In the process of improving the level of detail in the direct PE input database by including the minutes assigned for each clinical labor task, we noticed that there are several codes with minutes assigned for the clinical labor task called “complete botox log.”  We do not believe the completion of such a log is a direct resource cost of furnishing a medically reasonable and necessary physician’s service for a Medicare beneficiary.  Therefore, we proposed to eliminate the minutes assigned for the task “complete botox log” from the direct PE input database. The PE RVUs displayed in Addendum B on the CMS website were calculated with the modified inputs displayed in the CY 2016 direct PE input database.

The following is a summary of the comments we received regarding the clinical labor task “complete botox log.”

Comment: Several commenters, including the RUC, did not agree with the proposal to

eliminate the minutes associated with this clinical labor task. Commenters maintained that the clinical labor task of completing the botox log was a medically reasonable direct resource cost. One commenter stated that it was critical for clinical staff to maintain accurate bookkeeping of split botox vials, and that documentation must reflect the exact dosage of the drug given to patients and a statement that the unused portion of the drug was discarded.

Response: We continue to believe that the clinical labor assigned for the task “complete

botox log” is a form of indirect PE that is not allocated to individual services.  We believe that

this is a quality control issue for clinical staff.  Maintaining accurate administrative records, even for public safety, is not a task we generally allocate to individual services, instead we consider these costs as attributable across a range of services, and therefore, as an indirect PE. After consideration of comments received, we are finalizing the proposal to eliminate the minutes assigned for the task “complete botox log” from the direct PE input database.

• Clinical Labor Input Inconsistencies

Subsequent to the publication of the CY 2015 PFS final rule with comment period, stakeholders alerted us to several clerical inconsistencies in the clinical labor nonfacility intraservice time for several vertebroplasty codes with interim final values for CY 2015, based on our understanding of RUC recommended values.  We proposed to correct these inconsistencies in the CY 2016 proposed direct PE input database to reflect the RUC recommended values, without refinement, as stated in the CY 2015 PFS final rule with comment period.  The CY 2015 interim final direct PE inputs for these codes are displayed on the CMS website under downloads for the CY 2015 PFS final rule with comment period at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-

Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.

For CY 2016, we proposed the following adjustments:

• For CPT codes 22510 (percutaneous vertebroplasty (bone biopsy included when performed), 1 vertebral body, unilateral or bilateral injection, inclusive of all imaging guidance; cervicothoracic) and 22511 (percutaneous vertebroplasty (bone biopsy included when performed), 1 vertebral body, unilateral or bilateral injection, inclusive of all imaging guidance; lumbosacral), a value of 45 minutes for labor code L041B (“Radiologic Technologist”) we proposed to assign for the “assist physician” task and a value of 5 minutes for labor code L037D (“RN/LPN/MTA”) for the “Check dressings & wound/ home care instructions /coordinate office visits /prescriptions”

• For CPT code 22514 (percutaneous vertebral augmentation, including cavity creation (fracture reduction and bone biopsy included when performed) using mechanical device (eg, kyphoplasty), 1 vertebral body, unilateral or bilateral cannulation, inclusive of all imaging guidance; lumbar), we proposed to adjust the nonfacility intraservice time to 50 minutes for L041B, 50 minutes for L051A (“RN”), 38 minutes for a second L041B, and 12 minutes for

The PE RVUs displayed in Addendum B on the CMS website were calculated with the inputs displayed in the CY 2016 direct PE input database.

The following is a summary of the comments we received regarding clinical labor input inconsistencies.

Comment: Two commenters indicated that although they appreciated CMS’ efforts to

clean up errors in the direct PE database, they had specific concerns regarding the proposed changes.  The commenters stated that for CPT code 22510, it appeared that the direct PE clinical time file had the second technologist listed at 90 minutes for the “Assist physician” task, not 45 minutes as recommended.  The commenters indicated that CMS stated an intention to include 5 minutes for “Check dressings & wound” but this time did not appear to be included in the direct PE input labor file.  The commenters also noted that the postoperative E/M visit for CPT code 22510 was also not listed in the CMS file.

The commenters stated that for CPT code 22511, the CMS direct PE labor file correctly included the 45 minutes of “Assist physician” time for the second technologist, however, the 5 minutes for the RN/LPN/MTA blend (L037D) to “Check dressings & wound” was still not included in the CMS file.  The commenter indicated that the postoperative E/M visit was also not included for this code. The commenters also stated that for CPT code 22514, CMS was proposing to include the 5 minutes for “Check dressings & wound” in the intraservice time for this service.  The commenters indicated that this did not appear to be consistent with how CMS

was proposing to handle the same clinical labor task in the prior two codes discussed.  The commenters requested that CMS outline specifically which line items (from the PE spreadsheet) it proposed to change and the effects these changes would have on the direct inputs for these three codes.

Response:  We appreciate the detailed feedback from the commenters on the clinical

labor inconsistencies in these three codes. We agree with the commenters that there were remaining clinical labor errors in these procedures beyond those detailed in the CY 2016 PFS proposed rule, and appreciate the opportunity to clarify the discrepancies in clinical labor for these three procedures.

For CPT code 22510, we agree with the commenters that the clinical labor assigned to the RadTech (L041B) for “Assist Physician” was incorrectly listed twice in our direct PE input database.  The clinical labor staff type was also incorrectly entered as L041C, which is priced at the same rate but refers to a second Radiologic Technologist for Vertebroplasty.  We will remove the duplicative clinical labor and assign type L041B to the “Assist Physician” activity. We do not agree with the commenters that the time for clinical labor task “Check dressings & wound” was missing, as it is present in the database.  We agree with the commenters that the clinical labor time for the office visit was missing from CPT code 22510, and we will add it to the direct PE database.

For CPT code 22511, the commenters are correct that the time for clinical labor task “Assist physician” was entered at the correct value of 45 minutes, and the 5 minutes of clinical labor for “Check dressings & wound” does not appear in the non-facility setting. This clinical labor time appears to have been incorrectly entered for the facility setting instead; we will remove this time and add it to its proper non-facility setting. We agree with the commenters that the clinical labor time for the office visit was again missing from CPT code 22511, and we will add it to the direct PE input database.

For CPT code 22514, the time for clinical labor task “Assist physician” has been refined to 50 minutes as detailed in the CY 2016 PFS proposed rule. We agree with the commenters that the 5 minutes of clinical labor time for “Check dressings & wound” is missing from the direct PE input database.  We agree that the clinical labor for this activity should not be treated differently from the rest of the codes in the family, and therefore these 5 minutes are included in the direct PE input database.  The postoperative office visit is included in the direct PE input database for CPT code 22514.

After consideration of comments received, we are finalizing our proposed changes to clinical labor along with the additional corrections described above.

• Freezer

We identified several pathology codes for which equipment minutes are assigned to the item EP110 “Freezer.”  Minutes are only allocated to particular equipment items when those items cannot be used in conjunction with furnishing services to another patient at the same time. We do not believe that minutes should be allocated to items such as freezers since the storage of any particular specimen or item in a freezer for any given period of time would be unlikely to make the freezer unavailable for storing other specimens or items.  Instead, we proposed to classify the freezer as an indirect cost because we believe that would be most consistent with the principles underlying the PE methodology since freezers can be used for many specimens at once.  The PE RVUs displayed in Addendum B on the CMS website were calculated with the modified inputs displayed in the CY 2016 direct PE input database.

We did not receive comments on this proposal, and therefore, we are finalizing as proposed.

• Updates to Price for Existing Direct Inputs

In the CY 2011 PFS final rule with comment period (75 FR 73205), we finalized a process to act on public requests to update equipment and supply price and equipment useful life inputs through annual rulemaking beginning with the CY 2012 PFS proposed rule. During 2014,

we received a request to update the price of supply item “antigen, mite” (SH006) from $4.10 per test to $59.  In reviewing the request, it is evident that the requested price update does not apply to the SH006 item but instead represents a different item than the one currently included as an input in CPT code 86490 (skin test, coccidioidomycosis). Therefore, rather than changing the price for SH006 that is included in several codes, we proposed to create a new supply code for Spherusol, valued at $590 per 1 ml vial and $59 per test, and to include this new item as a supply for 86490 instead of the current input, SH006.

Comment: Several commenters strongly supported the CMS proposal to create a new

supply code for Spherusol that reflects the current price for the antigen and to update the direct inputs for CPT code 86490 to include this item. However, commenters noted that the public use files included in the CY 2016 PFS proposed rule continue to reflect the prior supply code SH006 with a price of $4.10.  Commenters asked whether this was a technical error and urged CMS to correct the input files to be consistent with the proposal described in the regulation preamble.

Response: We appreciate support for our proposal and acknowledge our inadvertent

omission of this change in the proposed direct PE input database.  After consideration of comments received, we are finalizing our proposal to create a supply item for Spherusol and it is included as a direct PE input for CPT code 86490.

We also received a request to update the price for EQ340 (Patient Worn Telemetry System) used only in CPT code 93229 (External mobile cardiovascular telemetry with electrocardiographic recording, concurrent computerized real time data analysis and greater than 24 hours of accessible ECG data storage (retrievable with query) with ECG triggered and patient selected events transmitted to a remote attended surveillance center for up to 30 days; technical support for connection and patient instructions for use, attended surveillance, analysis and transmission of daily and emergent data reports as prescribed by a physician or other qualified health care.) The requestor noted that we had previously proposed and finalized a policy to

remove wireless communication and delivery costs related to the equipment item that had previously been included in the direct PE input database as supply items. The requestor asked that we alter the price of the equipment from $21,575 to $23,537 to account for the equipment costs specific to the patient-worn telemetry system.

In the proposed rule, we stated that we considered this request in the context of the unique nature of this particular equipment item.  This equipment item is unique in several ways, including that it is used continuously 24 hours per day and 7 days per week for an individual patient over several weeks.  It is also unique in that the equipment is primarily used outside of a healthcare setting.  Within our current methodology, we currently account for these unique properties by calculating the per minute costs with different assumptions than those used for most other equipment by increasing the number of hours the equipment is available for use.

Therefore, we also believe it would be appropriate to incorporate other unique aspects of the operating costs of this item in our calculation of the equipment cost per minute. We believe the requestor’s suggestion to do so by increasing the price of the equipment is practicable and appropriate.  Therefore, we proposed to change the price for EQ340 (Patient Worn Telemetry System) to $23,537.  The PE RVUs displayed in Addendum B on the CMS website were calculated with the modified inputs displayed in the CY 2016 direct PE input database.

Comment:  One commenter supported the CMS proposal regarding the Patient Worn

Telemetry System (EQ340).  The commenter agreed with the proposed increase in the price of the equipment from $21,757 to $23,537, and the reason for this increase.  We did not receive any comments opposing the proposal.

Response:  After consideration of comments received, we are finalizing our proposal

regarding the Patient Worn Telemetry System equipment.

For CY 2015, we received a request to update the price for supply item “kit, HER–2/neu DNA Probe” (SL196) from $105 to $144.50.  Accordingly, in the CY 2015 proposed rule, we

proposed to update the price to $144.50.  In the CY 2015 final rule with comment period, we indicated that we obtained new information suggesting that further study of the price of this item was necessary before proceeding to update the input price. We obtained pricing information readily available on the Internet that indicated a price of $94 for this item for a particular hospital.  Subsequent to the CY 2015 final rule with comment period, stakeholders requested that we use the updated price of $144.50. One stakeholder suggested that the price of $94 likely reflected discounts for volume purchases not received by the typical laboratory.  We solicited comments on how to consider the higher-priced invoice, which is 53 percent higher than the price listed, relative to the price currently in the direct PE database.  Specifically, we solicited information on the price of the disposable supply in the typical case of the service furnished to a Medicare beneficiary, including, based on data, whether the typical Medicare case is furnished by an entity likely to receive a volume discount.

Comment:  Several commenters disagreed with the CMS proposal regarding the updated

price for the supply item “kit, HER–2/neu DNA Probe” (SL196).  One commenter stated that the price of $94 reflected a volume discount that could not be obtained by the typical provider. The lowered price referenced in the CY 2016 PFS proposed rule indicated that the purchaser may be receiving a competitive contractually arranged price. The commenter stated that the lowered price referenced is what might be expected to be acquired by the largest hospitals, which would be expected to buy supplies in greater volume than a small community hospital or mid-sized laboratory, and the price indicated does not reflect the prices for a laboratory of typical size.

Other commenters stated that they were unable to find this pricing information through publicly available sources, suggesting that it may not reflect typical transactions.  The commenters also stated that it was unclear as to whether the proposed price referred to FDA-approved kits, which are more expensive than non-approved kits. The commenters further indicated that a number of new morphometric analysis, multiplex quantitative/semi-quantitative ISH tests are in use today

with probe kit costs that are higher than those of HER-2/neu probe kits.  The commenters suggested that CMS should adopt a weighted-average of the probe kit prices for the probe kits currently used to perform these procedures.

Response:  Without robust, auditable information regarding the actual prices paid by a

range of practitioners that would allow us to reasonably determine a recommended price to be typical, we believe that we should assume that the best publicly available price is typical.

Generally speaking, we do not believe vendors are likely to allow public display of pricing that is not broadly available to potential customers since that would present significant competitive disadvantages in the market.  Therefore, given the options between the best publicly available price or prices on invoices selected for the distinct purpose of pricing individual services, we believe the best publicly available price is more likely to be typical. Therefore, we are not making any changes to the price of this supply item at this time.

Comment:  The RUC commented that in the CMS direct PE database the unit of measure

for SL196 is listed as “kit”, while on the submitted PE spreadsheet the unit is listed as “kit assay.” The RUC recommended that the unit of measure be changed to “kit assay” to correlate correctly with the cost shown in the database.

Response: We appreciate this additional information, and will change the unit of

measure of SL196 to “kit assay” in the direct PE database.

Comment:  Several commenters stated CMS’s estimated per-minute labor cost inputs are

too low for laboratory technicians (L033A), cytotechnologists (L045A) and histotechnologists (L037B).  The commenters stated that the complexity of many laboratory services demands highly-skilled, highly-trained, certified, and experienced personnel who typically must be paid higher wages than the current rates provided by CMS. Commenters stated that CMS has underestimated the actual labor costs associated with the work that these more specialized

laboratory personnel perform by 20 to 30 percent, after accounting for costs related to benefits, taxes, and training.

Response:  The clinical labor costs per minute are based on data from the Bureau of

Labor Statistics.  We believe that it is important to update that information uniformly among clinical labor types and will consider updating the clinical labor costs per minute in the direct PE database in future rulemaking.

• Typical Supply and Equipment Inputs for Pathology Services

In reviewing public comments in response to the CY 2015 PFS final rule with comment period, we re-examined issues around the typical number of pathology tests furnished at once.  In the CY 2013 final rule with comment period (77 FR 69074), we noted that the number of blocks assumed for a particular code significantly impacts the assumed clinical labor, supplies, and equipment for that service.  We indicated that we had concerns that the assumed number of blocks was inaccurate, and that we sought corroborating, independent evidence that the number of blocks assumed in the current direct PE input recommendations is typical. We note that, given the high volume of many pathology services, these assumptions have a significant impact on the PE RVUs for all other PFS services.  We refer readers to section II.H. where we detail our concerns about the lack of information regarding typical batch size and typical block size for many pathology services and solicit stakeholder input on approaches to obtaining accurate information that can facilitate our establishing payment rates that best reflect the relative resources involved in furnishing the typical service, for both pathology services in particular and more broadly for services across the PFS.

Comment:  Several commenters addressed the number of blocks and batch size for

prostate biopsies in particular.  We direct readers to section II.H. of this final rule with comment period for a more detailed discussion of the resource costs for these services. We continue to

seek stakeholder input regarding the best sources of information for typical number of blocks and batch sizes for pathology services.

1. Developing Nonfacility Rates

We noted that not all PFS services are priced in the nonfacility setting, but as medical practice changes, we routinely develop nonfacility prices for particular services when they can be furnished outside of a facility setting. We noted that the valuation of a service under the PFS in particular settings does not address whether those services are medically reasonable and necessary in the case of individual patients, including being furnished in a setting appropriate to the patient’s medical needs and condition.

• Request for Information on Nonfacility Cataract Surgery

Cataract surgery generally has been performed in an ambulatory surgery center (ASC) or a hospital outpatient department (HOPD).  We have not assigned nonfacility PE RVUs under the PFS for cataract surgery.  According to Medicare claims data, there are a relatively small number of these services furnished in nonfacility settings.  Except in unusual circumstances, anesthesia for cataract surgery is either local or topical/intracameral.  Advancements in technology have significantly reduced operating time and improved both the safety of the procedure and patient outcomes. As discussed in the proposed rule, we believe that it now may be possible for cataract surgery to be furnished in an in-office surgical suite, especially for routine cases.  Cataract surgery patients require a sterile surgical suite with certain equipment and supplies that we believe could be a part of a nonfacility-based setting that is properly constructed and maintained for appropriate infection prevention and control.

We also noted in the proposed rule that we believe there are potential advantages for all parties to furnishing appropriate cataract surgery cases in the nonfacility setting. Cataract surgery has been for many years the highest volume surgical procedure performed on Medicare beneficiaries.  For beneficiaries, cataract surgery in the office setting might provide the

additional convenience of receiving the preoperative, operative, and post-operative care in one location.  It might also reduce delays associated with registration, processing, and discharge protocols associated with some facilities.  Similarly, it might provide surgeons with greater flexibility in scheduling patients at an appropriate site of service depending on the individual patient’s needs.  For example, routine cases in patients with no comorbidities could be performed in the nonfacility surgical suite, while more complicated cases (for example, pseudoexfoliation) could be scheduled in the ASC or HOPD.  In addition, furnishing cataract surgery in the nonfacility setting could result in lower Medicare expenditures for cataract surgery if the nonfacility payment rate were lower than the sum of the PFS facility payment rate and the payment to either the ASC or HOPD.

We solicited comments from ophthalmologists and other stakeholders on office-based surgical suite cataract surgery.  In addition, we solicited comments from the RUC and other stakeholders on the direct PE inputs involved in furnishing cataract surgery in the nonfacility setting in conjunction with our consideration of information regarding the possibility of development of nonfacility cataract surgery PE RVUs.

We received 138 comments from stakeholders including professional medical societies, the RUC, ambulatory surgical centers (ASCs), practitioners, and the general public.  The RUC deferred to the specialty societies regarding the appropriateness of performing these services in the nonfacility setting.

Comment:  A few commenters suggested that development of PE RVUs would allow for

greater flexibility regarding scheduling and location where services are performed. Commenters provided information about clinical considerations related to furnishing these services in a nonfacility setting, with many commenters citing safety concerns involved in furnishing cataract surgery in the office setting.

Response:  We will use this information as we consider whether to proceed with

development of nonfacility PE RVUs for cataract surgery.

• Direct PE Inputs for Functional Endoscopic Sinus Surgery Services

A stakeholder indicated that due to changes in technology and technique, several codes that describe endoscopic sinus surgeries can now be furnished in the nonfacility setting.

According to Medicare claims data, there are a relatively small number of these services furnished in nonfacility settings.  These CPT codes are 31254 (Nasal/sinus endoscopy, surgical; with ethmoidectomy, partial (anterior)), 31255 (Nasal/sinus endoscopy, surgical; with ethmoidectomy, total (anterior and posterior)), 31256 (Nasal/sinus endoscopy, surgical, with maxillary antrostomy;), 31267 (Nasal/sinus endoscopy, surgical, with maxillary antrostomy; with removal of tissue from maxillary sinus), 31276 (Nasal/sinus endoscopy, surgical with frontal sinus exploration, with or without removal of tissue from frontal sinus), 31287 (Nasal/sinus endoscopy, surgical, with sphenoidotomy;), and 31288 (Nasal/sinus endoscopy, surgical, with sphenoidotomy; with removal of tissue from the sphenoid sinus). We solicited input from stakeholders, including the RUC, about the appropriate direct PE inputs for these services.

We received 53 comments from stakeholders including specialty societies, device manufacturers, medical centers, and physician practices (otolaryngology, allergy, facial, and plastics specialists).

Comment:  The RUC indicated an intention to review direct PE inputs at the January

2016 RUC meeting.  One specialty society representing otolaryngology head and neck surgeons indicated that endoscopic sinus surgery services have been identified by the CPT/RUC workgroup for development of bundled codes for this code family and inputs will likely be reviewed as part of this process.  Some commenters submitted information about their respective PEs related to CPT codes 31254, 31255, 31267, 31276, 31287, and 31288. Other commenters limited their comments to CPT codes 31254 and 31255, noting clinical concerns about

performance of other sinus surgery procedures in the nonfacility setting. A few commenters did not support development of nonfacility direct PE RVUs for endoscopic sinus surgery due to clinical considerations such as patient safety, possible complications, use of anesthesia, and need for establishment of standards and oversight of in-office surgical suites.

Response:  We appreciate the feedback we received from all commenters.  We will use

this information as we consider whether to proceed with development of nonfacility PE RVUs or functional endoscopic sinus surgery services.

1. Determination of Malpractice Relative Value Units (RVUs)

1. Overview

Section 1848(c) of the Act requires that each service paid under the PFS be composed of three components: work, PE, and malpractice (MP) expense. As required by section 1848(c)(2)(C)(iii) of the Act, beginning in CY 2000, MP RVUs are resource based.

Malpractice RVUs for new codes after 1991 were extrapolated from similar existing codes or as a percentage of the corresponding work RVU. Section 1848(c)(2)(B)(i) of the Act also requires that we review, and if necessary adjust, RVUs no less often than every 5 years. In the CY 2015 PFS final rule with comment period, we implemented the third review and update of MP RVUs. For a discussion of the third review and update of MP RVUs see the CY 2015 proposed rule (79 FR 40349 through 40355) and final rule with comment period (79 FR 67591 through 67596).

As explained in the CY 2011 PFS final rule with comment period (75 FR 73208), MP RVUs for new and revised codes effective before the next five-year review of MP RVUs were determined either by a direct crosswalk from a similar source code or by a modified crosswalk to account for differences in work RVUs between the new/revised code and the source code. For the modified crosswalk approach, we adjust (or “scale”) the MP RVU for the new/revised code to reflect the difference in work RVU between the source code and the new/revised work RVU (or, if greater, the clinical labor portion of the fully implemented PE RVU) for the new code.  For example, if the proposed work RVU for a revised code is 10 percent higher than the work RVU for its source code, the MP RVU for the revised code would be increased by 10 percent over the source code MP RVU. Under this approach the same risk factor is applied for the new/revised code and source code, but the work RVU for the new/revised code is used to adjust the MP RVUs for risk.

For CY 2016, we proposed to continue our current approach for determining MP RVUs for new/revised codes. For the new and revised codes for which we proposed work RVUs and

PE inputs, we also published the proposed MP crosswalks used to determine their MP RVUs. The MP crosswalks for those new and revised codes were subject to public comment and we are responding to comments and finalizing them in section II.H. of this CY 2016 PFS final rule with comment period.  The MP crosswalks for new and revised codes with interim final values established in this CY 2016 final rule with comment period will be implemented for CY 2016 and subject to public comment.  We will then respond to comments and finalize them in the CY 2017 PFS final rule with comment period.

2. Proposed Annual Update of MP RVUs

In the CY 2012 PFS final rule with comment period (76 FR 73057), we finalized a process to consolidate the five-year reviews of work and PE RVUs with our annual review of potentially misvalued codes.  We discussed the exclusion of MP RVUs from this process at the time, and we stated that, since it is not feasible to obtain updated specialty level MP insurance premium data on an annual basis, we believe the comprehensive review of MP RVUs should continue to occur at 5-year intervals.  In the CY 2015 PFS proposed rule (79 FR 40349 through 40355), we stated that there are two main aspects to the update of MP RVUs: (1) recalculation of specialty risk factors based upon updated premium data; and (2) recalculation of service level RVUs based upon the mix of practitioners providing the service.  In the CY 2015 PFS final rule with comment period (79 FR 67596), in response to several stakeholders’ comments, we stated that we would address potential changes regarding the frequency of MP RVU updates in a future proposed rule.  For CY 2016, we proposed to begin conducting annual MP RVU updates to reflect changes in the mix of practitioners providing services, and to adjust MP RVUs for risk.  Under this approach, the specialty-specific risk factors would continue to be updated every 5 years using updated premium data, but would remain unchanged between the 5-year reviews.  However, in an effort to ensure that MP RVUs are as

current as possible, our proposal would involve recalibrating all MP RVUs on an annual basis to reflect the specialty mix based on updated Medicare claims data. Since under this proposal, we would be recalculating the MP RVUs annually, we also proposed to maintain the relative pool of MP RVUs from year to year; this will preserve the relative weight of MP RVUs to work and PE RVUs. We proposed to calculate the current pool of MP RVUs by using a process parallel to the one we use in calculating the pool of PE RVUs.  (We direct the reader to section II.2.b.(6) for detailed description of that process, including a proposed technical revision that we are finalizing for 2016.) To determine the specialty mix assigned to each code, we also proposed to use the same process used in the PE methodology, described in section II.2.b.(6) of this final rule with comment period.  We note that for CY 2016, we proposed and are finalizing a policy to modify the specialty mix assignment methodology to use an average of the 3 most recent years of available data instead of a single year of data. We anticipate that this change will increase the stability of PE and MP RVUs and mitigate code-level fluctuations for all services paid under the PFS, and for new and low-volume codes in particular. We also proposed to no longer apply the dominant specialty for low volume services, because the primary rationale for the policy has been mitigated by this proposed change in methodology.  However, we did not propose to adjust the code-specific overrides established in prior rulemaking for codes where the claims data are inconsistent with a specialty that could be reasonably expected to furnish the service. We believe that these proposed changes serve to balance the advantages of using annually updated information with the need for year-to-year stability in values.  We solicited comments on both aspects of the proposal:  updating the specialty mix for MP RVUs annually (while continuing to update specialty-specific risk factors every 5 years using updated premium data); and using the same process to determine the specialty mix assigned to each code as is used in

the PE methodology, including the proposed modification to use the most recent 3 years of claims data.  We also solicited comments on whether this approach will be helpful in addressing some of the concerns regarding the calculation of MP RVUs for services with low volume in the Medicare population, including the possibility of limiting our use of code-specific overrides of the claims data.

The following is a summary of the comments we received regarding our current approach for determining malpractice RVUs for new/revised codes.

Comment:  Several commenters, including the RUC, generally supported CMS’ proposal

to update the MP RVUs on an annual basis.  Commenters, including the RUC, stated a preference for the annual collection of professional liability insurance (PLI) premium data to insure the MP RVUs for every service is accurate, as opposed to only collecting these data every five years.

Response:  We appreciate commenters’ support of our proposal to update the MP RVUs

on an annual basis. We also appreciate the comments from stakeholders regarding the frequency that we currently collect premium data.  We will continue to consider the appropriate frequency for doing so, and we would address any potential changes in future rulemaking.

Comment:  Commenters, including the RUC, support CMS’s proposal to use the 3 most

recent years of available data for the specialty mix assignment.

Response:  We appreciate the commenters’ support.

Comment:  Commenters supported CMS’ proposal to maintain the code-specific

overrides established in previous rulemaking for codes where the claims data are inconsistent with a specialty that could be reasonably expected to furnish the service. Commenters also requested that CMS publish the list of overrides annually to receive stakeholder feedback related to necessary modification to the list, and in an effort to be as transparent as possible.

Response:  We appreciate the comments and agree that we should increase the

transparency regarding the list of services with MP RVU overrides. Publication of this list will also allow commenters to alert us to any discrepancies between MP RVUs developed annually under the new methodology and previously established overrides.  Therefore, we have posted a public use file containing the overrides.  The file is available on the CMS Web site under the supporting data files for the CY 2016 PFS final rule at http://www.cms.gov/Medicare/Medicare-

Fee-for-Service-Payment/PhysicianFeeSched/index.html.

Comment: One commenter stated that CMS should be particularly mindful of using the

specialty mix in the Medicare claims data for services with low Medicare volume but high volume in the United States health care system more generally, such as pediatric procedures; and that CMS’ MP RVU methodology needs to differentiate between services that are truly low volume and those that occur frequently, but not among Medicare beneficiaries.

Response: We believe that the list of overrides we are making available as a public use

file on the CMS website will help address the commenter’s concern since the purpose of the code-specific overrides is to address circumstances where the claims data are inconsistent with the specialty that could be reasonably expected to furnish the service. We have previously accepted comment on services like those identified by the commenter and will continue to

consider comments regarding the need to use overrides for particular services, especially for high volume services outside the Medicare population.

Comment:  One commenter requested that CMS continue to use the dominant specialty

for low volume codes.

Response:  We acknowledge the concern about using the dominant specialty for low

volume codes, and will continue to monitor the resulting RVUs to determine if adjustments become necessary.  In general, we believe the 3-year average mitigates the need to apply the dominant specialty for low volume services.  However, we have a long history of applying the dominant specialty for low volume services in instances where the specialty indicated by the

claims data is inconsistent with the specialty that could be reasonably expected to furnish the service, and we are maintaining that practice.

Comment: Some commenters requested more information on how specialty impacts

were determined. Two commenters expressed concerns about the estimated impact of the several proposed changes in the MP methodology on some specialties—particularly gastroenterology, colon and rectal surgery, and neurosurgery. Those commenters state that they appreciate the assertion that it may be difficult to obtain premium data for some specialties, such as neurosurgery, and state that CMS must thoroughly vet the methodology used by its contractor to determine MP premiums for such specialties. The commenters urge CMS to review the data, continue to try to obtain premium data in as many states as possible, and to share the data with the public for the agency and specialties to determine its accuracy.

Response:  Specialty impacts are determined by comparing the estimated overall payment

for each specialty that would result from the proposed RVUs and policies to the estimated overall payment for each specialty under the current year RVUs and policies, using the most recent   year of available claims data as a constant.  We note that for MP RVUs, there were several refinements that resulted in minor impacts to particular specialties, especially those at the higher end of specialty risk factors.  We believe that these impacts are consistent with the general tendency of greater change in MP RVUs for specialties with risk factors of greater magnitude.

We agree with the commenters regarding of the importance of making certain that the collection of premium data and the methodology of calculating MP RVUs are as accurate as possible. This is the reason we continue to examine the methodology and develop technical improvements such as the ones described in this section of the final rule.  Additionally, we believe that annual calibration of MP RVUs will be likely to reduce the risk of irregularities, since we will regularly compare MP RVUs for individual codes and for specialties between consecutive years instead of only comparing MP RVUs update years.

After consideration of the public comments received, we are finalizing the policies as proposed.  That is, we are finalizing the proposal to conduct annual MP RVU updates to reflect changes in the mix of practitioners providing services and to adjust MP RVUs for risk, and to modify the specialty mix assignment methodology to use an average of the 3 most recent years of available data instead of a single year.  We note that we will continue to maintain the code-specific overrides where the claims data are inconsistent with a specialty that would reasonable be expected to furnish the services.

We also proposed an additional refinement in our process for assigning MP RVUs to individual codes.  Historically, we have used a floor of 0.01 MP RVUs for all nationally-priced PFS codes.  This means that even when the code-level calculation for the MP RVU falls below 0.005, we have rounded to 0.01.  In general, we believe this approach accounts for the minimum MP costs associated with each service furnished to a Medicare beneficiary.  However, in examining the calculation of MP RVUs, we do not believe that this floor should apply to add-on codes. Since add-on codes must be reported with another code, there is already an MP floor of 0.01 that applies to the base code, and therefore, to each individual service.  By applying the floor to add-on codes, the current methodology practically creates a 0.02 floor for any service reported with one add-on code, and 0.03 for those with 2 add-on codes, etc.  Therefore, we proposed to maintain the 0.01 MP RVU floor for all nationally-priced PFS services that are described by base codes, but not for add-on codes. We will continue to calculate, display, and make payments that include MP RVUs for add-on codes that are calculated to 0.01 or greater, including those that round to 0.01. We only proposed to allow the MP RVUs for add-on codes to round to 0.00 where the calculated MP RVU is less than 0.005.

Comment:  Several commenters, including the RUC, opposed CMS’ proposal to remove

the MP RVU floor of 0.01 for add-on services.  These commenters suggested that the

incremental risk associated with performing an additional procedure is not mitigated by the risk inherent in the base procedure.  Another commenter stated that each service should be considered separately for the purposes of calculating MP RVUs, and therefore, each service should be given the 0.01 floor regardless of base or add-on status.

Response:  We appreciate commenters’ feedback, but note that we do not believe the

comments respond to the rationale for the proposed refinement. We agree that the incremental risk in procedures described by add-on codes is not mitigated by the risk inherent in the base procedure.  That is why we did not propose to eliminate MP RVUs for add-on codes generally. Instead, we believe that when the incremental risk is calculated to be a number closer to 0.00 than 0.01, we do not believe that rounding such a number to 0.01 accurately reflects the risk of the service that is described by two codes (base code and add-on) relative to the risks associated with other PFS services.  We continue to believe that this refinement is the most appropriate approach, since we would continue to account for the incremental risk associated with add-on codes without overestimating the risk in circumstances where the MP RVU falls below 0.005. Therefore, we are finalizing the policy as proposed.

3. MP RVU Update for Anesthesia Services

In the CY 2015 PFS proposed rule (79 FR 40354 through 40355), we did not include an adjustment under the anesthesia fee schedule to reflect updated MP premium information, and stated that we intended to propose an anesthesia adjustment for MP in the CY 2016 PFS proposed rule.  We also solicited comments regarding how to best reflect updated MP premium amounts under the anesthesiology fee schedule.

As we previously explained, anesthesia services under the PFS are paid based upon a separate fee schedule, so routine updates must be calculated in a different way than those for services for which payment is calculated based upon work, PE, and MP RVUs.  To apply budget neutrality and relativity updates to the anesthesiology fee schedule, we typically develop proxy

RVUs for individual anesthesia services that are derived from the total portion of PFS payments made through the anesthesia fee schedule. We then update the proxy RVUs as we would the RVUs for other PFS services and adjust the anesthesia fee schedule conversion factor based on the differences between the original proxy RVUs and those adjusted for relativity and budget neutrality.

We believe that taking the same approach to update the anesthesia fee schedule based on new MP premium data is appropriate.  However, because work RVUs are integral to the MP RVU methodology and anesthesia services do not have work RVUs, we decided to seek potential alternatives prior to implementing our approach in conjunction with the proposed CY 2015 MP RVUs based on updated premium data. One commenter supported the delay in proposing to update the MP for anesthesia at the same time as updating the rest of the PFS, and another commenter suggested using mean anesthesia MP premiums per provider over a 4- or 5-year period prorated by Medicare utilization to yield the MP expense for anesthesia services; no commenters offered alternatives to calculating updated MP for anesthesia services. The latter suggestion might apply more broadly to the MP methodology for the PFS and does not address the methodology as much as the data source.

We continue to believe that payment rates for anesthesia should reflect MP resource costs relative to the rest of the PFS, including updates to reflect changes over time.  Therefore, for CY 2016, to appropriately update the MP resource costs for anesthesia, we proposed to make adjustments to the anesthesia conversion factor to reflect the updated premium information collected for the 5 year review.  To determine the appropriate adjustment, we calculated imputed work RVUs and MP RVUs for the anesthesiology fee schedule services using the work, PE, and MP shares of the anesthesia fee schedule. Again, this is consistent with our longstanding approach to making annual adjustments to the PE and work RVU portions of the anesthesiology fee schedule.  To reflect differences in the complexity and risk among the anesthesia fee

schedule services, we multiplied the service-specific risk factor for each anesthesia fee schedule service by the CY 2016 imputed proxy work RVUs and used the product as the updated raw proxy MP RVUs for each anesthesia service for CY 2016.  We then applied the same scaling adjustments to these raw proxy MP RVUs that we apply to the remainder of the PFS MP RVUs. Finally, we calculated the aggregate difference between the 2015 proxy MP RVUs and the proxy MP RVUs calculated for CY 2016. We then adjusted the portion of the anesthesia conversion factor attributable to MP proportionately; we refer the reader to section VI.C. of this final rule with comment period for the Anesthesia Fee Schedule Conversion Factors for CY 2016.  We invited public comments regarding this proposal.

The following is a summary of the comments we received regarding this proposal. Comment:  We received few comments with regard to our proposal; commenters

expressed appreciation that CMS recognized the unique aspects involved in updating the MP component associated with anesthesia services, and therefore, delayed the anesthesia MP update until the CY 2016 PFS.

Response:  We appreciate the commenters’ feedback, and we are finalizing the policy as

proposed.

4. MP RVU Methodology Refinements

In the CY 2015 PFS final rule with comment period (79 FR 67591 through 67596), we finalized updated MP RVUs that were calculated based on updated MP premium data obtained from state insurance rate filings. The methodology used in calculating the finalized CY 2015 review and update of resource-based MP RVUs largely paralleled the process used in the CY 2010 update. We posted our contractor’s report, “Final Report on the CY 2015 Update of Malpractice RVUs” on the CMS website.  It is also located under the supporting documents section of the CY 2015 PFS final rule with comment period located at http://www.cms.gov/PhysicianFeeSched/.  A more detailed explanation of the 2015 MP RVU

update can be found in the CY 2015 PFS proposed rule (79 FR 40349 through 40355).

In the CY 2015 PFS proposed rule, we outlined the steps for calculating MP RVUs.  In the process of calculating MP RVUs for purposes of the CY 2016 PFS proposed rule, we identified a necessary refinement to way we calculated Step 1, which involves computing a preliminary national average premium for each specialty, to align the calculations within the methodology to the calculations described within the aforementioned contractor’s report.

Specifically, in the calculation of the national premium for each specialty (refer to equations 2.3, 2.4, 2.5 in the aforementioned contractor’s report), we calculate a weighted sum of premiums across areas and divide it by a weighted sum of MP GPCIs across areas.  The calculation currently takes the ratio of sums, rather than the weighted average of the local premiums to the MP GPCI in that area.  Instead, we proposed to update the calculation to use a price-adjusted premium (that is, the premium divided by the GPCI) in each area, and then taking a weighted average of those adjusted premiums. The CY 2016 PFS proposed rule MP RVUs were calculated in this manner.

Additionally, in the calculation of the national average premium for each specialty as discussed above, our current methodology used the total RVUs in each area as the weight in the numerator (that is, for premiums), and total MP RVUs as the weights in the denominator (that is, for the MP GPCIs).  After further consideration, we believe that the use of these RVU weights is problematic.  Use of weights that are central to the process at hand presents potential circularity since both weights incorporate MP RVUs as part of the computation to calculate MP RVUs. The use of different weights for the numerator and denominator introduces potential inconsistency.

Instead, we believe that it would be better to use a different measure that is independent of MP RVUs and better represents the reason for weighting. Specifically, we proposed to use area population as a share of total U.S. population as the weight.  The premium data are for all MP premium costs, not just those associated with Medicare patients, so we believe that the

distribution of the population does a better job of capturing the role of each area’s premium in the “national” premium for each specialty than our previous Medicare-specific measure.  Use of population weights also avoids the potential problems of circularity and inconsistency.

The CY 2016 PFS final MP RVUs, as displayed in Addendum B of this final rule with comment period, reflect MP RVUs calculated following our established methodology, with the inclusion of the proposals and refinements described above.

Comment:  Commenters generally supported the technical changes to the MP RVU

methodology and found them reasonable.  One commenter stated that such refinements will increase stability of MP RVUs and does a better role of capturing the role of each local area’s premium in the “national” premium for each specialty.

Response:  We appreciate the commenters’ support, and we are finalizing the policy as

proposed.

Comment:  One commenter stated that the MP RVU for cataract and other ophthalmic

surgeries is deflated significantly because CMS assumes that optometry is providing the actual surgical portion of the procedure, when there is no state that allows optometrists to perform cataract surgery or any other major ophthalmic procedure.  The commenter states that the clinical reality is that optometry is involved only during the pre- or post- procedure time period, and CMS should not allow optometric utilization of those codes with co-management modifiers to be included in the calculations for any major ophthalmic surgical procedures.  The commenter suggested that if CMS does not agree to remove optometry from the calculation of MP RVUs for ophthalmic surgery, that CMS should use a much lower percentage of utilization to accurately reflect the true risk that optometrists encounter during this limited portion of the service. The commenter also disagreed that all providers who pay for malpractice insurance should have their premiums taken into consideration, and stated that when CMS looks at the dominant specialty for a given service, it must ensure that the claims reported—particularly by non-physician

providers such as optometrists, are for the surgical portion of the procedure for which the MP RVU is being considered.

Response:  We would clarify for the commenter that we apply the risk factor(s) of all

specialties involved with furnishing services to calculate the service level risk factors for all PFS codes. Our methodology already accounts for codes with longer global periods or codes where two different practitioners report different parts of the service, weighing the volume differentially among the kinds of practitioners that report the service depending on which portion of the service each reports. We also remind commenters that, to determine the raw MP RVU for a given service, we consider the greater of the work RVU or clinical labor RVU for the service. Since the time and intensity of the pre-service and post-service period are incorporated into the work RVUs for these services and the work RVUs are used in the development of MP RVUs, we believe it is methodologically consistent to incorporate the portion of the overall services that is furnished by practitioners other than those that furnish the procedure itself in the calculation of MP RVUs.  If we were to exclude the risk factors of some specialties that bill a specific code from the calculation of the service level risk factor, the resulting MP RVU would not reflect all utilization.  Likewise, we also disagree with the suggestion that the pre- and post- utilization should be removed from determining MP RVUs for ophthalmic surgical services.  The resources associated with pre- and post-operative periods for ophthalmic surgery are included in the total RVUs for the global surgical package.  Accordingly, if we did not include the portion of utilization attributed to pre- and post-operative visits in the calculation of service level risk factors, the MP RVUs for global surgery would overstate the relative MP costs.

Comment:  One commenter identified three low volume codes typically performed by

cardiac surgery or thoracic surgery that have anomalous MP RVU values: CPT code 31766 (carinal reconstruction), the commenter requested that the MP risk factor associated with Thoracic surgery be assigned; CPT Code 33420 (valvotomy, mitral valve; closed heart), the

commenter requests that the MP risk factor associated with Cardiac Surgery be assigned; and for 32654 (thorascoscopy, surgical; with control of traumatic hemorrhage), the commenter requests that the MP risk factor associated with Thoracic surgery be assigned.

Response:  We agree with the commenters and have added these services to the list of

those with specialty overrides for CY 2016. We hope to identify such anomalies more regularly in the future now that the public use file listing the overrides is available on the CMS website as indicated above.

5. CY 2016 Identification of Potentially Misvalued Services for Review

1. Public Nomination of Potentially Misvalued Codes

In the CY 2012 PFS final rule with comment period, we finalized a process for the public to nominate potentially misvalued codes (76 FR 73058). Members of the public including direct stakeholders may nominate potentially misvalued codes for review by submitting the code with supporting documentation during the 60-day public comment period following the release of the annual PFS final rule with comment period. Supporting documentation for codes nominated for the annual review of potentially misvalued codes may include, but is not limited to, the following:

• Documentation in the peer reviewed medical literature or other reliable data that there have been changes in work due to one or more of the following: technique; knowledge and technology; patient population; site-of-service; length of hospital stay; and work
• An anomalous relationship between the code being proposed for review and other

codes.

• Evidence that technology has changed work, that is, diffusion of

• Analysis of other data on time and effort measures, such as operating room logs or national and other representative
• Evidence that incorrect assumptions were made in the previous valuation of the service, such as a misleading vignette, survey, or flawed crosswalk assumptions in a previous
• Prices for certain high cost supplies or other direct PE inputs that are used to determine PE RVUs are inaccurate and do not reflect current
• Analyses of work time, work RVU, or direct PE inputs using other data sources (for example, Department of Veteran Affairs (VA) National Surgical Quality Improvement Program

(NSQIP), the Society for Thoracic Surgeons (STS) National Database, and the Physician Quality Reporting System (PQRS) databases).

• National surveys of work time and intensity from professional and management societies and organizations, such as hospital associations.

After we receive the nominated codes during the 60-day comment period following the release of the annual PFS final rule with comment period, we evaluate the supporting documentation and assess whether the nominated codes appear to be potentially misvalued codes appropriate for review under the annual process.  In the following year’s PFS proposed rule, we publish the list of nominated codes and indicate whether we are proposing each nominated code as a potentially misvalued code.

During the comment periods for the CY 2015 proposed rule and final rule with comment period, we received nominations and supporting documentation for three codes to be considered as potentially misvalued codes. We evaluated the supporting documentation for each nominated code to ascertain whether the submitted information demonstrated that the code should be proposed as potentially misvalued.

CPT code 36516 (Therapeutic apheresis; with extracorporeal selective adsorption or selective filtration and plasma reinfusion) was nominated for review as potentially misvalued. The nominator stated that CPT code 36516 is misvalued because of incorrect direct and indirect PE inputs and an incorrect work RVU.  Specifically, the nominator stated that the direct supply costs failed to include an $18 disposable bag and the $37 cost for biohazard waste disposal of the post-treatment bag, and that the labor costs for nursing staff were inaccurate. The nominator also stated that the overhead expenses associated with this service were unrealistic and that the current work RVU undervalues a physician’s time and expertise.  Based on the requestor’s comment, we proposed this code as a potentially misvalued code.  We also noted that we

established a policy in CY 2011 to consider biohazard bags as an indirect expense, and not as a direct PE input (75 FR 73192).

Comment:  Several commenters stated that they do not believe CPT code 36516 is

potentially misvalued because they found no indication that the clinical staff time, indirect expenses, or work was misvalued. All commenters requested that this code be removed from the potentially misvalued list.

Response:  We appreciate the comments, but we believe that the nominator presented

some concerns that may have merit, and review of the code is the best way to determine the validity of the concerns articulated by the original requestor.  Therefore, we are adding CPT code 36516 to the list of potentially misvalued codes and anticipate reviewing recommendations from the RUC and other stakeholders.

CPT Codes 52441 (Cystourethroscopy with insertion of permanent adjustable transprostatic implant; single implant) and 52442 (Cystourethroscopy with insertion of permanent adjustable transprostatic implant; each additional permanent adjustable transprostatic implant) were nominated for review as potentially misvalued. The nominator stated that the costs of the direct PE inputs were inaccurate, including the cost of the implant. We proposed these services as potentially misvalued codes.

Comment:  Some commenters disagreed that the commenter intended to nominate CPT

codes 52441 and 52442 as potentially misvalued.

Response:  After reviewing the original comment, we agree with these commenters’

perspective that the intention was not to nominate the codes as potentially misvalued. Therefore, we are not finalizing our proposal to review these codes under the potentially misvalued code initiative.

1. Electronic Analysis of Implanted Neurostimulator (CPT Codes 95970-95982)

In the CY 2015 final rule with comment period (79 FR 67670), we reviewed and valued all of the inputs for the following CPT codes: 95971 (Electronic analysis of implanted neurostimulator pulse generator system (eg, rate, pulse amplitude, pulse duration, configuration of wave form, battery status, electrode selectability, output modulation, cycling, impedance and patient compliance measurements); simple spinal cord, or peripheral (ie, peripheral nerve, sacral nerve, neuromuscular) neurostimulator pulse generator/transmitter, with intraoperative or subsequent programming); 95972 (Electronic analysis of implanted neurostimulator pulse generator system (eg, rate, pulse amplitude, pulse duration, configuration of wave form, battery status, electrode selectability, output modulation, cycling, impedance and patient compliance measurements); complex spinal cord, or peripheral (ie, peripheral nerve, sacral nerve, neuromuscular) (except cranial nerve) neurostimulator pulse generator/transmitter, with intraoperative or subsequent programming, up to one hour); and 95973 (Electronic analysis of implanted neurostimulator pulse generator system (eg, rate, pulse amplitude, pulse duration, configuration of wave form, battery status, electrode selectability, output modulation, cycling, impedance and patient compliance measurements); complex spinal cord, or peripheral (ie, peripheral nerve, sacral nerve, neuromuscular) (except cranial nerve) neurostimulator pulse generator/transmitter, with intraoperative or subsequent programming, each additional 30 minutes after first hour (List separately in addition to code for primary procedure)). Due to significant time changes in the base codes, we believe the entire family detailed in Table 7 is potentially misvalued and should be reviewed in a manner consistent with our review of CPT codes 95971, 95972 and 95973.

TABLE 7: Potentially Misvalued Codes Identified in the Electronic Analysis of Implanted Neurostimulator Family

Comment: One commenter agreed with the review of CPT codes 95970-95982 as

potentially misvalued services.

Response:  We are adding CPT codes 95970-95982 to the list of potentially misvalued

codes and anticipate reviewing recommendations from the AMA RUC and other stakeholders.

1. Review of High Expenditure Services across Specialties with Medicare Allowed Charges of

$10,000,000 or More

In the CY 2015 PFS rule, we proposed and finalized the high expenditure screen as a tool to identify potentially misvalued codes in the statutory category of “codes that account for the majority of spending under the PFS.” We also identified codes through this screen and proposed them as potentially misvalued in the CY 2015 PFS proposed rule (79 FR 40337 – 40338).  However, given the resources required for the revaluation of codes with 10- and 90- day global periods, we did not finalize those codes as potentially misvalued codes in the CY 2015 PFS final rule with comment period.  We stated that we would re-run the high expenditure screen at a future date, and subsequently propose the specific set of codes that meet the high expenditure criteria as potentially misvalued codes (79 FR 67578).

As detailed in the CY 2016 PFS proposed rule (80 FR 41706), we believed that our current resources will not necessitate further delay in proceeding with the high expenditure screen for CY 2016.  Therefore, we re-ran the screen with the same criteria finalized in last year’s final rule. However, in developing this CY 2016 proposed list, we also excluded all codes with 10- and 90-day global periods since we believe these codes should be reviewed as

part of the global surgery revaluation described in section II.B.6. of this final rule with comment period.

We proposed 118 codes as potentially misvalued codes, identified using the high expenditure screen under the statutory category, “codes that account for the majority of spending under the PFS.”  To develop the list, we followed the same approach taken last year except we excluded codes with 10- and 90- day global periods. Specifically, we identified the top 20 codes by specialty (using the specialties used in Table 64 in terms of allowed charges. As we did last year, we excluded codes that we have reviewed since CY 2010, those with fewer than $10 million in allowed charges, and those that described anesthesia or E/M services.  We excluded E/M services from the list of proposed potentially misvalued codes for the same reasons that we excluded them in a similar review in CY 2012.  These reasons were explained in the CY 2012 final rule with comment period (76 FR 73062 through 73065).

Comment:  Some commenters did not believe that high expenditure/high volume was an

appropriate criterion for us to use to identify the codes for the potentially misvalued codes initiative.  These commenters stated that high expenditure is not an objective gauge of potential misvaluation.  Additionally, commenters believed that selecting codes that have not been reviewed in the past 5 years insinuates that the delivery of these services and procedures has changed radically over that time span, which many doubted. Other commenters believed CMS should provide justification for the revaluation by providing evidence and/or data to show how the delivery of a service or procedure has changed within 5 years.  While many disagreed with our use of the high expenditure screen, some commenters specifically suggested use of different types of screens; some of which would screen for services for which volume has increased a certain percentage over a set period or screen for changes in the predominate site of service.

Response:  We appreciate commenters’ perspective on the proposed list of potentially

misvalued codes based on the high expenditure screen.  It is clear that over time the resources

involved in furnishing particular services can often change and, therefore, many services that have not recently been evaluated may become potentially misvalued.  Under section

1848(c)(2)(B) of the Act, we are mandated to review relative values for codes for all physicians’ services at least every 5 years. The purpose of specifically identifying potentially misvalued codes through particular screens established through rulemaking is to prioritize the review of individual codes since comprehensive, annual review of all codes for physicians’ services is not practical and, due to the need to maintain relativity, changes in values for individual services can have an impact across the PFS. We identify potentially misvalued codes in order to prioritize

review of subsets of PFS services. We prioritize review of individual services based on indications that a particular code is likely to be misvalued and on the impact that the potential misvaluation of the code would have on the valuation of PFS services broadly.  Our high expenditure screen is largely intended to address the latter situation where improved valuation would have the most significant impact on the valuation of PFS services more broadly. This approach is also consistent with another category of codes identified for screening by statute: codes with high PE relative value units.  In proposing to prioritize this list of high expenditure codes, we stated that the reason we identified these codes is because they have significant impact on PFS payment on a specialty level and have not been recently reviewed.

Comment: A few commenters suggested that E/M services should not be exempt from

review as potentially misvalued codes.

Response:  In the CY 2012 final rule (76 FR 73063), we explained the concerns

expressed by commenters that informed our decision to refrain from finalizing our proposal to review 91 E/M codes as potentially misvalued.  We believe that those concerns remain valid. We also believe that it is best to exempt E/M codes from our review of potentially misvalued codes since we are continuously exploring valuations of E/M services, potential refinements to the PFS, and other options for policies that may contribute to improved valuation of E/M

services.

Comment:  Many commenters also stated that the review of codes over such a short time

span puts significant burden on the specialty societies.  Many commenters agreed that high expenditure codes should be reviewed on a periodic basis over multiple years. Some commenters specifically suggested that the periodic basis should be 10 years while others suggested delaying any review of the codes until after the misvalued code target has been met.

Response:  Because of the concerns expressed by commenters about the burden

associated with code reviews, we continue to believe that it is appropriate to prioritize review of codes to a manageable subset that also have a high impact on the PFS and work with the specialty society to spread review of the remaining codes identified as potentially misvalued over a reasonable timeframe.  Therefore, we do not believe it would be appropriate to remove codes from the high expenditure list unless we find that we have reviewed both the work RVUs and direct PE inputs for the code during the specified time period.

Also, we believe that the resources involved in furnishing a service can evolve over time, including the time and technology used to furnish the service, and such efficiencies could easily develop in a time span as short as 5 years.  As a result, we continue to believe that the review of these high expenditure codes is necessary to ensure that the services are appropriately valued.

Additionally, not only do we believe that regular monitoring of codes with high impact on the PFS will produce a more accurate and equitable payment system, but we have a statutory obligation under section 1848(c)(2)(B) of the Act to review code values at least every 5 years (although we do not always conduct a review that involves the AMA RUC). Therefore, we do not agree with the commenter that suggested that changes in technology and practice can be effectively accounted for through review of code values every 10 years.

Comment:  Commenters stated that the following codes were reviewed since CY 2010

and, as a result, do not fit the criteria for the high expenditure screen and should be removed:

CPT codes 51728 (Insertion of electronic device into bladder with voiding pressure studies), 51729 (Insertion of electronic device into bladder with voiding and bladder canal (urethra) pressure studies), 76536 (Ultrasound of head and neck), 78452 (Nuclear medicine study of vessels of heart using drugs or exercise multiple studies), 92557 (Air and bone conduction assessment of hearing loss and speech recognition), 92567 (Eardrum testing using ear probe), 93350 (Ultrasound examination of the heart performed during rest, exercise, and/or drug-induced stress with interpretation and report) and 94010 (Measurement and graphic recording of total and timed exhaled air capacity).

Response:  We agree with commenters that the codes identified do not fit the criteria for

review based on the high expenditure screen.  Therefore, we are not proposing to review CPT codes 51728, 51729, 76536, 78452, 92557, 92567, 93350, and 94010 under the potentially misvalued code initiative.

Comment:  Commenters believed that services that are add-ons to the excluded 10- and

90-day global services should be removed from the list of codes identified through the high expenditure screen in order to maintain relativity.  The specific codes suggested for removal were:  CPT codes 22614 (Fusion of spine bones, posterior or posterolateral approach); 22840 (Insertion of posterior spinal instrumentation at base of neck for stabilization, 1 interspace); 22842 (Insertion of posterior spinal instrumentation for spinal stabilization, 3 to 6 vertebral segments); 22845 (Insertion of anterior spinal instrumentation for spinal stabilization, 2 to 3 vertebral segments); and 33518 (Combined multiple vein and artery heart artery bypasses).

Response: We agree with the commenters that the codes identified should be removed

from the list of codes identified for review through the high expenditure screen due to their relationship to the 10- and 90-day global services that were excluded from our screen.  Although we agree that these codes should be removed from this screen, we think it is worthwhile to note that for similar reasons, we believe we should consider these and similar add-on codes in

conjunction with efforts to improve the valuation and the global surgery packages as described in section II.B.6. of this final rule with comment period. Therefore, we are not including CPT codes 22614, 22840, 22842, 22845 on the list of codes identified for review through the high expenditure screen.

Comment: Commenters believed that CPT code 92002 (Eye and medical examination

for diagnosis and treatment, new patient) is considered an ophthalmological evaluation and management (E/M) service and as a result, should be excluded for all the same reasons we excluded other E/M codes.

Response:  We agree with commenters that CPT code 92002 is considered an E/M and,

as a result, should be excluded from the screen as were other E/Ms. Therefore, we are not including CPT code 92002 on the list of codes identified for review through the high expenditure screen.

Comment: A few commenters requested that codes with a work RVU equal to 0.00 (CPT

codes 51798 (Ultrasound measurement of bladder capacity after voiding), 88185 (Flow cytometry technique for DNA or cell analysis), 93296 (Remote evaluations of single, dual, or multiple lead pacemaker or cardioverter-defibrillator transmissions, technician review, support, and distribution of results up to 90 days), 96567 (Application of light to aid destruction of premalignant and/or malignant skin growths, each session), and 96910 (Skin application of tar and ultraviolet B or petrolatum and ultraviolet B)) or equal to 0.01 (CPT codes 95004 (Injection of allergenic extracts into skin, accessed through the skin)) be removed from the list of codes identified for review through the high expenditure screen.  Commenters stated that historically, services with 0.00 work RVUs were excluded from screens and that re-reviewing a service with a 0.01 work RVU would most likely not lower the work component unless work was completely removed from the code.

Response:  We continue to believe that codes with 0.00 work RVUs or very low work

RVUs of 0.01, should still be reviewed and can still be considered potentially misvalued.  As stated earlier, we do not believe it would be appropriate to remove codes from the high expenditure list unless we find that we have reviewed both the work RVUs and direct PE inputs. Therefore, we are maintaining CPT codes 51798, 88185, 93296, 96567, 96910 and 95004 as potentially misvalued codes and anticipate reviewing recommendations from the AMA RUC and other stakeholders.

Comment:  Various commenters objected to the presence of individual codes that met the

high expenditure screen criteria based on absence of clinical evidence that the individual services are misvalued.

Response:  We reviewed each of these comments, and believe that these kinds of

assessments are best addressed through the misvalued code review process.  As we describe in this section, the criteria for many misvalued code screens, including this one, are designed to prioritize codes that may be misvalued not to identify codes that are misvalued. Therefore, we

believe that supporting evidence for the accuracy of current values for particular codes is best considered as part of the review of individual codes through the misvalued code process.

Comment:  Several commenters believed that codes that are currently scheduled to be

considered by either the CPT Editorial Panel for new coding or the RUC for revised valuations (for work RVUs and/or PE inputs) at an upcoming meeting should be removed from the screen. Commenters also believed that it was best to allow these codes to go through the RUC code review process rather than identifying the codes as potentially misvalued through this screen.

Response:  Although a number of codes have been or will be considered through the

RUC review process, until we receive recommendations and review the codes for both work and direct PE inputs, we will continue to include these codes on the high expenditure list. We reiterate that we do not believe that the presence of a code on a misvalued code list signals that a particular code necessarily is misvalued.  Instead, the lists are intended to prioritize codes to be

reviewed under the misvalued code initiative.  If any code on the list finalized here is already being reviewed by the RUC through its process, we will receive a recommendation regarding valuation for the code, and the presence or absence of the code in this particular list is immaterial. However, if subsequent to the removal of a code from the high expenditure code list, the RUC decides not to review the code, we would still want to consider the code as potentially misvalued based on its meeting the criteria established for the screen. Therefore, we do not agree that we should remove individual codes from a potentially misvalued code list because the RUC already anticipates reviewing the code. However, we want to be clear that when we receive RUC recommendations regarding a code, we generally remove that code from misvalued code lists, regardless of whether or not the RUC reviewed the code on the basis of that particular screen.

Accordingly, we are finalizing the 103 codes in Table 8 as potentially misvalued services under the high expenditure screen and seek recommended values for these codes from the RUC and other interested stakeholders.

TABLE 8: List of Potentially Misvalued Codes Identified Through High Expenditure by Specialty Screen

6. Valuing Services That Include Moderate Sedation as an Inherent Part of Furnishing the Procedure

The CPT manual includes more than 400 diagnostic and therapeutic procedures, listed in Appendix G, for which the CPT Editorial Committee has determined that moderate sedation is an inherent part of furnishing the procedure.  For these diagnostic and therapeutic procedures, only the procedure code is reported by the practitioner who conducts the procedure, without separate billing by the same practitioner for anesthesia services, and, in developing RVUs for these services, we include the resource costs associated with moderate sedation in the valuation. To the extent that moderate sedation is inherent in the diagnostic or therapeutic service, we believe that the inclusion of moderate sedation in the valuation of the procedure is appropriate. In the CY 2015 PFS proposed rule (79 FR 40349), we noted that it appeared practice patterns for endoscopic procedures were changing, with anesthesia increasingly being separately reported for these procedures.  Due to the changing nature of medical practice, we noted that we were considering establishing a uniform approach to valuation for all Appendix G services.  We continue to seek an approach that is based on using the best available objective, broad-based information about the provision of moderate sedation, rather than merely addressing this issue on a code-by-code basis using RUC survey data when individual procedures are revalued. We sought public comment on approaches to address the appropriate valuation of these services given that moderate sedation is no longer inherent for many of these services.  To the extent that Appendix G procedure code values are adjusted to no longer include moderate sedation, we requested suggestions as to how moderate sedation should be reported and valued, and how to remove from existing valuations the RVUs and inputs related to moderate sedation.

To establish an approach to valuation for all Appendix G services based on the best data about the provision of moderate sedation, we need to determine the extent to which each code may be misvalued.  We know that there are standard packages for the direct PE inputs associated

with moderate sedation, and we began to develop approaches to estimate how much of the work involved in these services is attributable to moderate sedation.  However, we believe that we should seek input from the medical community prior to proposing changes in values for these services, given the different methodologies used to develop work RVUs for the hundreds of services in Appendix G. Therefore, in the CY 2016 PFS proposed rule, we solicited recommendations from the RUC and other interested stakeholders on the appropriate valuation of the work associated with moderate sedation before formally proposing an approach that allows Medicare to adjust payments based on the resource costs associated with the moderate sedation or anesthesia services that are being furnished.

The anesthesia procedure codes 00740 (Anesthesia for procedure on gastrointestinal tract using an endoscope) and 00810 (Anesthesia for procedure on lower intestine using an endoscope) are used for anesthesia furnished in conjunction with lower GI procedures.  In reviewing Medicare claims data, we noted that a separate anesthesia service is now reported more than 50 percent of the time that several types of colonoscopy procedures are reported.

Given the significant change in the relative frequency with which anesthesia codes are reported with colonoscopy services, we believe the relative values of the anesthesia services should be re- examined.  Therefore, in the CY 2016 PFS proposed rule, we proposed to identify CPT codes 00740 and 00810 as potentially misvalued.  We welcomed comments on both of these issues.

Comment: Several commenters noted that they support CMS’ decision to seek input from

the medical community prior to proposing a method for reporting and valuing moderate sedation as well as adjusting existing valuations to remove these services. One commenter also encouraged CMS to seek and consider recommendations from societies that represent members who provide dialysis vascular access interventional care, such as the American Society of Diagnostic and Interventional Nephrology.

Response: We thank the commenters for their support. Through notice and comment

rulemaking, we will review and consider any recommendations from the public, including those from any interested specialty societies.

Comment: In response to CMS’ proposal to identify anesthesia procedure codes 00740

and 00810 as potentially misvalued, the RUC stated that the committee anticipated reviewing CPT codes 00740 and 00810 as potentially misvalued codes.

Response: We appreciate the RUC’s responsiveness to the proposal.

Comment: One commenter disagreed that the increase in utilization of anesthesia is

indicative of potential misvaluation of the codes in Appendix G. This commenter noted that the policy adopted by CMS in the CY 2015 final rule to eliminate cost-sharing for anesthesia furnished in conjunction with screening colonoscopies encourages patients to undergo these screenings. The commenter also noted that use of anesthesia with upper endoscopy procedures not only decreases patient discomfort, but also decreases complications and creates more optimal conditions for efficiency during the procedure as well as reduced recovery time as compared to the use of narcotics and sedative hypnotic agents. The commenter believes that this results in savings that offset the costs of anesthesia services. The commenter also expressed the view that the work involved in these services has not changed.

Response: We thank the commenters for their input. Since the pool of beneficiaries that

receive anesthesia in conjunction with these Appendix G services has grown, we believe it is possible that the typical circumstances under which patients receive these services have changed since the services were last reviewed.  Therefore, we continue to seek recommendations regarding appropriate approaches to valuation for these services.

Comment: A few commenters noted that there are a variety of services in Appendix G

and stated their view that practitioners who furnish services for which there are claims data supporting the inherent nature of moderate sedation should not have to report moderate sedation separately, as they believe they would be faced with administrative burden and costs. They

recommended that CMS conduct ongoing analysis of claims data to determine which codes may require unbundling of moderate sedation and to refer only those codes as potentially misvalued. One commenter noted that they opposed the use of any “blanket approach” to valuing moderate sedation such as removing the standard packages for the direct PE inputs associated with moderate sedation. The commenter recommended instead that we look at codes by family or specialty in order to ensure that reimbursements are fair and accurate.  One commenter also noted the difference in the work involved with moderate sedation when it is furnished by the same physician who is furnishing the procedure compared with when it is furnished by another clinician, and requested that this be considered when valuing the moderate sedation services.

Another commenter suggested that CMS create a modifier to be used by surgeons providing moderate sedation. They also suggested that CMS consider the expenses involved with using a registered nurse or CRNA, the medications and delivery systems, patient monitoring equipment, and lengthened postoperative recovery period when valuing moderate sedation services.

Response: We thank the commenters for their input. We will consider input from the

medical community on this issue through evaluation of CPT coding changes and associated RUC recommendations, as well as feedback received through public comments, as we value these services through future notice and comment rulemaking.

7. Improving the Valuation and Coding of the Global Package

1. Proposed Transition of 10-Day and 90-Day Global Packages Into 0-Day Global Packages In the CY 2015 PFS final rule (79 FR 67582 through 67591) we finalized a policy to transition all 10-day and 90-day global codes to 0-day global periods in order to improve the

accuracy of valuation and payment for the various components of global surgical packages, including pre- and postoperative visits and the surgical procedure itself. Although in previous rulemaking we have marginally addressed some of the concerns we identified with global packages, we believe there is still a need to address other fundamental issues with the 10- and

• day postoperative global We believe it is critical that the RVUs we use to develop PFS payment rates reflect the most accurate resource costs associated with PFS services. We believe that valuing global codes that package services together without objective, auditable data on the resource costs associated with the components of the services contained in the packages may significantly skew relativity and create unwarranted payment disparities within PFS fee-for- service payment. We also believe that the resource-based valuation of individual physicians’ services will continue to serve as a critical foundation for Medicare payment to physicians.

Therefore, we believe it is critical that the RVUs under the PFS be based as closely and accurately as possible on the actual resources involved in furnishing the typical occurrence of specific services.

In the rulemaking for CY 2015, we stated our belief that transforming all 10- and 90-day global codes to 0-day global codes would:

• Increase the accuracy of PFS payment by setting payment rates for individual services based more closely upon the typical resources used in furnishing the procedures;
• Avoid potentially duplicative or unwarranted payments when a beneficiary receives postoperative care from a different practitioner during the global period;
• Eliminate disparities between the payment for E/M services in global periods and those furnished individually;
• Maintain the same-day packaging of pre- and postoperative physicians’ services in the 0-day global code; and
• Facilitate availability of more accurate data for new payment models and quality

1. Impact of the Medicare Access and CHIP Reauthorization Act of 2015

The MACRA was enacted into law on April 16, 2015. Section 523 of the MACRA addresses payment for global surgical packages.  Section 523(a) adds a new paragraph at section

1848(c)(8) of the Act. Section 1848(c)(8)(A)(i) of the Act prohibits the Secretary from implementing the policy established in the CY 2015 PFS final rule with comment period that would have transitioned all 10-day and 90-day global surgery packages to 0-day global periods. Section 1848(c)(8)(A)(ii) of the Act provides that nothing in the previous clause shall be construed to prevent the Secretary from revaluing misvalued codes for specific surgical services or assigning values to new or revised codes for surgical services.

Section 1848(c)(8)(B)(i) of the Act requires CMS to develop, through rulemaking, a process to gather information needed to value surgical services from a representative sample of physicians, and requires that the data collection shall begin no later than January 1, 2017. The collected information must include the number and level of medical visits furnished during the global period and other items and services related to the surgery, as appropriate.  This information must be reported on claims at the end of the global period or in another manner specified by the Secretary.  Section 1848(c)(8)(B)(ii) of the Act requires that, every 4 years, we must reassess the value of this collected information; and allows us to discontinue the collection if the Secretary determines that we have adequate information from other sources in order to accurately value global surgical services. Section 1848(c)(8)(B)(iii) of the Act specifies that the Inspector General will audit a sample of the collected information to verify its accuracy.  Section 1848(c)(8)(C) of the Act requires that, beginning in CY 2019, we must use the information collected as appropriate, along with other available data, to improve the accuracy of valuation of surgical services under the PFS.  Section 523(b) of the MACRA adds a new paragraph at section 1848(c)(9) of the Act that authorizes the Secretary, through rulemaking, to delay up to 5 percent of the PFS payment for services for which a physician is required to report information under section 1848(c)(8)(B)(i) of the Act until the required information is reported.

Since section 1848(c)(8)(B)(i) of the Act, as added by section 523(a) of the MACRA, requires us to use rulemaking to develop and implement the process to gather information needed

to value surgical services no later than January 1, 2017, we sought input from stakeholders on various aspects of this task. We solicited comments from the public regarding the kinds of auditable, objective data (including the number and type of visits and other services furnished by the practitioner reporting the procedure code during the current postoperative periods) needed to increase the accuracy of the values for surgical services. We also solicited comment on the most efficient means of acquiring these data as accurately and efficiently as possible. For example, we sought information on the extent to which individual practitioners or practices may currently maintain their own data on services, including those furnished during the postoperative period, and how we might collect and objectively evaluate those data for use in increasing the accuracy of the values beginning in CY 2019.

We received many comments regarding the kinds of auditable, objective data needed to increase the accuracy of the values for surgical services and the most efficient means of acquiring these data.  Commenters had several suggestions for the approach that CMS should take, including the following:

• Collect and examine large group practice data for CPT code 99024 (postoperative follow-up visit).
• Review Medicare Part A claims data to determine the length of stay of surgical services performed in the hospital facility
• Prioritize services that the Agency has identified as high concern

• Review postoperative visit and length of stay data for outliers.

In general, commenters were supportive of the need to identify auditable, objective, representative data, but many were not able to identify a specific source for such data. We appreciate the comments we received and we will consider these suggestions for purposes of future rulemaking.

As noted above, section 1848(c)(8)(C) of the Act mandates that we use the collected data to improve the accuracy of valuation of surgery services beginning in 2019.  We described in previous rulemaking (79 FR 67582 through 67591) the limitations and difficulties involved in the appropriate valuation of the global packages, especially when the values of the component services are not clear. We sought public comment on potential methods of valuing the individual components of the global surgical package, including the procedure itself, and the pre- and postoperative care, including the follow-up care during postoperative days.  We were also interested in stakeholder input on what other items and services related to the surgery, aside from postoperative visits, are furnished to beneficiaries during postoperative care.

We received many comments regarding potential methods of valuing the individual components of the global surgical package, including the following:

• Use a measured approach to valuing the individual components of the global surgical package rather than implementing a blanket data collection
• Examine and consider the level of the postoperative E/M visits, including differences between
• Consider the interaction between the valuing the global surgery package and the multiple procedure payment reduction (MPPR)

We will consider these comments regarding the best means to develop and implement the process to gather information needed to value surgical services and will provide further opportunity for public comment through future rulemaking.

Comment: We received many comments expressing strong support for the CMS proposal

to hold an open door forum or town hall meetings with the public.

Response:  We appreciate the extensive comments we received from the public regarding the

global surgical package. We have noted the positive feedback from commenters about holding potential open forums or town hall meetings to discuss this process. We will consider these

comments regarding the best means to develop and implement the process to gather information needed to value surgical services as we develop proposals for inclusion in next year’s PFS proposed rule.

• Elimination of the Refinement Panel

1. Background

As discussed in the CY 1993 PFS final rule with comment period (57 FR 55938), we adopted a refinement panel process to assist us in reviewing the public comments on CPT codes with interim final work RVUs for a year and in developing final work RVUs for the subsequent year.  We decided the panel would be composed of a multispecialty group of physicians who would review and discuss the work involved in each procedure under review, and then each panel member would individually rate the work of the procedure.  We believed establishing the panel with a multispecialty group would balance the interests of the specialty societies who commented on the work RVUs with the budgetary and redistributive effects that could occur if we accepted extensive increases in work RVUs across a broad range of services.

Following enactment of section 1848(c)(2)(K) of the Act, which required the Secretary periodically to identify and review potentially misvalued codes and make appropriate adjustments to the RVUs, we reassessed the refinement panel process.  As detailed in the CY 2011 PFS final rule with comment period (75 FR 73306), we continued using the established refinement panel process with some modifications.

For CY 2015, in light of the changes we made to the process for valuing new, revised, and potentially misvalued codes (79 FR 67606), we reassessed the role that the refinement panel process plays in the code valuation process. We noted that the current refinement panel process is tied to the review of interim final values.  It provides an opportunity for stakeholders to provide new clinical information that was not available at the time of the RUC valuation that might affect work RVU values that are adopted in the interim final value process. For CY 2015 interim final rates, we stated in the CY 2015 PFS final rule with comment period that we will use the refinement panel process as usual for these codes (79 FR 67609).

2. CY 2016 Refinement Panel Proposal

We proposed to permanently eliminate the refinement panel beginning in CY 2016, and instead, publish the proposed rates for all interim final codes in the PFS proposed rule for the subsequent year.  For example, we would publish the proposed rates for all CY 2016 interim final codes in the CY 2017 PFS proposed rule.  With the change in the process for valuing codes adopted in the CY 2015 final rule with comment period (79 FR 67606), proposed values for most codes that are being valued for CY 2016 were published in the CY 2016 PFS proposed rule. As explained in the CY 2015 final rule with comment period, a smaller number of codes being valued for CY 2016 will be published as interim final in the 2016 PFS final rule with comment period and be subject to comment.  Under our proposal, we will evaluate the comments we receive on these code values, and both respond to these comments and propose values for these codes for CY 2017 in the CY 2017 PFS proposed rule. Therefore, stakeholders will have two opportunities to comment and to provide any new clinical information that was not available at the time of the RUC valuation that might affect work RVU values that are adopted on an interim final basis. We believe that this proposed process, which includes two opportunities for public notice and comment, offers stakeholders a better mechanism and ample opportunity for providing any additional data for our consideration, and discussing any concerns with our interim final values, than the current refinement process.  It also provides greater transparency because comments on our rules are made available to the public at http://www.regulations.gov. We

welcomed comments on this proposed change to eliminate the use of refinement panels in our process for establishing final values for interim final codes.

The following is a summary of the comments we received on this proposed change to eliminate the use of refinement panels in our process for establishing final values for interim final codes.

Comment:  The majority of commenters, including the American Medical

Association/Specialty Society Relative (Value) Update Committee, opposed the proposal to

eliminate the refinement panel. Commenters expressed concern that the complete elimination of the refinement process decreases CMS’s accountability to its stakeholders who do not agree with the Agency’s decisions.  They urged CMS to provide detailed guidance on how to seek a change in previously finalized RVUs including the process to initiate a meeting with CMS staff to share and discuss new information or clarify previously shared information, as well as any key timelines or dates that may impact CMS’s ability to initiate a change in previously finalized RVUs.  Commenters also urged CMS to maintain a transparent appeal process.  Another stated that, as CY 2017 will be the first full year using the new process for establishing final values for interim final codes, it is possible that unforeseen needs for the continuation of the refinement panel could arise.

Several commenters agreed with the proposal to eliminate the refinement panel. One commenter supported the permanent elimination of the refinement panel since CMS’s display of interim final values in the subsequent year’s proposed rule will provide another opportunity for public input.  Another believed the new process will provide more timely input on the codes and stated that publishing interim final values for these in the proposed rule versus the final rule should allow adequate time for public comment and for physicians to prepare for changes that would have an impact on their practices and patients. Another commenter welcomed the increased opportunity to review and comment on interim values, especially given that CMS has not been obligated to accept recommendations of the refinement panels and has frequently rejected those recommendations.

Response:  We appreciate all of the comments on the proposal.  We understand that

commenters have an interest in a transparent process to review CMS’s assignment of RVUs to individual PFS services.  We also understand that some commenters believe that the purpose of the refinement panel process is to provide for reconsideration of the agency’s previous decisions. However, the refinement panel was established to assist us in reviewing the public comments on

CPT codes with interim final work RVUs and in balancing theinterests of the specialty societies whocommented on the work RVUs with thebudgetary and redistributive effects that could occur if we accepted extensive increases in work RVUs across a broadrange of services.

Therefore, we do not believe that the refinement panel has generally served as the kind of “appeals” or reconsideration process that some stakeholders envision in their comments. We also have come to believe that the refinement panel is not achieving its intended purpose. Rather than providing us with additional information, balanced across specialty interests, to assist us in establishing work RVUs, the refinement panel process generally serves to rehash the issues raised and information already discussed at the RUC meetings and considered by CMS.

We also appreciate commenters’ interest in CMS maintaining a transparent process with public accountability in establishing values for physicians’ services.  In contrast to the prior process of establishing interim final values and using a refinement panel process that generally is not observed by members of the public, we believe that the new process of proposing the majority of code values in the proposed rule and making sure that those proposed values are open for comment prior to their taking effect for payment inherently represents greater transparency and accountability.  We will also continue to work towards greater transparency in describing in rulemaking how we develop our proposed values for individual codes.  We believe that focusing our resources on notice and comment rulemaking would facilitate greater transparency.

Given that the timing for valuation of PFS services under the new process will in large part mitigate the need to establish values on an interim final basis and will provide two opportunities for notice and public comment, we do not believe that the refinement panel would necessarily provide value as an avenue for input, for either CMS or stakeholders, beyond that intrinsic in the notice and comment rulemaking process.  However, we appreciate commenters’ concerns that the new process has not been fully implemented and there may be unanticipated needs for additional input like the kind made available through the refinement panels. We agree

that it may be advisable to preserve existing avenues for public input beyond the rulemaking process, like the refinement panel.

Therefore, after consideration of all of the comments and the issues described in this section, we are not finalizing our proposal to eliminate the refinement panel process at this time. Instead, we will retain the ability to convene refinement panels for codes with interim final values under circumstances where additional input provided by the panel is likely to add value as a supplement to notice and comment rulemaking.  We will make the determination on whether to convene refinement panels on an annual basis, based on review of comments received on interim final values.  We remind stakeholders that CY 2016 is the final year for which we anticipate establishing interim final values for existing services.

We also want to remind stakeholders that we have established an annual process for the public nomination of potentially misvalued codes. This process, described in the CY 2012 PFS final rule (76 FR 73058), provides an annual means for those who believe that values for individual services are inaccurate and should be readdressed through notice and comment rulemaking to bring those codes to our attention.

• Improving Payment Accuracy for Primary Care and Care Management Services

In the CY 2016 PFS proposed rule, we sought public comment on a number of issues regarding payment for primary care and care coordination under the PFS.  We are committed to supporting primary care, and we have increasingly recognized care management as one of the critical components of primary care that contributes to better health for individuals and reduced expenditure growth (77 FR 68978).  Accordingly, we have prioritized the development and implementation of a series of initiatives designed to improve the accuracy of payment for, and encourage long-term investment in, care management services.

In addition to the Medicare Shared Savings Program, various demonstration initiatives including the Pioneer Accountable Care Organization (ACO) model, the patient-centered medical home model in the Multi-payer Advanced Primary Care Practice (MAPCP), the Federally Qualified Health Center (FQHC) Advanced Primary Care Practice demonstration and the Comprehensive Primary Care (CPC) initiative, among others (see the CY 2015 PFS final rule (79 FR 67715) for a discussion of these), we also have continued to explore potential refinements to the PFS that would appropriately value care management within Medicare’s statutory structure for fee-for-service physician payment and quality reporting.  The payment for some non-face-to- face care management services is bundled into the payment for face-to-face evaluation and management (E/M) visits.  However, because the current E/M office/outpatient visit CPT codes were designed with an overall orientation toward episodic treatment, we have recognized that these E/M codes may not reflect all the services and resources involved with furnishing certain kinds of care, particularly comprehensive, coordinated care management for certain categories of beneficiaries.

Over several years, we have developed proposals and sought stakeholder input regarding potential PFS refinements to improve the accuracy of payment for care management services.

For example, in the CY 2013 PFS final rule with comment period, we adopted a policy to pay

separately for transitional care management (TCM) involving the transition of a beneficiary from care furnished by a treating physician during an inpatient stay to care furnished by the beneficiary’s primary physician in the community (77 FR 68978 through 68993).  In the

CY 2014 PFS final rule with comment period, we finalized a policy, beginning in CY 2015 (78 FR 74414), to pay separately for chronic care management (CCM) services furnished to Medicare beneficiaries with two or more qualifying chronic conditions. We believe that these new separately billable codes more accurately describe, recognize, and make payment for non- face-to-face care management services furnished by practitioners and clinical staff to particular patient populations.

We view ongoing refinements to payment for care management services as part of a broader strategy to incorporate input and information gathered from research, initiatives, and demonstrations conducted by CMS and other public and private stakeholders, the work of all parties involved in the potentially misvalued code initiative, and, more generally, from the public at large.  Based on input and information gathered from these sources, we are considering several potential refinements that would continue our efforts to improve the accuracy of PFS payments. In this section, we discuss our comment solicitation and the public comments we received regarding these potential refinements.

1. Improved Payment for the Professional Work of Care Management Services

Although both the TCM and CCM services describe certain aspects of professional work, some stakeholders have suggested that neither of these new sets of codes nor the inputs used in their valuations explicitly account for all of the services and resources associated with the more extensive cognitive work that primary care physicians and other practitioners perform in planning and thinking critically about the individual chronic care needs of particular subsets of Medicare beneficiaries.  Commenters stated that the time and intensity of the cognitive efforts associated with such planning are in addition to the work typically required to supervise and

manage the clinical staff associated with the current TCM and CCM codes.  Similarly, we continue to receive requests from a few stakeholders for CMS to lead efforts to revise the current CPT E/M codes or construct a new set of E/M codes.  The goal of such efforts would be to better describe and value the work (time and intensity) specific to primary care and other cognitive specialties in the context of complex care of patients relative to the time and intensity of the procedure-oriented care physicians and practitioners, who use the same codes to report E/M services.  Some of these stakeholders have suggested that in current medical practice, many physicians, in addition to the time spent treating acute illnesses, spend substantial time working toward optimal outcomes for patients with chronic conditions and patients they treat episodically, which can involve additional work not reflected in the codes that describe E/M services since that work is not typical across the wide range of practitioners that report the same codes.  According to these groups, this work involves medication reconciliation, the assessment and integration of numerous data points, effective coordination of care among multiple other clinicians, collaboration with team members, continuous development and modification of care plans, patient or caregiver education, and the communication of test results.

We agree with stakeholders that it is important for Medicare to use codes that accurately describe the services furnished to Medicare beneficiaries and to accurately reflect the relative resources involved with furnishing those services.  Therefore, in the CY 2016 PFS proposed rule we solicited public comments on ways to recognize the different resources (particularly in cognitive work) involved in delivering broad-based, ongoing treatment, beyond those resources already incorporated in the codes that describe the broader range of E/M services. The resource costs of this work may include the time and intensity related to the management of both long- term and, in some cases, episodic conditions.  To appropriately recognize the different resource costs for this additional cognitive work within the structure of PFS resource-based payments, we

were particularly interested in codes that could be used in addition to, not instead of, the current E/M codes.

In our comment solicitation, we stated that, in principle, these codes could be similar to the hundreds of existing add-on codes that describe additional resource costs, such as additional blocks or slides in pathology services, additional units of repair in dermatologic procedures, or additional complexity in psychotherapy services.  For example, these codes might allow for the reporting of the additional time and intensity of the cognitive work often undertaken by primary care and other cognitive specialties in conjunction with an E/M service, much like add-on codes for certain procedures or diagnostic test describe the additional resources sometimes involved in furnishing those services.  Similar to the CCM code, the codes might describe the increased resources used over a longer period of time than during one patient visit. For example, the add- on codes could describe the professional time in excess of 30 minutes and/or a certain set of furnished services, per one calendar month, for a single patient to coordinate care, provide patient or caregiver education, reconcile and manage medications, assess and integrate data, or develop and modify care plans.  Such activity may be particularly relevant for the care of patients with multiple or complicated chronic or acute conditions, and should contribute to optimal patient outcomes including more coordinated, safer care.

Like CCM, we would require that the patient have an established relationship with the billing professional; and additionally, the use of an add-on code would require the extended professional resources to be reported with another separately payable service.  However, in contrast to the CCM code, the new codes might be reported based on the resources involved in professional work, instead of the resource costs in terms of clinical staff time.  The codes might also apply broadly to patients in a number of different circumstances, and would not necessarily make reporting the code(s) contingent on particular business models or technologies for medical practices.  We stated that we were interested in stakeholder comments on the kinds of services

that involve the type of cognitive work described above and whether or not the creation of particular codes might improve the accuracy of the relative values used for such services on the PFS.  Finally, we were interested in receiving information from stakeholders on the overlap between the kinds of cognitive resource costs discussed above and those already accounted for through the currently payable codes that describe CCM and other care management services.

We strongly encouraged stakeholders to comment on this topic to assist us in developing potential proposals to address these issues through rulemaking in CY 2016 for implementation in CY 2017.  We anticipated using an approach similar to our multi-year approach for implementing CCM and TCM services, to facilitate broader input from stakeholders regarding details of implementing such codes, including their structure and description, valuation, and any requirements for reporting.

Comment: We received many comments on these potential policy and coding

refinements that will be useful in the development of potential future policy proposals.  We note that the American Medical Association and others urged us to make separate Medicare payment for existing CPT codes that are not separately paid under the PFS, but that describe similar services and for which we have RUC-recommended values. These codes describe a broad range of services, some of which involve non face-to-face care management over a period of time.

Response:  We will take the comments into consideration in developing any potential

policy proposals in future PFS rulemaking.

2. Establishing Separate Payment for Collaborative Care

We believe that the care and management for Medicare beneficiaries with multiple chronic conditions, a particularly complicated disease or acute condition, or common behavioral health conditions often requires extensive discussion, information-sharing and planning between a primary care physician and a specialist (for example, with a neurologist for a patient with Alzheimer’s disease plus other chronic diseases).  We note that for CY 2014, CPT created four

codes that describe interprofessional telephone/internet consultative services (CPT codes 99446– 99449).  Because Medicare includes payment for telephone consultations with or about a beneficiary as a part of other services furnished to the beneficiary, we currently do not make separate payment for these services. We note that such interprofessional consultative services are distinct from the face-to-face visits previously reported to Medicare using the consultation codes, and we refer the reader to the CY 2010 PFS final rule for information regarding Medicare payment policies for those services (74 FR 61767).

However, in considering how to improve the accuracy of our payments for care coordination, particularly for patients requiring more extensive care, in the CY 2016 PFS proposed rule we also sought comment on how Medicare might accurately account for the resource costs of a more robust interprofessional consultation within the current structure of PFS payment.  For example, we were interested in stakeholders’ perspectives regarding whether there are conditions under which it might be appropriate to make separate payment for services like those described by these CPT codes. We expressed interest in stakeholder input regarding the parameters of, and resources involved in, these collaborations between a specialist and primary care practitioner, especially in the context of the structure and valuation of current E/M services. In particular, we were interested in comments about how these collaborations could be distinguished from the kind of services included in other E/M services, how these services could be described if stakeholders believe the current CPT codes are not adequate, and how these services should be valued under the PFS.  We also expressed interest in comments on whether we should tie those interprofessional consultations to a beneficiary encounter, and on developing appropriate beneficiary protections to ensure that beneficiaries are fully aware of the involvement of the specialist in the beneficiary’s care and the associated benefits of the collaboration between the primary care physician and the specialist physician prior to being billed for such services.

Additionally, we solicited comments on whether this kind of care might benefit from inclusion in a CMMI model that would allow Medicare to test its effectiveness with a waiver of beneficiary financial liability and/or variation of payment amounts for the consulting and the primary care practitioners. Without such protections, beneficiaries could be responsible for coinsurance for services of physicians whose role in the beneficiary’s care is not necessarily understood by the beneficiary.  Finally, we also solicited comments on key technology supports needed to support collaboration between specialist and primary care practitioners in support of high quality care management services, on whether we should consider including technology requirements as part of any proposed services, and on how such requirements could be implemented in a way that minimizes burden on providers.  We encouraged stakeholders to comment on this topic to assist us in developing potential proposals to address these issues through rulemaking in CY 2016 for implementation in CY 2017. We anticipated using an approach similar to our multi-year approach for implementing CCM and TCM services, to facilitate broader input from stakeholders regarding details of implementing such codes, including their structure and description, valuation, and any requirements for reporting.

Comment:  We received many comments on these potential policy and coding

refinements that will be useful in the development of potential future policy proposals.

Response:  We will take the comments into consideration in developing any potential

policy proposals in future PFS rulemaking.

1. Collaborative Care Models for Beneficiaries with Common Behavioral Health Conditions

In recent years, many randomized controlled trials have established an evidence base for an approach to caring for patients with common behavioral health conditions called “Collaborative Care.” Collaborative care typically is provided by a primary care team, consisting of a primary care provider and a care manager, who works in collaboration with a psychiatric consultant, such as a psychiatrist.  Care is directed by the primary care team and

includes structured care management with regular assessments of clinical status using validated tools and modification of treatment as appropriate.  The psychiatric consultant provides regular consultations to the primary care team to review the clinical status and care of patients and to make recommendations.  Several resources have been published that describe collaborative care models in greater detail and assess their impact, including pieces from the University of Washington (http://aims.uw.edu/), the Institute for Clinical and Economic Review

(http://ctaf.org/reports/integration-behavioral-health-primary-care), and the Cochrane

Collaboration (http://www.cochrane.org/CD006525/DEPRESSN_collaborative-care-for-people-

with-depression-and-anxiety).

Because this particular kind of collaborative care model has been tested and documented in medical literature, in the proposed rule, we were particularly interested in comments on how coding under the PFS might facilitate appropriate valuation of the services furnished under such a collaborative care model.  As these kinds of collaborative models of care become more prevalent, we would evaluate potential refinements to the PFS to account for the provision of services through such a model.  We solicited information to assist us in considering refinements to coding and payment to address this model in particular. We also sought comments on the potential application of the collaborative care model for other diagnoses and treatment modalities.  For example, we solicited comments on how a code similar to the CCM code applicable to multiple diagnoses and treatment plans could be used to describe collaborative care services, as well as other interprofessional services, and could be appropriately valued and reported within the resource-based relative value PFS system, and how the resources involved in furnishing such services could be incorporated into the current set of PFS codes without overlap. We also requested input on whether requirements similar to those used for CCM services should apply to a new collaborative care code, and whether such a code could be reported in conjunction with CCM or other E/M services.  For example, we might consider whether the code should

describe a minimum amount of time spent by the psychiatric consultant for a particular patient per one calendar month and be complemented by either the CCM or other care management code to support the care management and primary care elements of the collaborative care model. As with our comment solicitation on interprofessional consultation, since the patient may not have direct contact with the psychiatric consultant we solicited comments on whether and, if so, how written consent for the non-face-to-face services should be required prior to practitioners reporting any new interprofessional consultation code or the care management code.

We also solicited comments on appropriate care delivery requirements for billing, the appropriateness of CCM technology requirements or other technology requirements for these services, necessary qualifications for psychiatric consultants, and whether or not there are particular conditions for which payment would be more appropriate than others; as well as how these services may interact with quality reporting, the resource inputs we might use to value the services under the PFS (specifically, work RVUs, time, and direct PE inputs), and whether or not separate codes should be developed for the psychiatric consultant and the care management components of the service.

In addition, we solicited comments on whether this kind of care model should be implemented through a CMMI model that would allow Medicare to test its effectiveness with a waiver of beneficiary financial liability and/or variation of payment methodology and amounts for the psychiatric consultant and the primary care physician.  Again, we encouraged stakeholders to comment on this topic to assist us in developing potential proposals to address these issues through rulemaking in CY 2016 for implementation in CY 2017.

Comment:  We received many positive comments regarding the possibility of

implementing new payment codes that would allow more accurate reporting and payment when these services are furnished to Medicare beneficiaries.

Response:  We appreciate commenters’ interest in appropriate coding and payment for

these services.  We will take all comments into consideration as we consider the development of proposals in future rulemaking.

We took particular note that several commenters identified resource inputs CMS might use to value these services under the PFS, including defined time elements.  As we consider those comments, we encourage stakeholders to consider whether there are alternatives to time elements that would account for the range in intensity of services delivered in accordance with beneficiary need.  In addition, since the collaborative care models described in the proposed rule include primary care-based care management, as well as psychiatric consulting, we encourage further input including comments on this final rule with comment period, from a broad group of stakeholders, including the community of primary care providers, who are critical in the successful provision of these services.

3. CCM and TCM Services

1. Reducing Administrative Burden for CCM and TCM services

In CY 2013, we implemented separate payment for TCM services under CPT codes 99495 and 99496, and in CY 2015, we implemented separate payment for CCM services under CPT code 99490.  We established many service elements and billing requirements that the physician or nonphysician practitioner must satisfy to fully furnish these services and to report these codes (77 FR 68989, 79 FR 67728).  Particularly because of the significant amount of non face-to-face work involved in CCM and TCM services, these elements and requirements were relatively extensive and generally exceeded those for other E/M and similar services.  Since the implementation of these services, some practitioners have stated that the service elements and billing requirements are too burdensome, and suggested that they interfere with their ability to provide these care management services to their patients who could benefit from them.  In light of this feedback from the physician and practitioner community, we solicited comments on steps that we could take to further improve beneficiary access to TCM and CCM services. Our aims in

implementing separate payment for these services are that Medicare practitioners are paid appropriately for the services they furnish, and that beneficiaries receive comprehensive care management that benefits their long term health outcomes. However, we understand that excessive requirements on practitioners could possibly undermine the overall goals of the payment policies.  In the CY 2016 PFS proposed rule, we solicited stakeholder input on how we could best balance access to these services and practitioner burdens such that Medicare beneficiaries may obtain the full benefit of these services.

1. Payment for CPT Codes Related to CCM Services

As we stated in the CY 2015 PFS final rule (79 FR 67719), we believe that Medicare beneficiaries with two or more chronic conditions as defined under the CCM code can benefit from the care management services described by that code, and we want to make this service available to all such beneficiaries.  As with most services paid under the PFS, we recognized that furnishing CCM services to some beneficiaries will require more resources and some less; but we value and make payment based upon the typical service.  Because CY 2015 is the first year for which we are making separate payment for CCM services, we sought information regarding the circumstances under which CCM services are furnished. This information would include the clinical status of the beneficiaries receiving the service and the resources involved in furnishing the service, such as the number of documented non-face-to-face minutes furnished by clinical staff in the months the code is reported.  We were interested in examining such information to identify the range of minutes furnished over those months as well as the distribution of the number of minutes within the total volume of services. We also solicited objective data regarding the resource costs associated with furnishing the services described by this code. We stated that as we review that information, in addition to our own claims data, we would consider any changes in payment and coding that may be warranted in the coming years, including the

possibility of establishing separate payment amounts and making Medicare payment for the related CPT codes, such as the complex care coordination codes, CPT codes 99487 and 99489.

Comment:  We received several comments recommending various changes in the billing

requirements for CCM and TCM services.  Some commenters sought significant changes to the CCM scope of service elements, such as eliminating the requirement to use certified electronic health record technology (CEHRT); suspending the electronic care plan sharing requirement until such time that electronic health records (EHRs) have the ability to support such capabilities; or having CMS provide a model patient consent form.  Other commenters recommended more minor changes such as clarifying the application of CCM rules regarding fax transmission from certified EHRs, and changing the reporting rules for TCM services (required date of service and when the claim can be submitted).  Many commenters stated the current payment amounts are not adequate to cover the resources required to furnish CCM or TCM services and urged CMS to increase payments, for example by creating an add-on code to CPT code 99490, increasing the clinical labor PE input for CPT code 99490 to the RUC recommended 60 minutes, and/or paying separately for the complex CCM codes (CPT codes 99487 and 99489). Commenters also noted that since CY 2015 is the first year of separate payment for CCM, there is little utilization data available to assess average time spent in furnishing CCM services and similar issues. One commenter planned to share data with CMS next spring upon completion of a study on the cost and value associated with care management.

Response:  We will take these comments into consideration in the development of potential

proposals for future PFS rulemaking.  We will develop subregulatory guidance clarifying the intersection of fax transmission and CEHRT for purposes of CCM billing. Regarding TCM services, we are adopting the commenters’ suggestions that the required date of service reported on the claim be the date of the face-to-face visit, and to allow (but not require) submission of the claim when the face-to-face visit is completed, consistent with current policy governing the

reporting of global surgery and other bundles of services under the PFS.  We will revise the existing subregulatory guidance for TCM services accordingly.

• Target for Relative Value Adjustments for Misvalued Services

Section 220(d) of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113– 93, enacted on April 1, 2014) added a new subparagraph at section 1848(c)(2)(O) of the Act to establish an annual target for reductions in PFS expenditures resulting from adjustments to relative values of misvalued codes.  Under section 1848(c)(2)(O)(ii) of the Act, if the estimated net reduction in expenditures for a year as a result of adjustments to the relative values for misvalued codes is equal to or greater than the target for that year, reduced expenditures attributable to such adjustments shall be redistributed in a budget-neutral manner within the PFS in accordance with the existing budget neutrality requirement under section 1848(c)(2)(B)(ii)(II) of the Act.  The provision also specifies that the amount by which such reduced expenditures exceeds the target for a given year shall be treated as a net reduction in expenditures for the succeeding year, for purposes of determining whether the target has been met for that subsequent year.  Section 1848(c)(2)(O)(iv) of the Act defines a target recapture amount as the difference between the target for the year and the estimated net reduction in expenditures under the PFS resulting from adjustments to RVUs for misvalued codes. Section 1848(c)(2)(O)(iii) of the Act specifies that, if the estimated net reduction in PFS expenditures for the year is less than the target for the year, an amount equal to the target recapture amount shall not be taken into account when applying the budget neutrality requirements specified in section 1848(c)(2)(B)(ii)(II) of the Act.  Section 220(d) of the PAMA applies to calendar years (CYs) 2017 through 2020 and sets the target under section 1848(c)(2)(O)(v) of the Act at 0.5 percent of the estimated amount of expenditures under the PFS for each of those 4 years.

Section 202 of the Achieving a Better Life Experience Act of 2014 (ABLE) (Division B of Pub. L. 113-295, enacted December 19, 2014) amended section 1848(c)(2)(O) of the Act to accelerate the application of the PFS expenditure reduction target to CYs 2016, 2017, and 2018, and to set a 1 percent target for CY 2016 and 0.5 percent for CYs 2017 and 2018.  As a result of

these provisions, if the estimated net reduction for a given year is less than the target for that year, payments under the fee schedule will be reduced.

In the CY 2016 PFS proposed rule, we proposed a methodology to implement this statutory provision in a manner consistent with the broader statutory construct of the PFS.  In developing this proposed methodology, we identified several aspects of our approach for which we specifically solicited comments.  We organized this discussion by identifying and explaining these aspects in particular but we solicited comments on all aspects of our proposal.

1. Distinguishing “Misvalued Code” Adjustments from Other RVU Adjustments

The potentially misvalued code initiative has resulted in changes in PFS payments in several ways.  First, potentially misvalued codes have been identified, reviewed, and revalued through notice and comment rulemaking.  However, in many cases, the identification of particular codes as potentially misvalued has led to the review and revaluation of related codes, and frequently, to revisions to the underlying coding for large sets of related services. Similarly, the review of individual codes has initiated reviews and proposals to make broader adjustments to values for codes across the PFS, such as when the review of a series of imaging codes prompted a RUC recommendation and CMS updated the direct PE inputs for imaging services to assume digital instead of film costs.  This change, originating through the misvalued code initiative, resulted in a significant reduction in RVUs for a large set of PFS services, even though the majority of affected codes were not initially identified through potentially misvalued code screens.  Finally, due to both the relativity inherent in the PFS ratesetting process and the budget neutrality requirements specified in section 1848(c)(2)(B)(ii)(II) of the Act, adjustments to the RVUs for individual services necessarily result in the shifting of RVUs to broad sets of other services across the PFS.

To implement the PFS expenditure reduction target provisions under section 1848(c)(2)(O) of the Act, we must identify a subset of the adjustments in RVUs for a year to

reflect an estimated “net reduction” in expenditures. Therefore, we dismissed the possibility of including all changes in RVUs for a year in calculating the estimated net reduction in PFS expenditures, even though we believe that the redistributions in RVUs to other services are an important aspect of the potentially misvalued code initiative. Conversely, we considered the possibility of limiting the calculation of the estimated net reduction in expenditures to reflect RVU adjustments made to the codes formally identified as “potentially misvalued.” We do not believe that calculation would reflect the significant changes in payments that have directly resulted from the review and revaluation of misvalued codes under section 1848(c)(2) of the Act. We further considered whether to include only those codes that underwent a comprehensive review (work and PE).  As we previously have stated (76 FR 73057), we believe that a comprehensive review of the work and PE for each code leads to the more accurate assignment of RVUs and appropriate payments under the PFS than do fragmentary adjustments for only one component.  However, if we calculated the net reduction in expenditures using revisions to RVUs only from comprehensive reviews, the calculation would not include changes in PE RVUs that result from proposals like the film-to-digital change for imaging services, which not only originated from the review of potentially misvalued codes, but substantially improved the accuracy of PFS payments faster and more efficiently than could have been done through the multiple-year process required to complete a comprehensive review of all imaging codes.

After considering these options, we believe that the best approach is to define the reduction in expenditures as a result of adjustments to RVUs for misvalued codes to include the estimated pool of all services with revised input values.  This would limit the pool of RVU adjustments used to calculate the net reduction in expenditures to those for the services for which individual, comprehensive review or broader proposed adjustments have resulted in changes to service-level inputs of work RVUs, direct PE inputs, or MP RVUs, as well as services directly affected by changes to coding for related services.  For example, coding changes in certain codes

can sometimes necessitate revaluations for related codes that have not been reviewed as misvalued codes, because the coding changes have also affected the scope of the related services. This definition would incorporate all reduced expenditures from revaluations for services that are deliberately addressed as potentially misvalued codes, as well as those for services with broad- based adjustments like film-to-digital and services that are redefined through coding changes as a result of the review of misvalued codes.

Because the annual target is calculated by measuring changes from one year to the next, we also considered how to account for changes in values that are best measured over 3 years, instead of 2 years. Under our current process, the overall change in valuation for many misvalued codes is measured across values for 3 years:  the original value in the first year, the interim final value in the second year, and the finalized value in the third year.  As we describe in section II.H.2. of this final rule with comment period, our misvalued code process has been to establish interim final RVUs for the potentially misvalued, new, and revised codes in the final rule with comment period for a year.  Then, during the 60-day period following the publication of the final rule with comment period, we accept public comment about those valuations. For the final rule with comment period for the subsequent year, we consider and respond to public comments received on the interim final values, and make any appropriate adjustments to values based on those comments.  However, the calculation of the target would only compare changes between 2 years and not among 3 years, so the contribution of a particular change towards the target for any single year would be measured against only the preceding year without regard to the overall change that takes place over 3 years.

For recent years, interim final values for misvalued codes (year 2) have generally reflected reductions relative to original values (year 1), and for most codes, the interim final values (year 2) are maintained and finalized (year 3). However, when values for particular codes have changed between the interim final (year 2) and final values (year 3) based on public

comment, the general tendency has been that codes increase in the final value (year 3) relative to the interim final value (year 2), even in cases where the final value (year 3) represents a decrease from the original value (year 1).  Therefore, for these codes, the year 2 changes compared to year 1 would risk over-representing the overall reduction, while the year 3 to year 2 changes would represent an increase in value.  If there were similar targets in every PFS year, and a similar number of misvalued code changes made on an interim final basis, the incongruence in measuring what is really a 3-year change in 2-year increments might not be particularly problematic since each year’s calculation would presumably include a similar number of codes measured between years 1 and 2 and years 2 and 3.

However, including changes that take place over 3 years generates challenges in calculating the target for CY 2016 for two reasons. First, CY 2015 was the final full year of establishing interim final values for all new, revised, and potentially misvalued codes. Starting with this final rule with comment period, we are finalizing values for a significant portion of misvalued codes during one calendar year. Therefore, CY 2015 will include a significant number of services that would be measured between years 2 and 3 relative to the services measured between 1 and 2 years. Second, because there was no target for CY 2015, any reductions that occurred on an interim final basis for CY 2015 were not counted toward achievement of a target.  If we were to include any upward adjustments made to these codes based on public comment as “misvalued code” changes for CY 2016, we would effectively be counting the service-level increases for 2016 (year 3) relative to 2015 (year 2) against achievement of the target without any consideration to the service-level changes relative to 2014 (year 1), even in cases where the overall change in valuation was negative.

Therefore, we proposed to exclude code-level input changes for CY 2015 interim final values from the calculation of the CY 2016 misvalued code target since the misvalued change

occurred over multiple years, including years not applicable to the misvalued code target provision.

We note that the impact of interim final values in the calculation of targets for future years will be diminished as we transition to proposing values for almost all new, revised, and potentially misvalued codes in the proposed rule.  We anticipate a smaller number of interim final values for CY 2016 relative to CY 2015.  For calculation of the CY 2018 target, we anticipate almost no impact based on misvalued code adjustments that occur over multiple years.

The list of codes with changes for CY 2016 included under this definition of “adjustments to RVUs for misvalued codes” is available on the CMS website under downloads for the CY 2016 PFS final rule with comment period at http://www.cms.gov/Medicare/Medicare- Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html

The following is a summary of the comments we received regarding this aspect of the proposal to implement the statutory provision:

Comment:  Several commenters, including the RUC, supported CMS’ proposal to include

all services that receive revised input values even if the specific codes were not identified on a misvalued services list for review; the commenters’ stated that this is a reasonable and fair approach.

Response:  We appreciate the commenters’ feedback and support.

Comment: A few commenters stated that the selection of codes to be included for review

beyond the codes identified by the screens should be determined by the pertinent specialty societies as they are the best determiners of which codes make up a family of codes.  Another commenter stated that CMS should include the E/M services in the list of codes that are potentially misvalued.

Response:  We note that the process for selection of codes to be reviewed as potentially

misvalued is addressed in section II.H. of this final rule with comment period and has also been

addressed in prior rulemaking.  Our proposal to implement section 1848(c)(2)(O) of the Act does not address how codes are identified to be reviewed under the misvalued code initiative.  Instead, it addresses how to identify the changes in expenditures that result from such reviews in the calculation of the target amount.

Comment: Several commenters, including the RUC, also supported CMS’ proposal to

exclude code level input changes for CY 2015 interim final values from the calculation of the target.  The commenters concur that the year 2 and year 3 changes in values represent an incomplete picture of the redistributive effects for a particular year resulting from the review of the misvalued services, and the vast majority of redistribution happens between year 1 and year 2.

Response:  We appreciate the commenters’ support and feedback.

Comment:  One commenter disagreed with CMS’ proposal to exclude code-level input

changes for 2015 interim final values stating that it means organized medicine does not get credit for any net decreases associated with such codes and is therefore being penalized.  The commenter requested that CMS consider including 2015 interim final values in the calculation of the 2016 misvalued code target even though the misvalued change occurred over multiple years. Another commenter stated that the proposed net reduction in expenditures of 0.25 percent, as opposed to 1.00, means that the 0.75 percent difference will come from the conversion factor, and doing so would more than negate the 0.5 percent increase physicians were promised under MACRA, and therefore the commenter requested that CMS help mitigate this result by including 2015 interim final values in the calculation of the target.

Response:  With regard to the commenters who disagreed with the exclusion of code-

level input changes for 2015 interim final values, we cannot determine if the commenters intended to suggest that CMS was not including decreases that would help towards the achievement of the misvalued code target by excluding changes for 2015 interim final values, or

that CMS should include the changes between years 1 and 3. As stated in the CY 2016 proposed rule (80 FR 41712 through 41713), when values for particular codes have changed between the interim final (year 2) and final values (year 3) based on public comment, the general tendency has been that code values increase in the final value (year 3) relative to the interim final value (year 2), even in cases where the final value (year 3) represents a decrease from the original value (year 1).  Additionally, the statute requires comparison between 2 years, and therefore, we do not believe we have the authority to include changes between year 1 and year 3. Since our remaining options were to include changes between year 2 and year 3 which, as indicated above, generally results in an increase, or to exclude code-level input changes for CY 2015 interim final values, and the commenters express interest in moving closer to achievement of the target, we do not believe it would be in the commenters’ interest to include the changes between years 2 and 3.

With regard to the commenter who stated that the net reduction in expenditures under the PFS if CMS does not achieve the target reduction would negate the 0.5 percent increase physicians were promised under MACRA, we note that both of these provisions continue to apply under current law.

Comment:  Some commenters, including the RUC, suggested that CMS should be sure to

include existing codes that are either being deleted or will have utilization changes as a result of the misvalued code project and/or the CPT Editorial Panel process.  Another commenter stated that CMS was excluding existing codes with large volume changes, and recommended that such codes be included in the calculation of the target.  Some commenters recommended that CMS conduct a procedure-to-procedure comparison and then calculate the net reduction in RVUs, including the values of new and deleted CPT codes prompted by the misvalued code initiative. The commenters stated that this is an area where the specialty societies and CMS need to work together to determine the comparisons for calculating the net reduction.

Response:  We agree that changes in coding often contribute to improved valuation of

PFS services.  We note that we included these changes in our methodology in the proposed rule and explained that we would include services directly affected by changes to coding for related services.  We did not propose to exclude existing codes with large volume changes; changes for such codes have been included.  To clarify, we are including changes in values for any codes for which changes in coding or policies may result in differences in how a given service is reported from one year to the next.  Under our current ratesetting methodologies, we already consider how coding revisions change the way services are reported from one year to the next. The crosswalk we use to incorporate such changes in our methodology is based on RUC and specialty society recommendations that explicitly address the kinds of procedure-to-procedure comparisons suggested by the commenter.  This file is available in the “downloads” section of the PFS website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-

Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html under “Analytic Crosswalk

from CY 2015 to CY 2016.” Since it reflects the best information available, we used the same crosswalk to account for coding changes in the calculation of the target. We also refer readers to the list of HCPCS defined as misvalued for purposes of the target which is available on the CMS web site under downloads for the CY 2016 PFS final rule with comment period.

Comment:  One commenter recommended that CMS include the review of all individual

codes and broader adjustments across the PFS, as this would more accurately represent the total revaluations.

Response:  As we explained in the proposed rule, our goal is to include the review of all

individual codes and changes to inputs for additional codes where changes can be measured between two years.  Because PFS payments are developed under the statutory requirements of relativity and budget neutrality, including all adjustments to all codes would necessarily result in a net of zero.

Comment:  A few commenters raised objections to the statutory provision.  For example,

one commenter stated that the legislation is penalizing physicians and other healthcare professionals for already having taken on the task of identifying and revaluating potentially misvalued codes over the past 10 years. Other commenters stated that since the RUC and specialty societies have been addressing potentially misvalued codes since 2006, there should be a way to include revaluations made back to 2006 in the calculation of the target. Another commenter stated that CMS should hold primary care and E/M services harmless in this process, since these services are not over-valued but rather under-valued.  One commenter requested more time to evaluate the proposed process to identify yearly targets, and encouraged CMS to work with the AMA to discuss this issue at future RUC Panel meetings prior to implementing the provision. One commenter requested that CMS review its approach to determine if there are other methods that will come closer to reaching the target. One commenter stated that this new requirement creates a potential incentive to target codes that offer the greatest likelihood of savings, not those that are actually misvalued.

Response:  We appreciate the commenters’ feedback and have considered these concerns

to the extent possible in light of the requirements of section 1848(c)(2)(O) of the Act.

After consideration of the public comments received, we are finalizing the approach of defining the reduction in expenditures as a result of adjustments to RVUs for misvalued codes to include the estimated pool of all services with revised input values, including any codes for which changes in coding or policies might result in differences in how a given service is reported from one year to the next.  We are also finalizing our proposal to exclude code-level input changes for CY 2015 interim final values from the calculation of the CY 2016 misvalued code target.  After considering all comments, we continue to believe this approach is appropriate and compliant with statutory directives.

2. Calculating “Net Reduction”

Once the RVU adjustments attributable to misvalued codes are identified, estimated net reductions in PFS expenditures resulting from those adjustments would be calculated by determining the sum of all decreases and offsetting them against any applicable increases in valuation within the changes that we defined as misvalued, as described above.  Because section 1848(c)(2)(O)(i) of the Act only explicitly addresses reductions in expenditures, and we recognize that many stakeholders will want to maximize the overall magnitude of the measured reductions in order to prevent an overall reduction to the PFS conversion factor, we considered the possibility of ignoring the applicable increases in valuation in the calculation of net reduction.  However, we believe that the requirement to calculate “net” reductions implies that we are to take into consideration both decreases and increases.  Additionally, we believe this approach may be the only practical one due to the presence of new and deleted codes on an annual basis.

For example, a service that is described by a single code in a given year, like intensity- modulated radiation therapy (IMRT) treatment delivery, could be addressed as a misvalued service in a subsequent year through a coding revision that splits the service into two codes, “simple” and “complex.”  If we counted only the reductions in RVUs, we would count only the change in value between the single code and the new code that describes the “simple” treatment delivery code.  In this scenario, the change in value from the single code to the new “complex” treatment delivery code would be ignored, so that even if there were an increase in the payment for IMRT treatment delivery service(s) overall, the mere change in coding would contribute inappropriately to a “net reduction in expenditures.” Therefore, we proposed to net the increases and decreases in values for services, including those for which there are coding revisions, in calculating the estimated net reduction in expenditures as a result of adjustments to RVUs for misvalued codes.

The following is a summary of the comments we received regarding our proposal.

Comment:  One commenter stated that the proposal for calculating net reduction is

consistent with the plain reading of the statute.

Response:  We appreciate the commenter’s feedback and support.

Comment:  Several commenters, including the RUC, requested that CMS use a more

transparent process for calculation of the target, suggesting that the discussion in the CY 2016 PFS proposed rule was not sufficiently detailed to allow for replication by external stakeholders. Commenters requested that CMS provide a comprehensive methodological description of how CMS will calculate the target, including publication of dollar figure estimates, and information about individual service level estimated impacts on the net reduction.  Commenters further requested that we provide the impact on the net reduction either per CPT code, or that we identify a family of services and publish a combined impact for that family.  Another commenter expressed concern with how CMS will operationalize this policy, noting that the language in the CY 2016 PFS proposed rule did not outline where the adjustments would be made. The commenter further questioned how CMS planned to track the “savings” from the revaluation of services, and requested that CMS clarify how new technology will be handled, as well as new codes that are a restructuring of existing codes.

Response:  We appreciate the commenters’ feedback.  In response to the request for

greater transparency, we have posted a public use file that provides a comprehensive description of how the target is calculated as well as the estimated impact by code family on the CMS website under the supporting data files for the CY 2016 PFS final rule at  http://www.cms.gov/Medicare/Medicare-Fee-for-Service-

Payment/PhysicianFeeSched/index.html.

In response to the commenter who asked for clarification on how new technology will be handled, we assume the commenter intends to ask about how new codes for new services would be addressed under our proposed methodology.  Under our proposal, we would include

adjustments to values for all deleted, new, and revised codes under our calculations of changes from one year to the next.  We would also weight the changes in the values for those codes by the utilization for those services in order to calculate the net reduction in expenditures.  If a new code describes a new service (new technology as opposed to recoding of an existing service), then there would be no utilization for that code in the calculation. Without utilization, the value for a new service would have no impact on the calculation of the target.  In response to the commenter who expressed concern about how CMS would operationalize this policy, and stated that CMS did not explain where the adjustments would be, we note that if the estimated net reduction in expenditures is less than the target for the year, then there would be an overall reduction to the PFS conversion factor as described in section VI. of this final rule with comment period.

Comment:  One commenter disagreed that all increases should be incorporated into the

net reduction calculation and requested that CMS consider an approach that would maximize the overall magnitude of the measured reductions in order to prevent an overall reduction to the PFS conversion factor as a result of failure to achieve the target for reductions. Specifically, the commenter stated that codes identified as potentially misvalued for which there is compelling evidence based on the RUC recommendations to support an increase in RVUs based on a change in work should not be defined as misvalued for the purposes of calculating the target.

Response:  We believe the requirement that we calculate the net reduction in

expenditures indicates that we must account for adjustments in values including both increases and decreases and therefore, believe our proposal comports with the plain reading of the statute. We recognize that the RUC internal deliberations include rules that govern under what circumstances individual specialties can request that the RUC recommend CMS increase values for particular services. As observers to the RUC process, we appreciate having an understanding of these rules in the context of our review of RUC-recommended values.  However, we do not

believe that the internal RUC standards for developing recommendations are relevant in determining whether the statutory provision applies to adjustments to values for individual codes.

Comment:  Some commenters requested that CMS review its administrative authority to

achieve a target recapture amount in a selective manner, rather than by an across-the-board adjustment to the conversion factor.  A commenter stated that codes already sustaining reductions in 2016, and consequently contributing to the target, should not be subjected to additional across-the-board cuts to achieve the statutory target.

Response: We do not believe that section 1848(c)(2)(O)(iii) of the Act provides us

authority to insulate particular services from the effects of the budget neutrality adjustment for the target recapture amount that is required if the estimated net reduction in expenditures is less than the target for the year.  The statute specifies that an amount equal to the target recapture amount is not to be taken into account in applying the PFS budget neutrality requirement under section 1848(c)(2)(B)(ii)(II) of the Act.  This PFS budget neutrality adjustment has been in place since the outset of the PFS, and we have consistently interpreted and implemented it as an adjustment that is made across the entire PFS.  Therefore, we do not believe we can apply the budget neutrality adjustments in a selective manner.

Comment:  Several commenters, including the RUC, stated that when considering the net

impact of service-level input changes in a given year, it is important for CMS to understand specific scenarios in which codes under review should not be included in the net reduction target calculation.  The commenters requested that CMS not include particular payment initiatives, such as Advance Care Planning (ACP), in the target definition.  Instead, since the payment rates for these services require budget neutrality and relativity adjustments to all other PFS services and these reductions are not otherwise accounted for in the target calculation, CMS should count the payments for ACP services as “redistribution” (or, in other words, reductions) from other

services for CY 2016.  Commenters urged CMS to use the same approach for care management services valued under the PFS in the future. Generally, the commenters stated that these and similar new codes could not possibly be misvalued and therefore, should not only be excluded from the target, but the reductions to other services due to separate payment for these services should be counted as net reductions toward achievement of the misvalued code target.

Response:  Because we believe that all of our intended revaluations of services under the

PFS are intended to improve the accuracy of the relative value units for PFS services, we do not believe we should exclude increases and decreases to particular services in the target calculation. Therefore, we do not agree with commenters’ suggestions that codes describing one kind of service (e.g. care management) as opposed to another (for example, procedures or diagnostic tests) should be excluded from the target under the statutory provision.  Similarly, we do not agree that counting the relativity and budget neutrality redistributions that result from care management services as part of the net “reduction” would be consistent with a reasonable understanding of “net reduction” in allowed expenditures as a result of changes to misvalued codes.

However, in considering the points raised by commenters, we do agree that the increases in value for new codes like ACP or Chronic Care Management (CCM) are not the same as increases to other services.  In general, new codes describe new services that would not have been reported with particular codes in the previous years or new codes describe existing services that were reported using other codes in the prior year.  In other cases, however, new codes describe services that were previously included in the payment for other codes.  When those services become separately payable through new codes, we generally make adjustments to other relevant codes to adjust for the value of the services that will be separately reported.  In general, new codes describing care management services fall into this latter category, since the associated resource costs for these services were previously bundled into payment for other services.

However, unlike many other PFS services, the resource costs for these kinds of services were bundled into a set of broadly reported E/M codes and services that include E/M visits.  Since these codes are so broadly reported across nearly all PFS specialties, to the extent that it would be impracticable to make adjustments to individual codes, we have not made corresponding adjustments to E/M visits to account for the status of the new codes as separately billable.

Instead, when unbundling new separately reported services such as these, we have allowed our general budget neutrality adjustment to account for these types of changes, since budget neutrality adjustments apply broadly to the full range of PFS services, including both codes that specifically describe E/M visits and those with E/M services as components of the service, such as all codes with global periods.  In terms of calculating the net reduction in expenditures for purposes of section 1848(c)(2)(O)(i) of the Act, this means that the shift in payment to these new separately reportable services, unlike the adjustments to values for other new services, is not offset by adjustments to any other individual codes.  Therefore, under the methodology we proposed, the increase in payment for these new separately reportable services would be counted in the net reduction calculations since the adjustments to values for these services are reflected in values for individual codes, but the corresponding decreases would not be counted, since the corresponding decreases are not attributable to any particular codes.  Under the methodology we proposed, the change to make these types of codes separately reported would  be counted against achievement of the target even though the increases in value for these codes are fully offset by budget-neutrality adjustments to all other PFS services.

As we have reflected on the comments and on this particular circumstance, we do not believe that the change to separate payment for these kinds of services should be counted as increases that are included in calculating the “net reductions” in expenditures attributable to adjustments for misvalued codes.  Instead, we think that the adjustments to value these services should be considered in the context of the budget neutrality adjustments that are applied broadly

to PFS services. This would be consistent with our treatment of the increase in values for other new codes since the reductions or deletion of predecessor codes are counted as offsets in our calculation.  Since, under the established ratesetting methodology, the increases in new separately reportable services and the corresponding budget neutrality decreases fully offset one another and net to zero, we believe that the easiest way to account for the adjustments associated with valuing these services is to exclude altogether the changes for these types of codes from the list of codes included in the target. This will effectively make the creation and valuation of such codes neutral in the calculation of the misvalued code target.

After considering public comments, we are finalizing our policy as proposed with a modification to exclude from the calculation of the “net reduction” in expenditures changes in coding and valuation for services, such as ACP for CY 2016, that are newly reportable,  but for which no corresponding reduction is made to existing codes and instead reductions are taken exclusively through a budget neutrality adjustment.

3. Measuring the Adjustments

The most straightforward method to estimating the net reduction in expenditures due to adjustments to RVUs for misvalued codes is to compare the total RVUs of the relevant set of codes (by volume) in the current year to the update year, and divide that by the total RVUs for all codes (by volume) for the current year.  This approach had the advantage of being intuitive and readily replicable.

However, there are several issues related to the potential imprecision of this method.

First, and most significantly, the code-level PE RVUs in the update year include either increases due to the redistribution of RVUs from other services or reductions due to increases in PE for other services.  Second, because relativity for work RVUs is maintained through annual adjustments to the CF, the precise value of a work RVU in any given year is adjusted based on the total number of work RVUs in that year.  Finally, relativity for the MP RVUs is maintained

by both redistribution of MP RVUs and adjustments to the CF, when necessary (under our proposed methodology this is true annually; based on our established methodology the redistribution of the MP RVUs only takes place once every 5 years and the CF is adjusted otherwise). Therefore, to make a more precise assessment of the net reduction in expenditures that are the result of adjustments to the RVUs for misvalued codes, we would need to compare, for the included codes, the update year’s total work RVUs (by volume), direct PE RVUs (by volume), indirect PE RVUs (by volume), and MP RVUs (by volume) to the same RVUs in the current year, prior to the application of any scaling factors or adjustments. This would make for a direct comparison between years.

However, this approach would mean that the calculation of the net reduction in expenditures would occur within various steps of the PFS ratesetting methodology.  Although we believe that this approach would be transparent and external stakeholders could replicate this method, it might be difficult and time-consuming for stakeholders to do so.  We also noted that when we modeled the interaction of the statutory phase-in requirement under section 220(e) of the PAMA and the calculation of the target using this approach during the development of this proposal, there were methodological challenges in making these calculations.  When we simulated the two approaches using information from prior years, we found that both approaches generally resulted in similar estimated net reductions. After considering these options, we proposed to use the simpler approach of comparing the total RVUs (by volume) for the relevant set of codes in the current year to the update year, and divide that result by the total RVUs (by volume) for the current year.  We solicited comments on whether comparing the update year’s work RVUs, direct PE RVUs, indirect PE RVUs, and MP RVUs for the relevant set of codes (by volume) prior to the application of any scaling factors or adjustments to those of the current year would be a preferable methodology for determining the estimated net reduction.

The following is a summary of the comments we received regarding our proposal.

Comment:  A few commenters supported CMS’ selection of the simpler formula to

calculate the target over the more precise but more complex formula since it is simpler and easier to understand. One commenter stated that CMS did not indicate exactly how similar the two proposals are or which method estimated the larger reduction, and stated that CMS should make this information available in the final rule and consider revising the approach in CY 2017 rulemaking and use the method that results in the larger reduction.

Response:  We do not agree that CMS should do both calculations and determine which

to use based solely on which results in the higher amount.  We note that the target for net reductions in expenditures from adjustments to values for misvalued codes is a multi-year provision and we believe neither of the two methodologies is assured to produce a consistently higher result from year to year.  Since the majority of commenters agree that the more intuitive approach to estimating the net reduction in expenditures is preferable to the more precisely accurate approach, we are finalizing our approach as proposed.

Comment:  One commenter requested that CMS count the full reduction in payment for

codes subject to the phase-in required under section 1848(c)(7) of the Act as discussed in section

II.F. of this final rule with comment period, toward the target in the first year.  Another commenter stated that CMS used the fully reduced RVUs in calculating the target, not the first year phase-in RVUs, and therefore, CMS should include the full impact of the change in the equipment utilization rate for linear accelerators toward the target calculation.  Similarly, the commenter requested that any future multi-year phase-in proposals should similarly be counted toward the target in the first year.

Response:  The target provision requires the calculation of an estimated net reduction

measure between 2 years of PFS expenditures. As we have detailed in the above paragraphs, we believe that under certain specific circumstances, changes should be excluded from that estimate; but we do not believe we can include changes that would occur in future years based solely on

the rulemaking cycle during which policies are established. Therefore we will not count the full reduction in payment for codes that are subject to the phase-in toward the calculation of the net reduction in expenditures for the first year.  With regard to the commenter that stated that CMS used the fully reduced RVUs in calculating the target, we note that we only used the first year phase-in RVUs and, for the reasons stated above, believe that we are limited to including only the changes in the immediate year in the calculation of the target.

After consideration of the public comments received, we are finalizing the policy to calculate the net reduction using the simpler method as proposed.

4. Target Achievement for CY 2016

We refer readers to the regulatory impact analysis section of this final rule with comment period for our final estimate of the net reduction in expenditures relative to the 1 percent target for CY 2016, and the resulting adjustment required to be made to the conversion factor.

Additionally, we refer readers to the public use file that provides a comprehensive description of how the target is calculated as well as the estimated impact by code family on the CMS Web site under the supporting data files for the CY 2016 PFS final rule at  http://www.cms.gov/Medicare/Medicare-Fee-for-Service-

Payment/PhysicianFeeSched/index.html.

Complete Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule and Other Revisions to Prt B for CY 2016 (full text and downloadable .pdf document)

Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule and Other Revisions to Part B for CY 2016

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