Daily Rules, Proposed Rules, and Notices of the Federal Government
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• Interim final work, practice expense, and malpractice RVUs (including physician time, direct practice expense (PE) inputs, and the equipment utilization rate assumption) for new, revised, potentially misvalued, and certain other CY 2013 HCPCS codes as indicated in the sections that follow and listed in Addendum C to this final rule with comment period; and
• The appropriate direct PE inputs for establishing nonfacility PE RVUs for CPT code 63650 (Percutaneous implantation of neurostimulator electrode array, epidural).
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.
To assist readers in referencing sections contained in this preamble, we are providing a table of contents. Some of the issues discussed in this preamble affect the payment policies, but do not require changes to the regulations in the Code of Federal Regulations (CFR). Information on the regulations impact appears throughout the preamble and, therefore, is not discussed exclusively in section VIII. of this final rule with comment period.
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:
In the past, the Addenda referred to throughout the preamble of our annual PFS proposed and final rules with comment period were included in the printed
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 2012 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.
This major final rule with comment period revises payment policies 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 2013. It also implements provisions of the Affordable Care Act by establishing a face-to-face encounter as a condition of payment for certain durable medical equipment (DME) items. In addition, it implements statutory changes regarding the termination of non-random prepayment review.
The Social Security Act (Act) requires us to establish payments under the PFS based on national uniform relative value units (RVUs) and the relative resources used in furnishing a service. The Act requires that national RVUs be established for physician work, practice expense (PE), and malpractice expense. In this major final rule with comment period, we establish payment rates for CY 2013 for the PFS, payments for Part B drugs, and other Medicare Part B payment policies to ensure that our payment systems are updated to reflect changes in medical practice and in the relative value of services. It also implements provisions of the Affordable Care Act by establishing a face-to-face encounter as a condition of payment for certain durable medical equipment (DME) items, and by removing certain regulations regarding the termination of non-random prepayment review. It also establishes new claims-based data reporting requirements for therapy services to implement a provision in the Middle Class Tax Relief and Jobs Creation Act (MCTRCA). In addition, this rule:
• Identifies Potentially Misvalued Codes to be Evaluated.
• Establishes Additional Multiple Procedure Payment Reductions (MPPR).
• Expands Medicare Telehealth Services.
• Implements Regulatory Changes Regarding Payment for Technical Component of Certain Physician Pathology Services to Conform to Statute.
• Requires the Inclusion of Specific Information on Claims for Therapy Services.
• Establishes New Transitional Care Management Services.
• Clarifies Services Included in the Certified Registered Nurse Anesthetists Scope of Benefit.
• Modifies Ordering Requirements for Portable X-ray Services.
• Updates the Ambulance Fee Schedule.
• Sets Part B Drug Payment Rates for 2013.
• Addresses Ambulance Coverage—Physician Certification Statement.
• Updates policies regarding the—
++ Physician Compare Web site.
++ Physician Quality Reporting System.
++ Electronic Prescribing (eRx) Incentive Program.
++ Electronic Health Record (EHR) Incentive Program.
++ Medicare Shared Savings Program.
• Discusses Budget Neutrality for the Chiropractic Demonstration.
• Addresses Implementation of the Physician Value-Based Payment Modifier and the Physician Feedback Reporting Program.
• Establishes Medicare Coverage of Hepatitis B Vaccine.
• Updates Existing Standards for e-prescribing under Medicare Part D and Lifting the LTC Exemption.
The statute requires that we establish by regulation each year payment amounts for all physicians' service. These payment amounts are required to be adjusted to reflect the variations in
Several changes affect the specialty distribution of Medicare expenditures. This final rule with comment period reflects the Administration's priority to improve payment for primary care services. As described in Section II.N, in the absence of Congressional action, an overall reduction of 26.5 percent will be imposed in the conversion factor used to calculate payment for physicians' services on or after January 1, 2013 due to the Sustainable Growth Rate (SGR). To isolate the impact of changes that we are proposing in this final rule with comment period, we analyze and discuss the policies' impact with a constant conversion factor. In the absence of a change in the conversion factor, payments to primary care specialties will increase and payments to select other specialties will decrease due to several changes in how we calculate payments for CY 2013.
The largest payment increase for primary care specialties overall will result from a new payment for managing a beneficiary's care when the beneficiary is discharged from an inpatient hospital, a SNF, an outpatient hospital observation, partial hospitalization services, or a community mental health center. Payments to primary care specialties also will increase due to redistributions from changes in payments for services furnished by other specialties. Because of the budget-neutral nature of this system, decreases in payments for one service result in increases in payments in others.
Payments to primary care specialties are also impacted by the completion of the 4-year transition to new PE RVUs using the new Physician Practice Information Survey (PPIS) data that was adopted in the CY 2010 PFS final rule with comment period. The projected impacts of using the new PPIS data are generally consistent with the impacts discussed in the CY 2012 final rule with comment period (76 FR 72452).
Several types of providers are projected to see decreases in Medicare PFS payments, mainly as a result of the potentially misvalued codes initiative. We have received numerous new codes with new values and revised codes with new values for CY 2013 as a result of our ongoing misvalued codes initiative, an effort to improve payment accuracy. Many of the new and revised codes that we valued on an interim basis for CY 2013 originated with the potentially misvalued codes initiative. Reductions for pathology, neurology, and independent laboratories are a result of the misvalued code initiative. In the case of independent laboratories, we note that independent laboratories receive the majority of the Medicare revenue from the Clinical Lab Fee Schedule, which is unaffected by the misvalued code initiative. Radiation therapy centers will see an overall decrease of 9 percent primarily as a result of the PPIS transition discussed above and a change in the interest rate assumption used to calculate PE. Radiation oncology sees a 7 percent decrease for the same reasons as radiation therapy centers.
We note that throughout this final rule with comment period, unless otherwise noted, the term “practitioner” is used to describe both physicians and nonphysician practitioners (such as physician assistants, nurse practitioners, clinical nurse specialists, certified nurse-midwives, psychologists, or clinical social workers) who are permitted to bill Medicare under the PFS for their services. Since January 1, 1992, Medicare has paid for physicians' services under section 1848 of the Act, “Payment for Physicians' Services.” The Act requires that CMS make payments under the PFS using national uniform relative value units (RVUs) based on the relative resources used in furnishing a service. Section 1848(c) of the Act requires that national RVUs be established for physician work, PE, and malpractice expense. Before the establishment of the resource-based relative value system, Medicare payment for physicians' services was based on reasonable charges.
The concepts and methodology underlying the PFS were enacted as part of the Omnibus Budget Reconciliation Act (OBRA) of 1989 (Pub. L. 101-239), and OBRA 1990, (Pub. L. 101-508). The final rule published on November 25, 1991 (56 FR 59502) set forth the fee schedule for payment for physicians' services beginning January 1, 1992.
The physician work RVUs established for the implementation of the fee schedule in January 1992 were developed with extensive input from the physician community. A research team at the Harvard School of Public Health developed the original physician work RVUs for most codes in a cooperative agreement with the Department of Health and Human Services (HHS). In constructing the code-specific vignettes for the original physician work RVUs, Harvard worked with panels of experts, both inside and outside the federal government, and obtained input from numerous physician specialty groups.
Section 1848(b)(2)(B) of the Act specifies that the RVUs for anesthesia services are based on RVUs from a uniform relative value guide, with appropriate adjustment of the conversion factor (CF), in a manner to assure that fee schedule amounts for anesthesia services are consistent with those for other services of comparable value. We established a separate CF for anesthesia services, and we continue to utilize time units as a factor in determining payment for these services. As a result, there is a separate payment methodology for anesthesia services.
We establish physician work RVUs for new and revised codes based, in part, on our review of recommendations received from the American Medical Association/Specialty Society Relative Value Update Committee (AMA RUC).
Initially, only the physician work RVUs were resource-based, and the PE and malpractice RVUs were based on average allowable charges. Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 103-432), and Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) amended section 1848(c)(2)(C)(ii) of the Act and required us to develop resource-based PE RVUs for each physicians' service. We were to consider general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising PEs.
We established the resource-based PE RVUs for each physicians' service in a final rule, published November 2, 1998 (63 FR 58814), effective for services furnished in 1999. Separate PE RVUs are established for procedures that can be furnished in both a nonfacility setting, such as a physician's office, and a facility setting, such as a hospital outpatient department (HOPD). The difference between the facility and nonfacility RVUs reflects the fact that a facility typically receives separate payment from Medicare for its costs of furnishing the service, apart from payment under the PFS. The nonfacility
This resource-based system was based on two significant sources of actual PE data. Panels of physicians, practice administrators, and nonphysician health professionals (for example, registered nurses (RNs)), who were nominated by physician specialty societies and other groups identified the direct inputs required for each physicians' service. (We have since refined and revised these inputs based on recommendations from the AMA RUC.) Aggregate specialty-specific information on hours worked and PEs was obtained from the AMA's Socioeconomic Monitoring System (SMS).
Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) directed us 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
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 in CY 2010. Direct PE RVUs were calculated for CY 2013 using this methodology, unless otherwise noted.
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). For this update, we used the Physician Practice Information Survey (PPIS) conducted by the AMA. The PPIS is a multispecialty, nationally representative, PE survey of both physicians and nonphysician practitioners (NPPs) using a survey instrument and methods highly consistent with those used prior to CY 2010. We note that in CY 2010, for oncology, clinical laboratories, and independent diagnostic testing facilities (IDTFs), we continued to use the supplemental survey data to determine PE/HR values (74 FR 61752). Beginning in CY 2010, we provided for a 4-year transition for the new PE RVUs using the updated PE/HR data. In CY 2013, the final year of the transition, PE RVUs are calculated based on the new data.
Section 4505(f) of the BBA amended section 1848(c) of the Act to require that we implement resource-based malpractice RVUs for services furnished on or after CY 2000. The resource-based malpractice RVUs were implemented in the PFS final rule with comment period published November 2, 1999 (64 FR 59380). The malpractice RVUs were based on malpractice insurance premium data collected from commercial and physician-owned insurers.
Section 1848(c)(2)(B)(i) of the Act requires that we review all RVUs no less often than every 5 years. Prior to CY 2013, we conducted separate periodic reviews of work RVUs and PE RVUs. The First Five-Year Review of Work RVUs was published on November 22, 1996 (61 FR 59489) and was effective in 1997. The Second Five-Year Review of Work RVUs was published in the CY 2002 PFS final rule with comment period (66 FR 55246) and was effective in 2002. The Third Five-Year Review of Work RVUs was published in the CY 2007 PFS final rule with comment period (71 FR 69624) and was effective on January 1, 2007. The Fourth Five-Year Review of Work RVUs was published in the CY 2012 PFS final rule with comment period (76 FR 73026).
Initially refinements to the direct PE inputs relied on input from the AMA RUC-established the Practice Expense Advisory Committee (PEAC). Through March 2004, the PEAC provided recommendations to CMS for more than 7,600 codes (all but a few hundred of the codes included in the AMAs Current Procedural Terminology (CPT) codes). As part of the CY 2007 PFS final rule with comment period (71 FR 69624), we implemented a new bottom-up methodology for determining resource-based PE RVUs and transitioned the new methodology over a 4-year period. A comprehensive review of PE was undertaken prior to the 4-year transition period for the new PE methodology from the top-down to the bottom-up methodology, and this transition was completed in CY 2010. In CY 2010, we also incorporated the new PPIS data to update the specialty-specific PE/HR data used to develop PE RVUs, adopting a 4-year transition to PE RVUs developed using the PPIS data.
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 the CY 2005 PFS final rule with comment period (69 FR 66236), we implemented the first Five-Year Review of the malpractice RVUs (69 FR 66263). Minor modifications to the methodology were addressed in the CY 2006 PFS final rule with comment period (70 FR 70153). The second Five-Year Review and update of resource-based malpractice RVUs was published in the CY 2010 PFS final rule with comment period (74 FR 61758) and was effective in CY 2010.
In addition to the Five-Year Reviews, beginning for CY 2009, CMS and the AMA 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 with an emphasis on the following categories: (1) Codes and families of codes for which there has been the fastest growth; (2) codes or families of codes that have experienced substantial changes in PEs; (3) codes that are recently established for new technologies or services; (4) multiple codes that are frequently billed in conjunction with furnishing a single service; (5) codes with low relative values, particularly those that are often billed multiple times for a single treatment; (6) codes which have not been subject to review since the implementation of the fee schedule (the so-called `Harvard valued codes'); and (7) other codes determined to be appropriate by the Secretary.
Budget neutrality (BN) typically requires that expenditures not increase or decrease as a result of changes or revisions to policy. However, section 1848(c)(2)(B)(ii)(II) of the Act requires
To calculate the payment for each physicians' service, the components of the fee schedule (work, PE, and malpractice RVUs) are adjusted by geographic practice cost indices (GPCIs). The GPCIs reflect the relative costs of physician work, PE, and malpractice in an area compared to the national average costs for each component.
RVUs are converted to dollar amounts through the application of a CF, which is calculated by CMS' Office of the Actuary (OACT).
The formula for calculating the Medicare fee schedule payment amount for a given service and fee schedule area can be expressed as:
Payment = [(RVU work × GPCI work) + (RVU PE × GPCI PE) + (RVU malpractice × GPCI malpractice)] × CF.
The CY 2012 PFS final rule with comment period (76 FR 73026) implemented changes to the PFS and other Medicare Part B payment policies. It also finalized many of the CY 2011 interim RVUs and implemented interim RVUs for new and revised codes for CY 2012 to ensure that our payment systems are updated to reflect changes in medical practice and the relative values of services. In the CY 2012 PFS final rule with comment period, we announced the following for CY 2012: the total PFS update of −27.4 percent; the initial estimate for the sustainable growth rate (SGR) of −16.9 percent; and the conversion factor (CF) of $24.6712. These figures were calculated based on the statutory provisions in effect on November 1, 2011, when the CY 2012 PFS final rule with comment period was issued.
A correction notice was issued (77 FR 227) to correct several technical and typographical errors that occurred in the CY 2012 PFS final rule with comment period.
On December 23, 2011, the Temporary Payroll Tax Cut Continuation Act of 2011 (TPTCCA) (Pub. L. 112-78) was signed into law. Section 301 of the TPTCCA specified a zero percent update to the PFS from January 1, 2012 through February 29, 2012. As a result, the CY 2012 PFS conversion factor was revised to $34.0376 for claims with dates of service on or after January 1, 2012 through February 29, 2012. In addition, the TPTCCA extended several provisions affecting Medicare services furnished on or after January 1, 2012 through February 29, 2012, including:
• Section 303—the 1.0 floor on the physician work geographic practice cost index;
• Section 304—the exceptions process for outpatient therapy caps;
• Section 305—the payment to independent laboratories for the technical component (TC) of physician pathology services furnished to certain hospital patients, and
• Section 307—the 5 percent increase in payments for mental health services.
On February 22, 2012, the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96) (MCTRJCA) was signed into law. Section 3003 of the MCTRJCA extended the zero percent PFS update to the remainder of CY 2012. As a result of the MCTRJCA, the CY 2012 PFS CF was maintained as $34.0376 for claims with dates of service on or after March 1, 2012 through December 31, 2012. In addition:
• Section 3004 of MCTRJCA extended the 1.0 floor on the physician work geographic practice cost index through December 31, 2012;
• Section 3006 continued payment to independent laboratories for the TC of physician pathology services furnished to certain hospital patients through June 30, 2012; and
• Section 3005 extended the exceptions process for outpatient therapy caps through CY 2012 and made several other changes related to therapy claims and caps.
Practice expense (PE) is the portion of the resources used in furnishing the service that reflects the general categories of physician and practitioner expenses, such as office rent and personnel wages but excluding malpractice expenses, as specified in section 1848(c)(1)(B) of the Act. Section 121 of the Social Security Amendments of 1994 (Pub. L. 103-432), enacted on October 31, 1994, amended section 1848(c)(2)(C)(ii) of the Act to require us to develop a methodology for a resource-based system for determining PE RVUs for each physician's service. We develop PE RVUs by looking at the direct and indirect physician practice resources involved in furnishing each service. Direct expense categories include clinical labor, medical supplies, and medical equipment. Indirect expenses include administrative labor, office expense, and all other expenses. The sections that follow provide more detailed information about the methodology for translating the resources involved in furnishing each service into service-specific PE RVUs. In addition, we note that section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments in RVUs for a year may not cause total PFS payments to differ by more than $20 million from what they would have otherwise been if the adjustments were not made. Therefore, if revisions to the RVUs cause expenditures to change by more than $20 million, we make adjustments to ensure that expenditures do not increase or decrease by more than $20 million. We refer readers to the CY 2010 PFS final rule with comment period (74 FR 61743 through 61748) for a more detailed explanation of the PE methodology.
We use a “bottom-up” approach to determine the direct PE by adding the costs of the resources (that is, the clinical staff, equipment, and supplies) typically involved with furnishing each service. The costs of the resources are calculated using the refined direct PE inputs assigned to each CPT code in our PE database, which are based on our review of recommendations received from the AMA RUC. For a detailed explanation of the bottom-up direct PE methodology, including examples, we refer readers to the Five-Year Review of Work Relative Value Units Under the PFS and Proposed Changes to the Practice Expense Methodology proposed notice (71 FR 37242) and the CY 2007 PFS final rule with comment period (71 FR 69629).
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
The PPIS is a multispecialty, nationally representative, PE survey of both physicians and NPPs using a consistent survey instrument and methods highly consistent with those used for the SMS and the supplemental surveys. The PPIS gathered information from 3,656 respondents across 51 physician specialty and healthcare professional groups. We believe the PPIS is the most comprehensive source of PE survey information available to date. Therefore, we used the PPIS data to update the PE/HR data for the CY 2010 PFS for almost all of the Medicare-recognized specialties that participated in the survey.
When we began using the PPIS data beginning in CY 2010, we did not change the PE RVU methodology itself or the manner in which the PE/HR data are used in that methodology. We only updated the PE/HR data based on the new survey. Furthermore, as we explained in the CY 2010 PFS final rule with comment period (74 FR 61751), because of the magnitude of payment reductions for some specialties resulting from the use of the PPIS data, we finalized a 4-year transition (75 percent old/25 percent new for CY 2010, 50 percent old/50 percent new for CY 2011, 25 percent old/75 percent new for CY 2012, and 100 percent new for CY 2013) from the previous PE RVUs to the PE RVUs developed using the new PPIS data.
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.
We 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 these data with Medicare-recognized specialty data. Similarly, we do not use the PPIS data for sleep medicine since there is not a full year of Medicare utilization data for that specialty given when the specialty code was created.
Supplemental survey data on independent labs, from the College of American Pathologists, were implemented for payments in CY 2005. Supplemental survey data from the National Coalition of Quality Diagnostic Imaging Services (NCQDIS), representing independent diagnostic testing facilities (IDTFs), were blended with supplementary survey data from the American College of Radiology (ACR) and implemented for payments in CY 2007. Neither IDTFs nor independent labs participated in the PPIS. Therefore, we continue to use the PE/HR that was developed from their supplemental survey data.
Consistent with our past practice, the previous indirect PE/HR values from the supplemental surveys for medical oncology, independent laboratories, and IDTFs were updated to CY 2006 using the MEI to put them on a comparable basis with the PPIS data.
Previously, we have established PE/HR values for various specialties without SMS or supplemental survey data by crosswalking them to other similar specialties to estimate a proxy PE/HR. For specialties that were part of the PPIS for which we previously used a crosswalked PE/HR, we instead use the PPIS-based PE/HR. We continue previous crosswalks for specialties that did not participate in the PPIS. However, beginning in CY 2010 we changed the PE/HR crosswalk for portable x-ray suppliers from radiology to IDTF, a more appropriate crosswalk because these specialties are more similar to each other for physician 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).
There were five specialties whose utilization data were newly incorporated into ratesetting for CY 2012. In accordance with the final policies adopted in the CY 2012 final rule with comment period (76 FR 73036), we use proxy PE/HR values for these specialties by crosswalking values from other, similar specialties as follows: Speech Language Pathology from Physical Therapy; Hospice and Palliative Care from All Physicians; Geriatric Psychiatry from Psychiatry; Intensive Cardiac Rehabilitation from Cardiology, and Certified Nurse Midwife from Obstetrics/gynecology.
For CY 2013, there are two specialties whose utilization data will be newly incorporated into ratesetting. We proposed to use proxy PE/HR values for these specialties by crosswalking values from other specialties that furnish similar services as follows: Cardiac Electrophysiology from Cardiology; and Sports Medicine from Family Practice. These proposed changes are reflected in the “PE HR” file available on the CMS Web site under the supporting data files for the CY 2013 PFS final rule with comment period at
We did not receive any comments regarding our proposal to use these proxy PE/HR values for these specialties, and we continue to believe that the values crosswalked from other specialties that furnish similar services are appropriate. Therefore, we are finalizing our CY 2013 proposals to update the PE/HR data as reflected in the “PE HR” file available on the CMS Web site under the supporting data files for the CY 2013 PFS final rule with comment period at
As provided in the CY 2010 PFS final rule with comment period (74 FR 61751), CY 2013 is the final year of the 4-year transition to the PE RVUs calculated using the PPIS data. Therefore, the CY 2013 PE RVUs are developed based entirely on the PPIS data, except as noted in this section.
To establish PE RVUs for specific services, it is necessary to establish the direct and indirect PE associated with each service.
The relative relationship between the direct cost portions of the PE RVUs for any two services is determined by the relative relationship between the sum of the direct cost resources (that is, the clinical staff, equipment, and supplies) typically involved with furnishing 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.
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 physician work RVUs. We also incorporated the
• For a given service, we use 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 allocator. For example, if the direct portion of the PE RVUs for a given service was 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 6.00 since 2.00 is 25 percent of 8.00 and 6.00 is 75 percent of 8.00.
• Next, we add the greater of the work RVUs or clinical labor portion of the direct portion of the PE RVUs to this initial indirect allocator. In our example, if this service had work RVUs of 4.00 and the clinical labor portion of the direct PE RVUs was 1.50, we would add 6.00 plus 4.00 (since the 4.00 work RVUs are greater than the 1.50 clinical labor portion) to get an indirect allocator of 10.00. In the absence of any further use of the survey data, the relative relationship between the indirect cost portions of the PE RVUs for any two services would be determined by the relative relationship between these indirect cost allocators. For example, if one service had an indirect cost allocator of 10.00 and another service had an indirect cost allocator of 5.00, the indirect portion of the PE RVUs of the first service would be twice as great as the indirect portion of the PE RVUs for the second service.
• Next, we next incorporate the specialty-specific indirect PE/HR data into the calculation. As a relatively extreme example for the sake of simplicity, assume in our previous example that, 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. In this case, the indirect portion of the PE RVUs of the first service would be equal to that of the second service.
For procedures that can be furnished in a physician's office, as well as in a hospital or facility setting, we establish two PE RVUs: facility and nonfacility. The methodology for calculating PE RVUs is the same for both the facility and nonfacility RVUs, but is applied independently to yield two separate PE RVUs. Because Medicare makes a separate payment to the facility for its costs of furnishing a service, the facility PE RVUs are generally lower than the nonfacility PE RVUs.
Diagnostic services are generally comprised of two components: a professional component (PC) and a technical component (TC), each of which may be furnished independently or by different providers, or they may be furnished together as a “global” service. When services have PC and TC components that can be billed separately, the payment for the global component equals the sum of the payment for the TC and PC. This is a result of using a weighted average of the ratio of indirect to direct costs across all the specialties that furnish the global components, TCs, and PCs; that is, we apply the same weighted average indirect percentage factor to allocate indirect expenses to the global components, PCs, and TCs for a service. (The direct PE RVUs for the TC and PC sum to the global under the bottom-up methodology.)
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).
First, we create a setup file for the PE methodology. The setup file contains the direct cost inputs, the utilization for each procedure code at the specialty and facility/nonfacility place of service level, and the specialty-specific PE/HR data from the surveys.
Sum the costs of each direct input.
Create indirect allocators.
There are two situations where this formula is modified:
• If the service is a global service (that is, a service with global, professional, and technical components), then the indirect allocator is: indirect percentage (direct PE RVUs/direct percentage) + clinical PE RVUs + work RVUs.
• If the clinical labor PE RVUs exceed the work RVUs (and the service is not a global service), then the indirect allocator is: indirect percentage (direct PE RVUs/direct percentage) + clinical PE RVUs.
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 RVUs, clinical PE RVUs, or both depending on whether the service is a global service and whether the clinical PE RVUs exceed the work RVUs (as described earlier in this step).
Apply a scaling adjustment to the indirect allocators.
Calculate the indirect practice cost index.
The final PE BN adjustment is calculated by comparing the results of Step 18 to the current pool of PE RVUs. This final BN adjustment is required in order 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 all specialties are included for purposes of calculating the final BN adjustment. (See “Specialties excluded from ratesetting calculation” later in this section.)