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Tuesday,

August 22, 2006

Part II

Department of
Health and Human
Services
Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, et al.


Medicare Program; Revisions to Payment
Policies Under the Physician Fee
Schedule for Calendar Year 2007 and
Other Changes to Payment Under Part B;
Proposed Rule
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48982 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

DEPARTMENT OF HEALTH AND WordPerfect, or Excel; however, we Craig Dobyski, (410) 786–4584 (for
HUMAN SERVICES prefer Microsoft Word.) issues related to list of telehealth
2. By mail. You may mail written services).
Centers for Medicare & Medicaid comments (one original and two copies) Roberta Epps, (410) 786–4503 (for
Services to the following address only: Centers issues related to diagnostic imaging
for Medicare & Medicaid Services, services).
42 CFR Parts 405, 410, 411, 414, 415, Department of Health and Human Bill Larson, (410) 786–4639 (for issues
and 424 Services, Attention: CMS–1321–P, P.O. related to coverage of bone mass
Box 8015, Baltimore, MD 21244–8015. measurement and addition of
[CMS–1321–P] Please allow sufficient time for mailed ultrasound screening for abdominal
comments to be received before the aortic aneurysm to the ‘‘Welcome to
RIN 0938–AO24 Medicare’’ benefit).
close of the comment period.
3. By express or overnight mail. You Dorothy Shannon, (410) 786–3396 (for
Medicare Program; Revisions to
may send written comments (one issues related to the outpatient therapy
Payment Policies Under the Physician
original and two copies) to the following cap).
Fee Schedule for Calendar Year 2007 Catherine Jansto, (410) 786–7762 (for
and Other Changes to Payment Under address only: Centers for Medicare &
Medicaid Services, Department of issues related to payment for covered
Part B outpatient drugs and biologicals).
Health and Human Services, Attention:
AGENCY: Centers for Medicare & CMS–1321–P, Mail Stop C4–26–05, Henry Richter, (410) 786–4562 (for
Medicaid Services (CMS), HHS. 7500 Security Boulevard, Baltimore, MD issues related to payments for end-stage
ACTION: Proposed rule. 21244–1850. renal disease facilities).
4. By hand or courier. If you prefer, Fred Grabau, (410) 786–0206 (for
SUMMARY: This proposed rule would you may deliver (by hand or courier) issues related to private contracts and
address certain provisions of the Deficit your written comments (one original opt-out provision).
Reduction Act of 2005, as well as make Lisa Ohrin, (410) 786–4565 (for issues
and two copies) before the close of the
other proposed changes to Medicare related to physician self-referral
comment period to one of the following
Part B payment policy. prohibitions).
addresses. If you intend to deliver your
We are proposing these changes to David Walczak (410) 786–4475 (for
comments to the Baltimore address,
ensure that our payment systems are issues related to reassignment
please call telephone number (410) 786–
updated to reflect changes in medical provisions).
7197 in advance to schedule your August Nemec (410) 786–0612 (for
practice and the relative value of arrival with one of our staff members.
services. This proposed rule also issues related to independent diagnostic
Room 445–G, Hubert H. Humphrey testing facilities).
discusses geographic practice cost Building, 200 Independence Avenue,
indices (GPCI) changes; requests for Anita Greenberg, (410) 786–4601 (for
SW., Washington, DC 20201; or 7500 issues related to the clinical laboratory
additions to the list of telehealth Security Boulevard, Baltimore, MD
services; payment for covered outpatient fee schedule).
21244–1850. James Menas (410) 786–4507 (for
drugs and biologicals; payment for renal (Because access to the interior of the issues related to payment for physician
dialysis services; policies related to HHH Building is not readily available to pathology services).
private contracts and opt-out; policies persons without Federal Government Diane Milstead, (410) 786–3355 or
related to bone mass measurement identification, commenters are Gaysha Brooks (410) 786–9649 (for all
services, independent diagnostic testing encouraged to leave their comments in other issues).
facilities, the physician self-referral the CMS drop slots located in the main SUPPLEMENTARY INFORMATION:
prohibition; laboratory billing for the lobby of the building. A stamp-in clock Submitting Comments: We welcome
technical component (TC) of physician is available for persons wishing to retain comments from the public on all issues
pathology services; the clinical a proof of filing by stamping in and set forth in this rule to assist us in fully
laboratory fee schedule; certification of retaining an extra copy of the comments considering issues and developing
advanced practice nurses; health being filed.) policies. You can assist us by
information technology, and the health Comments mailed to the addresses referencing the file code CMS–1321–P
care information transparency initiative. indicated as appropriate for hand or and the specific ‘‘issue identifier’’ that
DATES: Comment Date: Comments will courier delivery may be delayed and precedes the section on which you
be considered if we receive them at one received after the comment period. choose to comment.
of the addresses provided below, no Submission of comments on Inspection of Public Comments: All
later than 5 p.m. on October 10, 2006. paperwork requirements. You may comments received before the close of
ADDRESSES: In commenting, please refer submit comments on this document’s the comment period are available for
to file code CMS–1321–P. Because of paperwork requirements by mailing viewing by the public, including any
staff and resource limitations, we cannot your comments to the addresses personally identifiable or confidential
accept comments by facsimile (fax) provided at the end of the ‘‘Collection business information that is included in
transmission. of Information Requirements’’ section in a comment. We post all comments
You may submit comments in one of this document. received before the close of the
three ways (no duplicates, please): For information on viewing public comment period on the following Web
1. Electronically. You may submit comments, see the beginning of the site as soon as possible after they have
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electronic comments on specific issues SUPPLEMENTARY INFORMATION section. been received: http://www.cms.hhs.gov/
in this regulation to http:// FOR FURTHER INFORMATION CONTACT: Pam eRulemaking. Click on the link
www.cms.hhs.gov/eRulemaking. Click West, (410) 786–2302 (for issues related ‘‘Electronic Comments on CMS
on the link ‘‘Submit electronic to practice expense). Regulations’’ on that Web site to view
comments on CMS regulations with an Stephanie Monroe, (410) 786–6864 public comments.
open comment period.’’ (Attachments (for issues related to the geographic Comments received timely will also
should be in Microsoft Word, practice cost index). be available for public inspection as

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Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules 48983

they are received, generally beginning Nutrition Therapy (MNT) for the FQHC ACOG American College of Obstetrics and
approximately 3 weeks after publication Program Gynecology
of a document, at the headquarters of F. Proposed Payment for Covered ACR American College of Radiology
Outpatient Drugs and Biologicals (ASP ADA American Dietetic Association
the Centers for Medicare & Medicaid
Issues) AFROC Association of Freestanding
Services, 7500 Security Boulevard, G. Proposed Provisions Related to Payment Radiation Oncology Centers
Baltimore, Maryland 21244, Monday for Renal Dialysis Services Furnished by AGA American Gastroenterological
through Friday of each week from 8:30 End Stage Renal Disease (ESRD) Association
a.m. to 4 p.m. To schedule an Facilities AHRQ Agency for Healthcare Research and
appointment to view public comments, H. Private Contracts and Opt-Out Quality
phone 1–800–743–3951. Provision—Practitioner Definition AMA American Medical Association
Information on the physician fee I. Proposed Changes to Reassignment and AMP Average manufacturer price
schedule can be found on the CMS Physician Self-Referral Rules Relating to ASA American Society of Anesthesiologists
Diagnostic Tests ASGE American Society of Gastrointestinal
homepage. You can access this data by J. Supplier Access to Claims Billed on Endoscopy
using the following directions: Reassignment ASP Average sales price
1. Go to the following Web site: http:// K. Coverage of Bone Mass Measurement ASTRO American Society for Therapeutic
www.cms.hhs.gov/PhysicianFeeSched/. Tests Radiation Oncology
2. Select ‘‘PFS Federal Regulation L. Independent Diagnostic Testing Facility ATA American Telemedicine Association
Notices.’’ (IDTF) Issues AUA American Urological Association
To assist readers in referencing 1. Proposed IDTF Changes in the Physician AWP Average wholesale price
sections contained in this preamble, we Fee Schedule Proposed Rule BBA Balanced Budget Act of 1997
are providing the following table of 2. Proposed Performance Standards for BBRA Balanced Budget Refinement Act of
contents. Some of the issues discussed IDTFs 1999
3. Supervision BES (Bureau of the Census) Business
in this preamble affect the payment
4. Place of Service Expenditure Survey
policies, but do not require changes to M. Independent Laboratory Billing for the BIPA Medicare, Medicaid, and SCHIP
the regulations in the Code of Federal Technical Component (TC) of Physician Benefits Improvement Protection Act of
Regulations. Information on the Pathology Services to Hospital Patients 2000
regulation’s impact appears throughout N. Public Consultation for Medicare BLS Bureau of Labor Statistics
the preamble and is not exclusively in Payment for New Outpatient Clinical BMD Bone mineral density
section VI. Diagnostic Laboratory Tests BMI Body mass index
O. Proposal To Establish Criteria for BMM Bone mass measurement
Table of Contents National Certifying Bodies That Certify BNF Budget neutrality factor
I. Background Advanced Practice Nurses BP Best price
A. Development of the Relative Value P. Chiropractic Services Demonstration BSA Body surface area
System Q. Promoting Effective Use of Health CAH Critical access hospital
1. Work RVUs Information Technology CAP College of American Pathologists
2. Practice Expense Relative Value Units R. Health Care Information Transparency CBSA Core-Based Statistical Area
(PE RVUs) Initiative CCI Correct Coding Initiative
3. Resource-Based Malpractice RVUs III. Collection of Information Requirements CF Conversion factor
4. Refinements to the RVUs IV. Response to Comments CFR Code of Federal Regulations
5. Adjustments to RVUs Are Budget V. Regulatory Impact Analysis CMA California Medical Association
Neutral Regulation Text CMS Centers for Medicare & Medicaid
B. Components of the Fee Schedule Addendum A—Explanation and Use of Services
Payment Amounts Addendum B CNS Clinical nurse specialist
C. Most Recent Changes to the Fee Addendum B—2007 Relative Value Units CPEP Clinical Practice Expert Panel
Schedule and Related Information Used in CPI Consumer Price Index
II. Provisions of the Proposed Rule Determining Medicare Payments for CPO Care Plan Oversight
A. Resource-Based PE RVUs and Practice 2007 CPT (Physicians’) Current Procedural
Expense Proposals for Calendar Year Addendum C—Codes for Which We Terminology (4th Edition, 2002,
2007 Received Practice Expense Review copyrighted by the American Medical
B. Geographic Practice Cost Indices Committee (PERC) Recommendations on Association)
C. Medicare Telehealth Services Practice Expense Direct Cost Inputs CRNA Certified Registered Nurse
D. Miscellaneous Coding Issues Addendum D—2007 Geographic Practice Anesthetist
1. Global Period for Remote Afterloading Cost Indices (GPCIs) by Medicare Carrier CT Computed tomography
High Intensity Brachytherapy Procedures and Locality CTA Computed tomographic angiography
2. Assignment of RVUS to CPT Codes for Addendum E—2007 Geographic Adjustment CY Calendar year
Proton Beam Treatment Delivery Factors (GAF) DHS Designated health services
Services Addendum F—Proposed CPT/HCPCS DME Durable medical equipment
E. Deficit Reduction Act (DRA) Related Imaging Codes Defined by Section
DMERC Durable Medical Equipment
Proposals 5102(b) of the DRA
Regional Carrier
1. Section 5102 of the DRA—Proposed In addition, because of the many DRA Deficit Reduction Act
Adjustments for Payments to Imaging organizations and terms to which we refer by DSMT Diabetes outpatient self-management
Services acronym in this proposed final rule, we are training services
2. Section 5107 of the DRA—Revisions to listing these acronyms and their DXA Dual energy x-ray absorptiometry
Payments for Therapy Services corresponding terms in alphabetical order E&M Evaluation and management
3. Section 5112 of the DRA—Proposed below: EPO Erythopoeitin
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Addition of Ultrasound Screening for AADA American Academy of Dermatology ESRD End stage renal disease
Abdominal Aortic Aneurysm (AAA) Association FAX Facsimile
4. Section 5113 of the DRA—Proposed AAH American Association of Homecare FI Fiscal intermediary
Non-Application of the Part B Deductible AAP Average acquisition price FR Federal Register
for Colorectal Cancer Screening Tests ACC American College of Cardiology GAF Geographic adjustment factor
5. Section 5114—Proposed Addition of ACG American College of Gastroenterology GAO General Accounting Office
Diabetes Outpatient Self-Management ACHPN Advanced Certified Hospice and GDP Gross domestic product
Training Services (DSMT) and Medical Palliative Nurse GPO Group purchasing organization

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48984 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

GPCI Geographic practice cost index PPS Prospective payment system team at the Harvard School of Public
HCPAC Health Care Professional Advisory PRA Paperwork Reduction Act Health developed the original physician
Committee PT Physical therapy work RVUs for most codes in a
HCPCS Healthcare Common Procedure QCT Quantitative computerized
cooperative agreement with the
Coding System tomography
HCRIS Healthcare Cost Report Information RFA Regulatory Flexibility Act Department of Health and Human
System RIA Regulatory impact analysis Services (HHS). In constructing the
HSA Health Savings Account RN Registered nurse code-specific vignettes for the original
HHA Home health agency RUC (AMA’s Specialty Society) Relative physician work RVUs, Harvard worked
HHS (Department of) Health and Human (Value) Update Committee with panels of experts, both inside and
Services RVU Relative value unit outside the Federal government, and
HIT Health information technology SXA Single energy x-ray absorptiometry obtained input from numerous
HOCM High osmolar contrast media SPA Single photon absorptiometry
physician specialty groups.
HPSA Health Professional Shortage Area SGR Sustainable growth rate
HRSA Health Resources Services SMS (AMA’s) Socioeconomic Monitoring Section 1848(b)(2)(A) of the Act
Administration (HHS) System specifies that the RVUs for radiology
HUD (Department of) Housing and Urban SNF Skilled Nursing Facility services are based on relative value
Development SNM Society for Nuclear Medicine scale we adopted under section
IDTF Independent diagnostic testing facility TA Technology Assessment 1834(b)(1)(A) of the Act, (the American
IPF Inpatient psychiatric facility TC Technical Component College of Radiology (ACR) relative
IPPS Inpatient prospective payment system UAF Update adjustment factor value scale), which we integrated into
IRF Inpatient rehabilitation facility UPIN Unique Physician Identification
ISO Insurance Services Office Number
the overall PFS. Section 1848(b)(2)(B) of
IVIG Intravenous immune globulin WAC Wholesale acquisition cost the Act specifies that the RVUs for
JCAAI Joint Council of Allergy, Asthma, WAMP Widely available market price anesthesia services are based on RVUs
and Immunology from a uniform relative value guide. We
JUA Joint underwriting association I. Background established a separate conversion factor
LCD Local coverage determination [If you choose to comment on issues (CF) for anesthesia services, and we
LTCH Long-term care hospital in this section, please include the continue to utilize time units as a factor
LOCM Low osmolar contrast media caption ‘‘BACKGROUND’’ at the in determining payment for these
LOINC Logical Observation Identifiers beginning of your comments.] services. As a result, there is a separate
Names and Codes Since January 1, 1992, Medicare has
MA Medicare Advantage
payment methodology for anesthesia
MCAC Medicare Coverage Advisory
paid for physicians’ services under services.
Committee section 1848 of the Social Security Act We establish physician work RVUs for
MCG Medical College of Georgia (the Act), ‘‘Payment for Physicians’ new and revised codes based on
MedPAC Medicare Payment Advisory Services.’’ The Act requires that recommendations received from the
Commission payments under the physician fee American Medical Association’s (AMA)
MEI Medicare Economic Index schedule (PFS) be based on national Specialty Society Relative Value Update
MMA Medicare Prescription Drug, uniform relative value units (RVUs) Committee (RUC).
Improvement, and Modernization Act of based on the resources used in
2003 furnishing a service. Section 1848(c) of 2. Practice Expense Relative Value Units
MNT Medical nutrition therapy (PE RVUs)
MRA Magnetic resonance angiography
the Act requires that national RVUs be
MRI Magnetic resonance imaging established for physician work, practice Section 121 of the Social Security Act
MSA Metropolitan statistical area expense (PE), and malpractice expense. Amendments of 1994 (Pub. L. 103–432),
NCD National coverage determination Before the establishment of the enacted on October 31, 1994, amended
NCQDIS National Coalition of Quality resource-based relative value system, section 1848(c)(2)(C)(ii) of the Act and
Diagnostic Imaging Services Medicare payment for physicians’ required us to develop resource-based
NDC National drug code services was based on reasonable PE RVUs for each physician’s service
NECMA New England County Metropolitan charges. beginning in 1998. We were to consider
Area
NECTA New England City and Town Area A. Development of the Relative Value general categories of expenses (such as
NP Nurse practitioner System office rent and wages of personnel, but
NPP Nonphysician practitioners excluding malpractice expenses)
NPWP Nonphysician Work Pool 1. Work RVUs comprising practice expenses.
OBRA Omnibus Budget Reconciliation Act The concepts and methodology Section 4505(a) of the Balanced
OIG Office of Inspector General underlying the PFS were enacted as part Budget Act of 1997 (BBA) (Pub. L. 105–
OMB Office of Management and Budget of the Omnibus Budget Reconciliation 33), amended section 1848(c)(2)(C)(ii) of
OPD Outpatient Department the Act to delay implementation of the
OPPS Outpatient prospective payment
Act (OBRA) of 1989, Pub. L. 101–239,
and OBRA 1990, (Pub. L. 101–508). The resource-based PE RVU system until
system
OSCAR Online Survey and Certification final rule, published November 25, 1991 January 1, 1999. In addition, section
and Reporting (56 FR 59502), set forth the fee schedule 4505(b) of the BBA provided for a 4-year
PA Physician assistant for payment for physicians’ services transition period from charge-based PE
PBM Pharmacy benefit managers beginning January 1, 1992. Initially, RVUs to resource-based RVUs.
PC Professional component only the physician work RVUs were We established the resource-based PE
PE Practice Expense resource-based, and the PE and RVUs for each physician’s service in a
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PEAC Practice Expense Advisory malpractice RVUs were based on final rule, published November 2, 1998
Committee (63 FR 58814), effective for services
PERC Practice Expense Review Committee
average allowable charges.
PET Positron emission tomography
The physician work RVUs established furnished in 1999. Based on the
PFS Physician Fee Schedule for the implementation of the fee requirement to transition to a resource-
PLI Professional liability insurance schedule in January 1992 were based system for PE over a 4-year
PPI Producer price index developed with extensive input from period, resource-based PE RVUs did not
PPO Preferred provider organization the physician community. A research become fully effective until 2002.

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This resource-based system was based insurers from all the States, the District malpractice × GPCI malpractice)] ×
on two significant sources of actual PE of Columbia, and Puerto Rico. CF.
data: The Clinical Practice Expert Panel (Note: As discussed in the June 29,
4. Refinements to the RVUs
(CPEP) data and the AMA’s 2006 proposed notice for the Five-Year
Socioeconomic Monitoring System Section 1848(c)(2)(B)(i) of the Act Review of Work Relative Value Units
(SMS) data. The CPEP data were requires that we review all RVUs no less Under the Physician Fee Schedule and
collected from panels of physicians, often than every 5 years. The first 5-year Proposed Changes to the Practice
practice administrators, and review of the physician work RVUs Expense Methodology (71 FR 37170),
nonphysicians (for example, registered went into effect in 1997, published on we have proposed to establish a separate
nurses) nominated by physician November 22, 1996 (61 FR 59489). The budget neutrality adjustor that would be
specialty societies and other groups. second 5-year review went into effect in applied in the calculation of the work
The CPEP panels identified the direct 2002, published on November 1, 2001 RVUs. Application of this budget
inputs required for each physician’s (66 FR 55246). The next scheduled 5- neutrality adjustor would enable us to
service in both the office setting and year review is scheduled to go into meet the budget neutrality provisions of
out-of-office setting. The AMA’s SMS effect in 2007. section 1848(c)(2)(B)(ii) of the Act.)
data provided aggregate specialty- In 1999, the AMA’s RUC established
specific information on hours worked the Practice Expense Advisory C. Most Recent Changes to the Fee
and practice expenses. Committee (PEAC) for the purpose of Schedule
Separate PE RVUs are established for refining the direct PE inputs. Through The final rule with comment period
procedures that can be performed in March of 2004, the PEAC provided that appeared in the Federal Register on
both a nonfacility setting, such as a recommendations to CMS for over 7,600 November 21, 2005 (70 FR 70116)
physician’s office, and a facility setting, codes (all but a few hundred of the addressed Medicare Part B payment
such as a hospital outpatient codes currently listed in the AMA’s policy, including the physician fee
department. The difference between the Current Procedural Terminology (CPT) schedule, that is applicable for calendar
facility and nonfacility RVUs reflects codes). year (CY) 2006; and finalized certain
the fact that a facility receives separate In the November 15, 2004, PFS final
provisions of the interim final rule to
payment from Medicare for its costs of rule (69 FR 66236), we implemented the
implement the Competitive Acquisition
providing the service, apart from first 5-year review of the malpractice
Program (CAP) for Part B Drugs.
payment under the PFS. The nonfacility RVUs (69 FR 66263).
It also revised Medicare Part B
RVUs reflect all of the direct and
5. Adjustments to RVUS Are Budget payment and related policies regarding:
indirect practice expenses of providing
Neutral Physician work, practice expense and
a particular service.
Section 212 of the Balanced Budget Section 1848(c)(2)(B)(ii)(II) of the Act malpractice RVUs; Medicare telehealth
Refinement Act of 1999 (BBRA) (Pub. L. provides that adjustments in RVUs for a services; multiple diagnostic imaging
106–113) directed the Secretary of year may not cause total PFS payments procedures; covered outpatient drugs
Health and Human Services (the to differ by more than $20 million from and biologicals; supplemental payments
Secretary) to establish a process under what they would have been if the to Federally Qualified Health Centers
which we accept and use, to the adjustments were not made. In (FQHCs); renal dialysis services;
maximum extent practicable and accordance with section coverage for glaucoma screening
consistent with sound data practices, 1848(c)(2)(B)(ii)(II) of the Act, if services; National Coverage
data collected or developed by entities adjustments to RVUs cause Determination (NCD) timeframes; and
and organizations to supplement the expenditures to change by more than physician referrals for nuclear medicine
data we normally collect in determining $20 million, we make adjustments to services and supplies to health care
the PE component. On May 3, 2000, we ensure that expenditures do not increase entities with which physicians have
published the interim final rule (65 FR or decrease by more than $20 million. financial relationships.
25664) that set forth the criteria for the In addition, the rule finalized the
B. Components of the Fee Schedule interim RVUs for CY 2005 and issued
submission of these supplemental PE
Payment Amounts interim RVUs for new and revised
survey data. The criteria were modified
in response to comments received, and To calculate the payment for every procedure codes for CY 2006. The rule
published in the Federal Register (65 physician service, the components of also updated the codes subject to the
FR 65376) as part of a November 1, 2000 the fee schedule (physician work, PE, physician self-referral prohibition and
final rule. The PFS final rules published and malpractice RVUs) are adjusted by discussed payment policies relating to
in 2001 and 2003, respectively, (66 FR a geographic practice cost index (GPCI). teaching anesthesia services, therapy
55246 and 68 FR 63196) extended the The GPCIs reflect the relative costs of caps, private contracts and opt-out, and
period during which we would accept physician work, PEs, and malpractice chiropractic and oncology
these supplemental data. insurance in an area compared to the demonstrations.
national average costs for each In accordance with section
3. Resource-Based Malpractice RVUs component. 1848(d)(1)(E)(i) of the Act, we also
Section 4505(f) of the BBA amended Payments are converted to dollar announced that the PFS update for CY
section 1848(c) of the Act to require us amounts through the application of a 2006 would be ¥4.4 percent; the initial
to implement resource-based CF, which is calculated by the Office of estimate for the sustainable growth rate
malpractice RVUs for services furnished the Actuary and is updated annually for for CY 2006 would be 1.7; and the CF
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on or after 2000. The resource-based inflation. for CY 2006 would be $36.1770.


malpractice RVUs were implemented in The general formula for calculating However, subsequent to publication of
the PFS final rule published November the Medicare fee schedule amount for a the CY 2005 PFS final rule with
2, 1999 (64 FR 59380). The malpractice given service and fee schedule area can comment period, section 5104 of the
RVUs were based on malpractice be expressed as: Deficit Reduction Act (DRA) of 2005
insurance premium data collected from Payment = [(RVU work × GPCI work) + (Pub. L. 109–171, February 8, 2006), was
commercial and physician-owned (RVU PE × GPCI PE) + (RVU enacted which amended section 1848(d)

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48986 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

of the statute to provide for a 0 percent recommending direct PE inputs (clinical original CPEP inputs, we are requesting
update effective January 1, 2006. staff, supplies, and equipment) for new that all the medical specialties examine
We also note that the Five-Year and existing CPT codes. the direct PE inputs on our Web site and
Review of Work Relative Value Units The PERC reviewed the PE inputs for let us know whether there are additional
Under the Physician Fee Schedule and over 2000 existing codes, some of which items from the original CPEP data that
Proposed Changes to the Practice were unresolved PE issues from the CY are a necessary part of the post-
Expense Methodology proposed notice 2006 PFS final rule with comment operative care and if the PE inputs listed
appeared in the Federal Register on period, at their meetings held in are correct. (See the SUPPLEMENTARY
June 29, 2006 (71 FR 37170). In that September 2005, February 2006 and INFORMATION section of this proposed
notice, we proposed revisions to work April 2006. (A list of these reviewed rule for directions on accessing our Web
RVUs affecting payment for physicians’ codes can be found in Addendum C of site.)
services. The revisions reflect changes this proposed rule.)
We have reviewed the PERC- 2. Payment for Splint and Cast Supplies
in medical practice, coding changes,
and new data on relative value submitted recommendations and In the PFS final rules published
components that affect the relative propose to adopt all of them. We have November 1999 (64 FR 59380) and
amount of physician work required to worked with the AMA staff to make November 2000 (65 FR 65376), we
perform each service, as required by the corrections for any typographical errors removed splint and cast supplies from
statute. We also proposed revisions to and to ensure that previously PEAC- the PE database for the CPT codes for
our methodology for calculating PE accepted standards are incorporated in fracture management and cast/strapping
RVUs, including changes based on the recommendations. application procedures. Because splint
supplemental survey data for PE. This The complete PERC recommendations and cast supplies could be separately
revised methodology would be used to and the revised PE database can be billed using Healthcare Common
establish payment for services beginning found on our Web site. (See the Procedure Coding System (HCPCS)
SUPPLEMENTARY INFORMATION section of codes (Q4001–Q4051) that were
January 1, 2007.
As indicated in the June 29, 2006 this proposed rule for directions on established for payment of these
proposed notice, we will respond to the accessing our Web site.) supplies under section 1861(s)(5) of the
comments received on that notice as (b) Standard Supplies and Equipment Act, we did not want to make duplicate
part of the final Medicare PFS rule for for 90-Day Global Codes payment under the PFS for these items.
CY 2007 scheduled for publication this In the CY 2006 PFS proposed rule (70
We are proposing to revise the CPEP FR 70116), we proposed to reinstate
fall. If adopted, the RVU revisions supply and equipment inputs for those
would be fully implemented for services payment for all splints and cast supplies
90-day global procedures for which the through the PE component of the PFS
furnished to Medicare beneficiaries on RUC has only refined the clinical labor
or after January 1, 2007. The PE because we believed we may have
inputs. We are proposing to apply the unintentionally prohibited
revisions would be phased-in over a standard supply and equipment inputs remuneration for these supplies when
four-year period; although, as we gain for the facility setting for 90-day global they are not used for reduction of a
experience with the new methodology, services to these remaining unrefined fracture or dislocation (covered under
we will reexamine this policy beginning 90-day global procedure codes. As section 1861(s)(5) of the Act), but rather
next year and propose necessary recommended by the RUC, for supplies, are provided (and covered) as ‘‘incident
revisions through future rulemaking. we propose to include one minimum to’’ a physician service under section
II. Provisions of the Proposed Rule supply visit package for each post- 1861(s)(2)(A) of the Act. This proposal
[If you choose to comment on issues operative visit assigned to each code was not finalized; however, in our final
in this section, please include the and a post-surgical incision care kit rule we asked the medical specialties
caption ‘‘PROVISIONS’’ at the (suture, staples, or both) where and the PERC to determine the typical
beginning of your comments.] appropriate, along with additional items supplies for splints and casts necessary
recommended by the RUC for certain for each of the fracture management
A. Resource-Based Practice Expense procedures. For equipment, we are codes and the cast/strapping application
(PE) RVU Proposals for CY 2007 proposing to include an exam table and codes because we wanted to make
Major changes to the PE methodology light. However, there are several issues certain that the supply inputs were
for 2007, as well as a detailed on which we need input before we correct before we proceeded with
discussion of the current PE finalize the recommended standards. rulemaking for the CY 2007 PFS. At its
methodology, are discussed in the June For example, for many of the 90-day February 2006 meeting, the PERC
29, 2006 proposed notice (71 FR 37170 codes in question, the current supply reviewed and approved the supply
through 37430). input data contain supplies in far larger inputs submitted by the AAOS for each
This proposed rule contains proposals quantities than are contained in either CPT code for fracture management and
for direct PE including clinical labor, the visit package or incision care kit. For cast/strapping application and these
medical supplies and medical other codes, the current data includes were forwarded to us as PERC
equipment. items that are not contained in the recommendations. During this interim
package or kit. In other cases, the period we also reassessed the options
1. RUC Recommendations for Direct PE recommendations from the RUC contain for payment of materials for splints and
Inputs and Other PE Input Issues additional items in quantities that casts.
The following discussions are appear excessive. We plan to work with We believe that the majority of the
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proposals concerning direct PE inputs. all the concerned specialties to ensure splint and cast supplies that are
that the finalized inputs do represent currently paid through the Q-codes are
(a) RUC Recommendations the typical supplies needed to perform furnished in relationship to cast/
The AMA’s Relative Value Update each procedure. strapping procedures for the
Committee (RUC) established a new Because the application of the 90-day management of fractures and
committee, the Practice Expense Review global standard supplies and equipment dislocations. However, we did not
Committee (PERC), to assist the RUC in would result in the deletion of some intend for the medically necessary

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splint and cast supplies used for other each 15 minutes at 0.45 RVUs, 97803 recommended by the HCPAC, as
reasons (for example, serial casting, Medical nutrition therapy; re- follows:
wound care, or protection) not to be assessment and intervention, • CPT 97802 = 0.45 RVUs.
paid. Because it may be difficult for the individual, face-to-face with the patient, • CPT 97803 = 0.37 RVUs.
contractors to identify the purpose for each 15 minutes at 0.37 RVUs, and • CPT 97804 = 0.25.
the cast/strapping application procedure 97804 Medical nutrition therapy; group Because we propose to add the work
on a claim form, we believe that (two or more individuals), each 30 RVUs to these services, the MNT
contractors may have been paying for minutes at 0.25 RVUs. However, during clinical labor time in the direct input
the splint and cast supply Q-codes rulemaking for the CY 2001 PFS final database would be removed with the
when the service is performed for other rule, we indicated that MNT was not adoption of this proposal. Additionally,
purposes than treatment of fractures and covered because there was yet no two HCPCS codes, G0270 MNT subs tx
dislocations. statutory benefit category that would for change dx and G0271 Group MNT 2
Since these splint and cast supplies allow medical nutritionists to bill these or more 30 mins were created to track
can be covered under both sections services. We also did not accept the MNT services following the second
1861(s)(5) and 1861(s)(2)(A) of the Act, HCPAC recommendations for work referral in the same year. These HCPCS
we are proposing to include payment for RVUs for these MNT services because codes correspond to CPT codes 97803
both statutory benefits using the the codes were designed for use only by and 97804, respectively. Therefore, we
separate HCPCS Q-codes. This would nonphysicians. The following year, would also propose to add the same
allow for payment for these medically section 105(c) of the Medicare, work RVUs to these HCPCS codes and
necessary supplies whether based on Medicaid, and SCHIP Benefits to delete the clinical labor inputs from
sections 1861(s)(5) or 1861(s)(2)(A) of Improvement Protection Act of 2000 the PE database upon adoption of this
the Act, while ensuring that no (BIPA) provided for the coverage of policy. We encourage specialty societies
duplicate payments are made. MNT services when furnished by and other professional groups to
Physicians would continue to bill the registered dietitians or nutritional comment on this proposal.
HCPCS Q-codes, in addition to the cast/ professionals at 85 percent of the 4. Surgical Pathology Codes
strapping application procedure codes, amount that a physician would be paid We heard from the College of
to be paid for these materials. for the same services. As a result, we American Pathologists (CAP) regarding
The following supplies would established values for these MNT the equipment times assigned to CPT
continue to be paid separately using the services for the 2002 PFS. In keeping codes 88304 and 88305 in the basic
HCPCS Q-codes and would not be with our earlier decision, we did not surgical pathology family of codes.
included in the PE database upon assign the HCPAC-recommended work While all six codes in this family have
adoption of this proposal: values. However, the associated work been refined by the PEAC, this
• Fiberglass roll. value for each code was utilized in the refinement occurred at 4 separate PEAC
• Cast padding. conversion of work to clinical labor time meetings. CPT codes 88304 and 88305
• Cast shoe. for MNTs as part of the PE component.
• Stockingnet/stockinette. were refined at the first PEAC meeting
At that time we received several in April 1999 before time standards
• Plaster bandage. comments, including one from the
• Denver splint. were established for the equipment at
American Dietetic Association (ADA), subsequent PEAC meetings when the
• Dome paste bandage. urging us to adopt the work values
• Cast sole. other four CPT codes 88300, 88302,
recommended by the HCPAC. 88307, and 88309 were reviewed. Using
• Elastoplast roll. More recently, the ADA has requested
• Fiberglass splint. our proposed bottom-up PE
us to reconsider our decision not to methodology to value these codes, the
• Ace wrap.
accept the HCPAC recommended work
• Kerlix. lack of the equipment time standards for
RVUs. The ADA contends that the
• Webril. CPT codes 88304 and 88305 create a
• Malleable arch bars and elastics. payment rate established by section rank-order anomaly in this family.
The splint and cast supplies would 105(c) of BIPA, 85 percent of the PFS Consequently, CAP, after reviewing and
not be included in the PEs for the amount that would be paid for the same applying current standards for the
following CPT codes: service if furnished by a physician, is equipment times, submitted suggested
• 24500 through 24685 based on the premise that work values revised equipment times to us. We are
• 25500 through 25695 are inherent to these MNT services. The proposing to accept these times and the
• 26600 through 26785 ADA believes that without work RVUs, proposed times will be reflected in the
• 27500 through 27566 the payment for these services does not PE database on our Web site (See the
• 27750 through 27848 reflect 85 percent of what a physician SUPPLEMENTARY INFORMATION section of
• 28400 through 28675 would be paid for performing the same this proposed notice for directions on
• 29000 through 29750. service. Because these MNT codes were accessing our Web site.)
We are requesting input, specifically created specifically for MNT
from medical specialties and contractors professionals, the ADA compared the 5. Other PE Issues
on this proposal. work associated with their services to In the CY 2006 PFS final rule with
physician E/M services of CPT 99203 comment period (70 FR 70116), we
3. Medical Nutrition Therapy Services and 99213, which have respective work explained that we were not
In 2000, the Health Care Professional RVUs of 1.34 and 0.67. implementing the PERC or other
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Advisory Committee (HCPAC) After reviewing the issues and proposed PE changes for CY 2006 due
recommended that we assign work relevant arguments raised by the ADA, to issues with the PE methodology. In
RVUs to three new medical nutrition we are persuaded that it would be this proposed rule, we are proposing
therapy (MNT) CPT codes—97802 appropriate to include work RVUs for that the PERC and other PE changes
Medical nutrition therapy; initial the MNT services. Consequently, we are originally proposed for CY 2006 would
assessment and intervention, proposing to establish work RVUs for be implemented and effective with the
individual, face-to-face with the patient, each code at the level previously CY 2007 PFS. The following

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subsections, (a) through (j), summarize from the PE database with the CY 2007 CPT codes 99375 and 99378 for home
the PE proposals from the CY 2006 PFS PFS rule. (See 70 FR 70138). health and hospice supervision to 4 G-
final rule with comment period that we codes that are related to home health
(e) Imaging Rooms
are including in this proposed rule. and hospice physician supervision,
Additionally, we are including several We are proposing to implement the certification and recertification, G0179,
other items which concern inputs for PE updates for the contents and prices of 5 GO180, GO181, and GO182. These G-
that are discussed below in subsections ‘‘rooms’’ used in imaging procedures codes are incorrectly valued for clinical
(k) through (n). including— labor. These G-codes are cross-walked
• Basic radiology room; from CPT codes 99375 and 99378,
(a) PE Recommendations on CPEP • Radiographic-fluoroscopic room; which underwent PEAC refinement in
Inputs for CY 2006 • Mammography room; January 2003 for the CY 2004 PFS.
We are proposing to use a clinical • Computed tomography (CT) room; However, at that time we inadvertently
labor time of 167 minutes for the service and did not apply the new refinements to
period for CPT code 36522, • Magnetic resonance imaging (MRI) these specific G-codes. (See 70 FR 70139
Extracorporeal Photopheresis; maintain room (See 70 FR 70139). through 70140.)
the nonfacility setting PE RVUs for CPT (f) Equipment Pricing for Select Services
code 78350, single photon bone (j) Programmers for Implantable
and Procedures Neurostimulators and Intrathecal Drug
densitometry; and remove the PE inputs
for the nonfacility setting for CPT codes We are proposing to accept the Infusion Pumps
76975, GI endoscopic ultrasound, and following equipment pricing
Although we had initially proposed,
15852, Dressing change not for burn. (70 information provided by various
in the CY 2006 PFS proposed rule, to
FR 70136 through 70137) specialty societies for select services
remove two programmers from the PE
and procedures as discussed in the CY
(b) Supply Items for CPT Code 95015 database (EQ208 for medication pump
2006 PFS final rule with comment
(Which Is Used for Intradermal Allergy from two codes (CPT 62367 and 62368)
period. (See 70 FR 70139):
Tests With Drugs, Biologicals, or and EQ209 for the neurostimulator from
• Equipment pricing for certain
Venoms) 8 codes (CPT 95970–97979)), based on
radiology services received from the
comments received as discussed in the
We are proposing to implement the ACR as presented in Table 15 of the CY
CY 2006 PFS final rule with comment
allergy and immunology specialty’s 2006 PFS proposed rule.
period (see 70 FR 70140), we
recommendation to change the test • Equipment pricing on the
determined that we will retain these
substance in CPT code 95015 to venom, ultrasound color doppler transducers
programmers in the database. In
at $10.70 (from single antigen, at $5.18) and vaginal probe received from the
addition, we added ‘‘with printer’’ to
and the quantity to 0.3 ml (from 0.1 ml). American College of Obstetrics and
the description of EQ208 based on
(See 70 FR 70138.) Gynecology (ACOG).
comments received. We are proposing to
• For CPT 36522, extracorporeal
(c) Flow Cytometry Services implement these decisions for CY 2007.
photopheresis, equipment pricing
Based on information from the society information specific to this procedure. (k) Cardiac Monitoring Services
representing independent laboratories, • Pricing of EMG botox machine used
we are proposing to implement the in CPT code 92265 as presented by the We are requesting more specific PE
following direct PE inputs: American Academy of Ophthalmology. information related to remote cardiac
• Clinical Labor—We are proposing monitoring services because these
(g) Supply Item for In Situ services do not fit the direct PE model
to change the staff type in the service
Hybridization Codes (CPT Codes 88365, used for typical physician services.
(intra) period in both CPT codes 88184
88367, and 88368) These services are overwhelmingly
and 88185 to cytotechnologist, at $0.45
per minute (currently lab technician, at We are proposing to implement the performed by specialized independent
$0.33 per minute). Society for Clinical Pathologists’ request diagnostic testing facilities (IDTFs) that
• Supplies—We are proposing to to change the probe quantity for CPT are paid under the PFS, but due to the
change the antibody cost for both CPT code 88367 In situ hybridization, auto to characteristics of cardiac monitoring
codes 88184 and 88185 to $8.50 (from 1.5, equal to that of the other two codes services, frequently maintain more
$3.544). in the family. extensive operating hours than the
• Equipment—We are proposing to typical physician office. Specifically, we
(h) Supply Item for Percutaneous are looking for data to indicate the
add the following equipment to CPT Vertebroplasty Procedures (CPT codes
code 88184: typical number and type of
22520 and 22525) transmissions or other encounters per
+ Computer.
+ Printer. Based on documentation provided by day between the beneficiary and the
+ Slide strainer. the Society for Interventional Radiology, IDTF for each of the remote monitoring
+ Biohazard hood. we are proposing to implement a new services. We would also like to know
+ Wash assistant. price of $696.00 for the vertebroplasty the number and type of clinical staff, as
+ FAC loader. kit, to replace a temporary price of well as the corresponding time, that are
+ We are proposing to add a $660.50 that was a placeholder price necessary to ensure appropriate services
computer and printer to the equipment from the CY 2006 PFS final rule with are available for each patient.
for CPT code 88185 (70 FR 70138). comment period. (See 70 FR 70139.) Additionally, we are interested in
mstockstill on PROD1PC63 with PROPOSAL_2

identifying any other direct PE inputs


(d) Low Osmolar Contrast Media (i) Clinical Labor for G-Codes Related to for typical supplies and equipment
(LOCM) and High Osmolar Contrast Home Health and Hospice Physician relating to these services, and any data
Media (HOCM) Supervision, Certification and that would reflect indirect PEs, such as
Because separate payment is available Recertification overhead and non-clinical payroll
for both types of contrast media, we are We are proposing to apply the expenses. We believe that the following
proposing to delete LOCM and HOCM refinements made to the PE inputs to codes represent atypical PE scenarios

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and would like to receive PE (m) Supply for CPT Code 50384, pricing documentation was needed from
information regarding these services: Removal (via Snare/Capture) of the medical specialty societies and, for
• Cardiac event monitoring (CPT Internally Dwelling Ureteral Stent Via many of these items, we received
codes 93271, 93012 and 93270). Percutaneous Approach, Including sufficient documentation in the form of
• Pacemaker monitoring (CPT codes Radiological Supervision and catalog listings, vendor Web sites,
Interpretation invoices, and manufacturer quotes. We
93733 and 93736).
• Holter monitoring (CPT codes Upon review of the RUC- have accepted the documented prices
93232, 93226, 93231 and 93225). recommended direct PE inputs for CPT for many of these items and these prices
50384, a new procedure for CPT 2006, are reflected in the PE RVUs in
• INR monitoring (HCPCS codes we identified the inappropriate Addendum B of this proposed rule. The
G0248 and G0249). inclusion of a ureteral stent that we are items listed below in Tables 1 and 2
(l) Clarification With Respect to Non- proposing to delete for CY 2007. We represent the outstanding items from CY
Facility PE RVUs believe that the addition of the ureteral 2006 and new items added from the
stent, valued by the specialty at $162, to current RUC recommendations. We are
In the CY 2006 PFS final rule with CPT code 50384, which is the procedure requesting that commenters provide
comment (70 FR 70335) we provided a for the removal of a stent, was an
clarification in Addendum A pricing information on items in these
inadvertent error by the specialty during tables along with acceptable
concerning use of ‘‘NA’’ in the PE RVU the April 2005 RUC meeting.
columns for Addendum B. Commenters documentation, as noted in the footnote
requested that further clarification be (n) Supply and Equipment Items to each table, to support recommended
made concerning the payment amount Needing Specialty Input prices. For supplies or equipment that
for procedures performed in the non- We have identified certain supply and have previously appeared on this list,
facility setting if there is an ‘‘NA’’ in the equipment items for which we were and for which we received no or
non-facility PE RVU column. Our policy unable to verify the pricing information inadequate documentation, we are
is that if the Medicare carrier pays for (see Table 1: Supply Items Needing proposing to delete these items unless
the service in the non-facility setting, Specialty Input for Pricing and Table 2: we receive adequate information to
the service will be paid at the facility PE Equipment Items Needing Specialty support current pricing by the
RVU rate. In this proposed rule, we are Input for Pricing). During the CY 2006 conclusion of the comment period for
proposing revisions to Addendum A to rulemaking process, we listed both this proposed rule.
include this clarification. supply and equipment items for which BILLING CODE 4120–01–P
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mstockstill on PROD1PC63 with PROPOSAL_2

EP22AU06.000</GPH>

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mstockstill on PROD1PC63 with PROPOSAL_2

EP22AU06.001</GPH>

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48992 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules
mstockstill on PROD1PC63 with PROPOSAL_2

BILLING CODE 4120–01–C


EP22AU06.002</GPH>

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B. Geographic Practice Cost Indices implementing only one-half of any for any locality where the GPCI would
(GPCI) adjustment in the first year if more than otherwise fall below 1.0 for purposes of
1 year has elapsed since the last GPCI payment for services furnished on or
[If you choose to comment on issues
revision. The GPCIs were first after January 1, 2004 and before January
in this section, please include the
implemented in 1992. The first review 1, 2007. Beginning on January 1, 2007,
caption ‘‘GPCI’’ at the beginning of your
and revision was implemented in 1995 the 1.00 floor will be removed and the
comments.]
and the last GPCI revision was work GPCI will revert to the fully
Section 1848(e)(1)(A) of the Act implemented in 2005. The next update
requires us to develop separate GPCIs to implemented value. The values for the
is scheduled to be implemented in work GPCI and subsequent changes to
measure resource cost differences January 2008.
among localities compared to the the Geographic Adjustment Factor
We do not anticipate proposing (GAF) published in this proposed rule
national average for each of the three fee significant changes to the GPCIs in
schedule components. While requiring reflect the removal of the 1.0 floor. For
response to changes in the source data. many payment localities this change
that the PE and malpractice GPCIs There have been no new Census data to
reflect the full relative cost differences, had no impact on the GAF; however, the
affect the work GPCI, the PE GPCI will GAFs for a number of payment localities
section 1848(e)(1)(A)(iii) of the Act reflect any changes in the Department of
requires that the physician work GPCIs were reduced due to this change. The
Housing and Urban Development (HUD) impact of this change on the GAFs for
reflect only one-quarter of the relative rental data, and the malpractice GPCI
cost differences compared to the those payment localities is shown below
(based on malpractice RVUs) will reflect
national average. in Table 3.
the national claims-based premium data
Section 1848(e)(1)(C) of the Act for 2004 and 2005. Details of the The proposed GPCIs for 2007 are
requires us, in consultation with methodology, data sources, and shown in Addendum D and the
appropriate physician representatives, adjustments to the GPCIs will be made proposed GAFs for 2007 are shown in
to review the GPCIs at least every 3 available for public comment in the CY Addendum E. The GPCIs shown in
years and allows us to make 2008 PFS proposed rule. Addendum D are fully implemented
adjustments based on our review. This In addition, section 412 of the MMA and reflect 2007 budget neutrality
section of the Act also requires us to amended section 1848(e)(1) of the Act to scaling coefficients provided by the
phase-in the adjustment over 2 years, establish a floor of 1.0 for the work GPCI Office of the Actuary.

TABLE 3.—PAYMENT LOCALITIES WITH NEGATIVE PERCENT CHANGE IN GAF 1 BETWEEN 2006 AND 2007 DUE TO
REMOVAL OF THE 1.000 WORK FLOOR
2006 2007 Percent
Locality name GAF GAF change

Fort Worth, TX ..................................................................................................................................................... 0.998 0.996 ¥0.17


Rest of Michigan .................................................................................................................................................. 0.986 0.984 ¥0.20
Rest of New York ................................................................................................................................................ 0.952 0.950 ¥0.21
Rest of Maryland ................................................................................................................................................. 0.982 0.978 ¥0.36
Metropolitan St. Louis, MO .................................................................................................................................. 0.978 0.974 ¥0.41
Rest of Pennsylvania ........................................................................................................................................... 0.950 0.946 ¥0.44
Ohio ..................................................................................................................................................................... 0.970 0.966 ¥0.44
Austin, TX ............................................................................................................................................................ 1.020 1.015 ¥0.47
New Hampshire ................................................................................................................................................... 1.010 1.005 ¥0.50
Minnesota ............................................................................................................................................................ 0.980 0.975 ¥0.53
Galveston, TX ...................................................................................................................................................... 0.991 0.986 ¥0.54
Metropolitan Kansas City, MO ............................................................................................................................. 0.987 0.981 ¥0.56
Fort Lauderdale, FL ............................................................................................................................................. 1.022 1.016 ¥0.59
Arizona ................................................................................................................................................................. 0.999 0.993 ¥0.65
Wisconsin ............................................................................................................................................................. 0.956 0.950 ¥0.65
Colorado .............................................................................................................................................................. 0.998 0.991 ¥0.67
East St. Louis, IL ................................................................................................................................................. 1.003 0.996 ¥0.68
New Orleans, LA ................................................................................................................................................. 0.984 0.977 ¥0.73
Rest of Washington ............................................................................................................................................. 0.984 0.976 ¥0.77
Indiana ................................................................................................................................................................. 0.937 0.930 ¥0.79
Beaumont, TX ...................................................................................................................................................... 0.951 0.942 ¥0.96
Alabama ............................................................................................................................................................... 0.923 0.914 ¥0.99
Virginia ................................................................................................................................................................. 0.958 0.948 ¥1.06
Southern Maine ................................................................................................................................................... 0.992 0.981 ¥1.09
Rest of Georgia ................................................................................................................................................... 0.943 0.932 ¥1.14
Tennessee ........................................................................................................................................................... 0.933 0.921 ¥1.27
Utah ..................................................................................................................................................................... 0.960 0.948 ¥1.30
South Carolina ..................................................................................................................................................... 0.930 0.917 ¥1.41
Rest of Illinois ...................................................................................................................................................... 0.952 0.938 ¥1.43
Rest of Florida ..................................................................................................................................................... 0.982 0.968 ¥1.45
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West Virginia ........................................................................................................................................................ 0.942 0.928 ¥1.47


North Carolina ...................................................................................................................................................... 0.951 0.936 ¥1.55
New Mexico ......................................................................................................................................................... 0.947 0.932 ¥1.57
Kansas* ................................................................................................................................................................ 0.934 0.919 ¥1.60
Rest of Louisiana ................................................................................................................................................. 0.936 0.919 ¥1.78
Kentucky .............................................................................................................................................................. 0.932 0.915 ¥1.80
Kansas* ................................................................................................................................................................ 0.936 0.919 ¥1.81
Rest of Oregon .................................................................................................................................................... 0.946 0.929 ¥1.81

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TABLE 3.—PAYMENT LOCALITIES WITH NEGATIVE PERCENT CHANGE IN GAF 1 BETWEEN 2006 AND 2007 DUE TO
REMOVAL OF THE 1.000 WORK FLOOR—Continued
2006 2007 Percent
Locality name GAF GAF change

Vermont ............................................................................................................................................................... 0.968 0.950 ¥1.82


Virgin Islands ....................................................................................................................................................... 1.007 0.989 ¥1.83
Rest of Texas ...................................................................................................................................................... 0.947 0.929 ¥1.87
Idaho .................................................................................................................................................................... 0.922 0.904 ¥1.91
Iowa ..................................................................................................................................................................... 0.927 0.909 ¥1.97
Rest of Maine ...................................................................................................................................................... 0.936 0.916 ¥2.14
Oklahoma ............................................................................................................................................................. 0.913 0.893 ¥2.14
Mississippi ............................................................................................................................................................ 0.919 0.898 ¥2.31
Arkansas .............................................................................................................................................................. 0.905 0.884 ¥2.34
Puerto Rico .......................................................................................................................................................... 0.905 0.883 ¥2.44
Nebraska .............................................................................................................................................................. 0.925 0.902 ¥2.44
Wyoming .............................................................................................................................................................. 0.934 0.910 ¥2.55
Montana ............................................................................................................................................................... 0.928 0.902 ¥2.83
Rest of Missouri * ................................................................................................................................................. 0.910 0.883 ¥2.97
North Dakota ........................................................................................................................................................ 0.924 0.895 ¥3.16
South Dakota ....................................................................................................................................................... 0.922 0.891 ¥3.35
1 Calculation for the GAF: (.52466*work gpci) + (.03865*mp gpci) + (.52466*pe gpci).

In the CY 2005 PFS proposed rule, (identified as of July 1, 2000 by CPT evidence showing that the use of a
published August 15, 2004, we codes 99241 through 99275, 99201 telecommunications system does not
discussed the issue of changes to the through 99215, 90804 through 90809, affect the diagnosis or treatment plan as
GPCI payment localities (69 FR 47504). and 90862) and any additional service compared to a faceπtoπface delivery of
In that proposed rule, we noted that we specified by the Secretary. In addition, the requested service.
look for the support of a State medical the statute requires us to establish a Since establishing the process, we
society as the impetus for changes to process for adding services to or have added the following to the list of
existing payment localities. Because the deleting services from the list of Medicare telehealth services:
GPCIs for each locality are calculated telehealth services on an annual basis. psychiatric diagnostic interview
using the average of the county-specific In the December 31, 2002 Federal examination; ESRD services with two to
data from all of the counties in the Register (67 FR 79988), we established three visits per month and four or more
locality, removing high cost counties a process for adding services to or visits per month (although we require at
from a locality will result in lower deleting services from the list of least one visit a month by a physician,
GPCIs for the remaining counties. Medicare telehealth services. This CNS, NP, or PA to examine the vascular
Therefore, because of this redistributive process provides the public an ongoing access site); and individual medical
impact, we have refrained, in the past, opportunity to submit requests for nutritional therapy.
from making changes to payment adding services. We assign any request Requests to add services to the list of
localities unless the State medical to make additions to the list of Medicare Medicare telehealth services must be
association provides evidence that any telehealth services to one of the submitted and received no later than
proposed change has statewide support. following categories: December 31 of each CY to be
We would be interested in receiving • Category #1: Services that are considered for the next proposed rule.
suggestions on alternative ways that we similar to office and other outpatient For example, requests submitted before
could administratively reconfigure visits, consultation, and office the end of CY 2005 are considered for
payment localities that could be psychiatry services. In reviewing these the CY 2007 proposed rule. For more
developed and proposed in future requests, we look for similarities information on submitting a request for
rulemaking. In addition, MEDPAC and between the proposed and existing an addition to the list of Medicare
the GAO have both expressed interest in telehealth services for the roles of, and telehealth services, visit our Web site at
studying the physician payment interactions among, the beneficiary, the www.cms.hhs.gov/telehealth.
localities. CMS intends to work with physician (or other practitioner) at the
distant site and, if necessary, the 2. Submitted Requests for Addition to
both groups to study our current
telepresenter. We also look for the List of Telehealth Services
methodology and develop alternative
options. similarities in the telecommunications We received the following requests for
system used to deliver the proposed additional approved services in CY
C. Medicare Telehealth Services service, for example, the use of 2005: (1) Nursing facility care; (2)
[If you choose to comment on issues interactive audio and video equipment. speech language pathology; (3)
in this section, please include the • Category #2: Services that are not audiology; and (4) physical therapy
caption ‘‘TELEHEALTH’’ at the similar to the current list of telehealth services. The following is a discussion
beginning of your comments.] services. Our review of these requests of the requests submitted in CY 2005.
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includes an assessment of whether the


1. Requests for Adding Services to the use of a telecommunications system to Nursing Facility Care
List of Medicare Telehealth Services deliver the service produces similar The American Telemedicine
Section 1834(m)(4)(F) of the Act diagnostic findings or therapeutic Association (ATA) and an individual
defines telehealth services as interventions as compared with the practitioner submitted a request to add
professional consultations, office visits, faceπtoπface ‘‘hands on’’ delivery of the the following services: Initial nursing
and office psychiatry services same service. Requestors should submit facility care (as represented by HCPCS

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codes 99304 through 99306); subsequent discussed above, is currently being a family of codes with varying numbers
nursing facility care (HCPCS codes reviewed within DHHS, we cannot of source positions. All of the codes in
99307 through 99310); nursing facility consider approving nursing facility care the family, CPT codes 77781–77784 are
discharge services (HCPCS codes 99315 for telehealth at this time. We will currently designated as 90-day global
and 99316); and other nursing facility review and consider the services. CPT codes 77781–77784 are
services as described by HCPCS code recommendations of the report to the used to treat many clinical conditions,
99318. The requestors explained that Congress once it is issued. If it is but primarily patients with prostate
the primary purpose of using telehealth determined that SNFs should be added cancer, breast cancer and sarcoma.
in the Skilled Nursing Facility (SNF) as an originating site, this change will Patients with any of these conditions
setting is to provide urgent consultation be considered in future rulemaking. usually receive several treatments (2–
when the patient has a sudden change 10) over a two to ten day period of time.
Speech Language Pathology, Audiology
in his or her condition, and to provide Due to the increasing variability in
and Physical Therapy
increased availability to primary and treatment regimens, it is difficult to
specialty care on days when the The ATA and an individual assign RVUs for a ‘‘typical’’ patient
physician is not present in the SNF or practitioner submitted a request to add based on a global period of 90 days.
when traveling is a hardship. The various speech therapy, audiology and Therefore, we are proposing that this
requestors believe that the current list of physical therapy services to the list of family of codes (CPT codes 77781,
Medicare telehealth services is not Medicare telehealth services. The 77782, 77783 and 77784) be assigned a
appropriate because the list does not requestors also asked us to add physical global period of ‘‘XXX’’, which will
include codes that are specifically therapists, speech language pathologists permit separate payment each time the
intended for nursing facility residents. and audiologists to the list of approved services are provided and allow
telehealth practitioners. payment to be based on the actual
CMS Review
CMS Review service(s) provided. We will request that
Nursing Facility Care the RUC revalue the work RVUs and the
Physical therapists, speech language PE inputs for these services if a change
Section 1834(m)(C)(ii) of the Act pathologists and audiologists are not
defines a telehealth originating site as a in the global period is finalized.
permitted under current law to provide However we are proposing, on an
physician’s or practitioner’s office; or a and receive payment for Medicare
hospital, critical access hospital (CAH), interim basis, to revise the work RVUs
telehealth services at the distant site. and PE inputs to reflect the removal of
rural health clinic, or FQHC. SNFs are The statute permits only a physician, as
not defined in the statute as originating the postoperative visit, CPT code 99212,
defined by section 1861(r) of the Act or that is currently assigned to these
sites. a practitioner as described in section
However, section 418 of the MMA services. The proposed interim work
1842(b)(18)(C) of the Act (CNS, NP, PA, RVUs for these services would be as
required the Health Resources Services nurse midwife, clinical psychologist,
Administration (HRSA), a component of follows:
clinical social worker, registered • 77781 = 1.21
HHS, in consultation with CMS, to dietitian or other nutrition professional),
conduct an evaluation of demonstration • 77782 = 2.04
to furnish Medicare telehealth services.
projects under which SNFs, as defined • 77783 = 3.27
Since speech language pathologists,
in section 1819(a) of the Act, are treated audiologists and physical therapists are • 77784 = 5.15
as originating sites for Medicare not permitted under current law to We are also proposing to delete the
telehealth services. The MMA also provide and receive payment for registered nurse (RN) time in the post-
required the Secretary to submit a report Medicare telehealth services at the service period as well as the patient
to the Congress that includes distant site, we cannot fully consider gowns for the post-service visit. We
recommendations on ‘‘mechanisms to the request to add speech therapy, would also note that, to the extent that
ensure that permitting a SNF to serve as audiology services and physical therapy these services are performed as staged
an originating site for the use of to the list of Medicare telehealth procedures, providers may make use of
telehealth services or any other service services. We are exploring this issue as applicable modifiers.
delivered via a telecommunications part of a report to the Congress (required 2. Assignment of RVUs to CPT Codes for
system does not serve as a substitute for by section 223(d) of BIPA) on additional Proton Beam Treatment Delivery
in-person visits furnished by a sites and settings, geographic areas, and Services
physician, or for in-person visits types of non-physician practitioners that
furnished by a physician assistant (PA), We have received a request to assign
could be reimbursed for the provision of
nurse practitioner (NP), or clinical nurse PE inputs for the non-facility setting to
telehealth services.
specialist (CNS), as is otherwise Proton Beam treatment delivery services
required by the Secretary’’ and provides D. Miscellaneous Coding Issues represented by CPT codes 77520
the authority to include SNFs as a [If you choose to comment on issues through 77525.
Medicare telehealth originating site, if in this section, please include the These services are currently carrier-
the Secretary concludes in the report caption ‘‘Miscellaneous Coding Issues’’ priced; therefore, payment in the facility
that it is advisable to do so and that at the beginning of your comments.] or non-facility setting is established by
mechanisms could be established to The following sections address each carrier. To the extent that
ensure that the use of a specific coding issues related to physicians and suppliers wish to have
telecommunications system does not payment for services under the PFS. national RVUs assigned for these
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serve as a substitute for the required in- services, there is an established process
person physician or practitioner SNF 1. Global Period for Remote utilizing the AMA–RUC to recommend
visits. This report is currently under Afterloading High Intensity work RVUs, as well as the direct PE
review in DHHS. Brachytherapy Procedures inputs used to compute the PE RVUs, to
Given that SNFs are not defined in the CPT Code 77783, Remote afterloading CMS. We would strongly encourage the
statute as a telehealth originating site high intensity brachytherapy; 9–12 physicians and suppliers to use this
and the report to the Congress, as source positions or catheters, resides in established process, and would also be

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interested in receiving comments on full payment for the highest priced (b) Reduction in TC for Imaging Services
this issue. procedure and reduce payment for each Under the PFS to OPD Payment Amount
additional procedure by 25 percent, Section 5102(b)(1) of the DRA
E. Deficit Reduction Act (DRA) Related
when more than one procedure from the amended section 1848 of the Act and
Proposals
same imaging family is performed requires that, with respect to imaging
[If you choose to comment on issues during the same session on the same services, if—
in this section, please include the day. ‘‘(i) The technical component
caption ‘‘DRA PROPOSALS’’ at the As described in the CY 2006 PFS final
(including the technical component
beginning of your comments.] rule with comment period, at the time,
The DRA of 2005 (Pub. L. 109–171), portion of a global fee) of the service
the statute required us to make changes
was enacted February 8, 2006 and established for a year under the fee
such as this in a budget neutral manner,
included provisions that affect the schedule * * *, without application of
meaning that the estimated savings
Medicare program. The following the geographic adjustment factor * * *,
generated by the application of the
section addresses the specific DRA exceeds,
multiple imaging procedure payment
(ii) The Medicare OPD fee schedule
provisions that are being addressed in reduction were used to increase
amount established under the
this proposed rule. payment for other physician fee
prospective payment system for hospital
schedule services. We increased the CY
1. Section 5102—Proposed Adjustments outpatient department services * * *
2006 PE RVUs by 0.3 percent to offset
for Payments to Imaging Services for such service for such year,
the estimated savings generated by the
Section 5102 of the DRA includes two determined without regard to
multiple imaging payment reduction
provisions that affect payment of policy. geographic adjustment * * *, the
imaging services under the Medicare Subsequent to the publication of the Secretary shall substitute the amount
physician fee schedule. The first CY 2006 PFS final rule with comment described in clause (ii), adjusted by the
provision addresses payment for certain period, section 5102(a) of the DRA geographic adjustment factor [under the
multiple imaging procedures for CY (Multiple Procedure Payment Reduction PFS] * * *, for the fee schedule amount
2007 and application of budget for Imaging Exempted From Budget for such technical component for such
neutrality while the second provision Neutrality), required that ‘‘effective for year.’’
addresses limiting the payment amount fee schedules established beginning As required by the statute, for imaging
under PFS to the outpatient department with 2007, reduced expenditures services (described below) furnished on
(OPD) payment amount for the technical attributable to the multiple procedure or after January 1, 2007, we will cap the
component (TC) of certain imaging payment reduction for imaging under PFS payment amount for the year (prior
services. the final rule published by the Secretary to geographic adjustment) by the CY
in the Federal Register on November 21, 2007 outpatient prospective payment
(a) Payment for Multiple Imaging 2005 (42 CFR 405, et al.) insofar as it system (OPPS) payment amount (prior
Procedures for 2007 relates to the physician fee schedules for to geographic adjustment). We will then
In general, Medicare prices diagnostic 2006 and 2007’’ are exempted from the apply the PFS geographic adjustment to
imaging procedures in the following budget neutrality provision. As a result, the capped payment amount.
three ways: we are proposing to remove the 0.3 Section 5102(b)(2) of the DRA
• The professional component (PC) percent increase to the CY 2006 PE exempts the estimated savings from this
represents the physician’s interpretation RVUs from the CY 2007 PE RVUs in provision from the PFS budget
(PC-only services are billed with the 26 accordance with the statute. neutrality requirement. Section
modifier). In addition, in response to our request 5102(b)(1) of the DRA defines imaging
• The TC represents PE and includes for data on the appropriateness of the 50 services as ‘‘* * * imaging and
clinical staff, supplies, and equipment percent reduction in the CY 2006 PFS computer-assisted imaging services,
(TC-only services are billed with the TC final rule with comment period (70 FR including X-ray, ultrasound (including
modifier). 70261), the ACR provided information echocardiography), nuclear medicine
• The global service represents both for 25 code combinations supporting a (including positron emission
PC and TC. reduction of between 21 and 44 percent. tomography), magnetic resonance
As discussed in the CY 2006 PFS final Given the expected interaction between imaging, computed tomography, and
rule with comment period (70 FR the multiple procedure imaging policy fluoroscopy, but excluding diagnostic
70261), in the CY 2006 PFS proposed and the further imaging payment and screening mammography.’’
rule (70 FR 45764 through 46064), we reductions mandated by section 5102(b) In order to apply section 5102(b) of
had proposed to reduce payment for the of the DRA described below, along with the DRA, we needed to determine the
TC of selected diagnostic imaging the new information we have received CPT and alpha-numeric HCPCS codes
procedures belonging to one of eleven from the ACR on the multiple imaging that fall within the scope of ‘‘imaging
imaging families when the procedures procedure policy as it applies to services’’ defined by the DRA provision.
are performed on contiguous body areas common combinations of imaging In general, we believe that imaging
by 50 percent for CY 2006. However, in services, we believe it would be prudent services provide visual information
the final rule with comment period, we to maintain the multiple imaging regarding areas of the body that are not
stated that we would phase-in the 50 payment reduction at its current 25 normally visible, thereby assisting in the
percent reduction over two years, percent level while we continue to diagnosis or treatment of illness or
beginning with a 25 percent reduction examine the appropriate payment injury. We began by considering the
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in 2006. We also sought additional data levels. Therefore, we are proposing to CPT 7XXXX series codes for radiology
and comments on the appropriateness of continue the multiple imaging payment services and then adding in other CPT
50 percent as the final level of reduction for 2007 at the 25 percent codes and alpha-numeric HCPCS codes
reduction. The reduction applies to the level. We would proceed through future that describe imaging services. We then
TC and the technical portion of the rulemaking in the event we determine excluded nuclear medicine services that
global service, but does not apply to the that revisions to the policy are were either non-imaging diagnostic or
PC of the service. Currently, we make warranted. treatment services. We also excluded all

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codes for unlisted procedures, since we upper gastrointestinal endoscopy with services for which we propose to make
would not know in advance of any transendoscopic ultrasound-guided the comparison between the PFS TC
specific clinical scenario whether or not intramural or transmural fine needle payment amount and the OPPS payment
the unlisted procedure was an imaging aspiration/biopsy(s). In these cases, we amount used to establish OPD payment.
service. We excluded all mammography are unable to clearly distinguish Payment for an individual service on
services, consistent with the statute. We imaging from non-imaging services this list would only be capped if the
excluded radiation oncology services because, for example, a specific PFS TC payment amount exceeds the
that were not imaging or computer- procedure may or may not utilize an OPPS payment amount.
assisted imaging services. We also imaging modality, or the use of an
excluded all HCPCS codes for imaging imaging technology cannot be To the extent changes are made to
services that are not separately paid segregated from the performance of the codes for services already on the list, we
under the OPPS since there would be no main procedure. Note that we included propose to update the list through
corresponding OPPS payment to serve carrier priced services since these program instructions to our contractors.
as a TC cap. We excluded any service services are within the statutory To the extent that the same imaging
where the CPT code describes a definition of imaging services and are service is coded differently under the
procedure for which fluoroscopy, also within the statutory definition of PFS and the OPPS, we propose to
ultrasound, or another imaging modality PFS services (that is, carrier-priced TCs crosswalk the code under the PFS to the
is either included in the code whether of PET scans). appropriate code under the OPPS that
or not it is used or is employed Our proposed list of codes that could be reported for the same service
peripherally in the performance of the identify imaging services defined by the provided in the hospital outpatient
main procedure, for example, 31622 for DRA OPPS cap provision can be found setting. Our proposed list of crosswalks
bronchoscopy with or without in Addendum F to this proposed rule. is below:
fluoroscopic guidance and 43242 for Note that this is the list of imaging

OPPS
MFS code Descriptor Desc
code

74185 ...... Mri angio, abdom w or w/o dye ........................................... C8900 .... MRA w/cont, abd.
76093 ...... Magnetic image, breast ....................................................... C8905 .... MRI w/o fol w/cont, brst, un.
76094 ...... Magnetic image, both breasts ............................................. C8908 .... MRI w/o fol w/cont, breast.
71555 ...... Mri angio chest w or w/o dye .............................................. C8909 .... MRA w/cont, chest.
73725 ...... Mr ang lwr ext w or w/o dye ................................................ C8912 .... MRA w/cont, lwr ext.
72198 ...... Mr angio pelvis w/o & w/dye ............................................... C8918 .... MRA w/cont, pelvis.

(c) Interaction of the Multiple Imaging imaging reduction and the OPPS cap, amount as illustrated in the following
Payment Reduction and the OPPS Cap we propose to first apply the multiple example.
For CY 2007 imaging services imaging payment reduction and then
potentially subject to both the multiple apply the OPPS cap to the reduced

25% Mul-
Pre-OPPS tiple imag- OPPS cap Final MPFS
HCPCS cap MPFS ing reduc- rate payment
rate tion

7XXX1 .............................................................................................................................. $341.89 $256.42 $316.55 $256.42


7XXX2 .............................................................................................................................. 552.86 414.65 391.83 391.83

We considered first applying the pathology services and a similar the Medicare Economic Index (MEI)
OPPS cap and then applying the separate cap on outpatient occupational (except that if an increase for a year is
multiple procedure reduction. However, therapy services. These caps apply to not a multiple of $10, it is rounded to
as indicated in the CY 2006 OPPS final expenses incurred for the respective the nearest multiple of $10).
rule, we received public comments therapy services under Medicare Part B, We implemented the separate
suggesting that the OPPS payment rates with the exception of outpatient statutory limits of $1740 for outpatient
may implicitly include at least some hospital services. The caps were in physical therapy and speech-language
multiple imaging discount. While we effect from January 1, through December pathology services and $1740 for
continue to examine this issue, we 31, 1999, from September 1, 2003 occupational therapy on January 1,
believe the most appropriate policy is to through December 7, 2003, and 2006. The DRA of 2005 was enacted on
apply the multiple imaging payment beginning January 1, 2006. In 2000 February 8, 2006. Section 5107(a) of the
reduction prior to the application of the through 2002, and from December 8, DRA required the Secretary to develop
OPPS cap. 2003 through December 31, 2005, the an exceptions process for the therapy
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2. Section 5107—Revisions to Payments Congress placed moratoria on caps effective January 1, 2006. The
for Therapy Services implementation of the caps. Section exceptions process applies only to
1833(g)(2) of the Act provides that, for expenses incurred in 2006. Details of
Section 1833(g) of the Act applies an 1999 through 2001, the caps were the exceptions process were published
annual per beneficiary combined cap $1500, and for years after 2001, the caps
in a manual change on February 13,
beginning January 1, 1999, on outpatient are equal to the preceding year’s cap
2006 (CR4364). The change request
physical therapy and speech-language increased by the percentage increase in

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consists of three transmittals with screening test will be available even if In developing the proposed rule based
current numbers of— the qualifying patient does not present on this provision, we reviewed the 2005
• Transmittal 855, CR 4364, Pub. L. signs or symptoms of disease or illness. United States Preventive Services Task
100–04; To conform the regulations to the Force (USPSTF) recommendations and
• Transmittal 47, CR 4365, Pub. L. statutory requirements of section 5112 related material on ultrasound screening
100–02; and of the DRA, we are proposing to include for AAAs. This includes—
• Transmittal 140, CR 4364, Pub. L. an exception in § 411.15(a)(1) to permit • A recommendation for a one-time
100–08. coverage for ultrasound screening for ultrasound screening for men aged 65 to
The transmittals are available on our AAAs that meet the conditions for 75 who have smoked at least 100
Web site at http://www.cms.hhs.gov/ coverage that we are proposing to cigarettes in their lifetime;
Transmittals/. specify under new § 410.19(b) • No recommendation for or against
In accordance with the statute, the ultrasound screening for AAAs for men
(Conditions for coverage of an
therapy caps will remain in effect, but who have not smoked at least 100
ultrasound screening for abdominal
without the exceptions process, with cigarettes in their lifetime; and
aortic aneurysms). We are also adding a
respect to expenses incurred beginning • A recommendation against routine
new § 411.15(k)(12).
on January 1, 2007. The dollar amount screening for AAAs in women.
of the therapy caps in 2007 will be the As provided in the DRA, this new
coverage allows payment for a one-time Based on the statutory language and
2006 rate ($1740) increased by the the USPSTF recommendations outlined
percentage increase in the MEI. As only screening examination. We are
proposing to add new § 410.19(b) to above, we are proposing to define the
noted above, under current law, the term ‘‘eligible beneficiary’’ for coverage
exceptions process will not apply to provide for the coverage of the screening
examinations for AAAs as specified in of ultrasound screening examinations
therapy services incurred after for AAA to mean an individual who—
section 5112 of the DRA. We are also
December 31, 2006, but the therapy caps
proposing to add new § 410.19(c) • Has received a referral for an
will remain inapplicable to therapy ultrasound screening as a result of an
services provided in the outpatient (Limitation on coverage of ultrasound
screening for abdominal aortic initial preventive physical examination
hospital setting as provided in section (as defined in section 1861(ww)(1) of
1833(g) of the Act. aneurysms.) to provide the limitation on
coverage for an individual who is not an the Act);
Section 5107(b) of the DRA requires • Has not been previously furnished
the Secretary to implement, by July 1, eligible beneficiary as defined in
such a covered ultrasound screening
2006, edits for clinically illogical proposed new § 410.19(a).
examination under the Medicare
combinations of procedure codes and We are proposing definitions set forth
program; and
other edits in order to limit in new § 410.19(a) of this proposed rule • Is included in at least one of the
inappropriate payment for therapy that would be included to implement following risk categories:
services. In January 2006, we the statutory provisions and to help the + Has a family history of an AAA; or
implemented Correct Coding Initiative reader in understanding the provisions + Is a man age 65 to 75 years who
(CCI) edits for the therapy providers that of this regulation. The proposed smoked at least 100 cigarettes in his
bill to the fiscal intermediaries, thus, definitions include the following terms: lifetime; or
addressing the section 5107 of the DRA • Eligible beneficiary. + Is an individual who manifests
requirement with respect to edits for • Ultrasound screening for abdominal other risk factors that are described in
clinically illogical combinations of aortic aneurysms. a benefit category recommended by the
procedure codes. Adoption of these Specifically, section 5112(a)(1) of the USPSTF regarding an AAA that has
code edits ensures that these providers DRA amended section 1861 of the Act been determined by the Secretary
of outpatient Part B therapy services, to provide that coverage of ultrasound through the NCD process.
including SNFs, comprehensive screening for AAAs will be available for To facilitate our consideration of
outpatient rehabilitation facilities, an individual—(i) who receives a possible expansions of coverage in the
certain outpatient physical therapy and referral for such an ultrasound screening future for identifying (1) other risk
speech-language therapy providers as a result of an initial preventive factors in a benefit category
(rehabilitation agencies) and home physical examination (as defined in recommended for screening for the early
health agencies (HHAs) (where section 1861(ww)(1) of the Act); (ii) who detection of AAAs by the USPSTF, and
beneficiary is not under a Part A plan has not been previously furnished such (2) alternative screening technologies to
of care) meet the same CCI edit an ultrasound screening under this title; ultrasound screening for AAAs of
requirements as those that have been in and (iii) who has a family history of commensurate accuracy and cost, we
place for physicians, private practice AAA or manifests risk factors included are proposing to add language to our
therapists, and OPPS hospitals. We are in a beneficiary category recommended regulations that would allow us to make
considering the implementation of other for screening by the United States determinations through the NCD
edits in the future to further address Preventive Services Task Force process. The NCD process would allow
concerns about inappropriate payment regarding AAAs. the Secretary to expand coverage more
for therapy services. Section 5112(a)(2) of the DRA also quickly following an assessment of
adds a definition of the term those subjects than is possible under the
3. Section 5112-Proposed Addition of ‘‘ultrasound screening for an Abdominal standard rulemaking process. We intend
Ultrasound Screening for Abdominal Aortic Aneurysm’’ to mean, ‘‘(1) a to use the NCD process, which includes
Aortic Aneurysm (AAA) procedure using sound waves (or other an opportunity for public comments, for
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Section 5112 of the DRA of 2005 procedures using alternative evaluating the medical and scientific
amended section 1861 of the Act to technologies, of commensurate accuracy issues relating to the coverage of
provide for coverage under Part B of and cost, that the Secretary may specify) alternative screening technologies and
ultrasound screening for AAAs, provided for the early detection of the identification of other risk factors for
effective for services furnished on or abdominal aortic aneurysm; and (2) AAAs recommended by the USPSTF
after January 1, 2007, subject to certain includes a physician’s interpretation of that may be brought to our attention in
eligibility and other limitations. This the results of the procedure.’’ the future. Use of an NCD to establish

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a change in the scope of benefits is 4. Section 5113—Proposed Non- by adding a new paragraph (10). We are
authorized by section 1871(a)(2) of the Application of the Part B Deductible for also proposing to revise § 405.2463 by—
Act. An aggrieved party can challenge Colorectal Cancer Screening Tests • Revising paragraph (a) to expand
an NCD under the procedures the definition of an FQHC visit to
Current Medicare policy requires that,
established by section 1869(f) of the Act. include certified providers of DSMT and
with limited exceptions, incurred
These proposed coverage provisions MNT services under new sub-paragraph
expenses for covered part B services are
would be set forth in proposed new (a)(1)(ii)(B). We would also revise the
subject to, and count toward meeting
§ 410.19 (a)(1)(i) and definition of an RHC visit in new
the Part B annual deductible. Section
§ 410.19(a)(2)(iii)(C). subparagraph (a)(1)(i) to include a face-
5113 of the DRA amended section
to-face encounter between a patient and
Section 5112(b) of DRA also amended 1833(b) of the Act to provide for an
a clinical psychologist or clinical social
section 1861(ww)(2) of the Act (the exception to the application of the Part
worker to conform to statutory language
initial preventive physical examination B deductible with respect to colorectal
at section 1861(aa)(1)(B) of the Act. We
benefit) by adding the new ultrasound cancer screening tests. Beginning
are also proposing to redesignate and
screening benefit to the list of January 1, 2007, colorectal cancer
revise paragraphs (b) and (c) as new
screening services, as described in
preventive services for which paragraphs (a)(2) and (a)(3),
section 1861(pp)(1) of the Act, are no
physicians and other qualified respectively.
longer subject to the Part B deductible.
nonphysician practitioners must • We are proposing to incorporate
The conditions for and limitations on
provide ‘‘education, counseling and paragraph (a)(2) into (a)(1), and to
coverage for colorectal cancer screening
referral’’ to new beneficiaries who take redesignate and revise current
tests under Medicare part B are
advantage of the initial preventive paragraph (a)(3) as new paragraph (b).
described in § 410.37.
physical examination benefit within the We would also clarify that it is generally
To conform our regulations to this
first 6 months after the effective date of permissible for both FQHCs and Rural
statutory change, we are proposing to
their first Part B coverage period. Health Clinics to furnish, when
revise § 410.160 to include an exception
Therefore, we are also proposing to necessary, most types of medical and
from the Part B annual deductible for
amend § 410.16(a)(7) of the regulations other health visits on the same day to
the colorectal cancer screening services
so that it reflects the additional the same patient. We are also proposing
described in § 410.37.
to amend this paragraph to permit a
responsibilities that physicians and
5. Section 5114—Proposed Addition of separate additional FQHC visit for
qualified nonphysician practitioners
Diabetes Outpatient Self-Management DSMT and MNT services (which may
will have under the initial preventive occur on the same date of service when
Training Services (DSMT) and Medical
physical examination benefit with Nutrition Therapy (MNT) for the FQHC the beneficiary receives care from their
respect to the new ultrasound screening Program FQHC physician or non-physician
benefit. practitioner) when reasonable and
Section 5114 of the DRA amended
Beginning January 1, 2007, we are section 1861(aa)(3) of the Act to add necessary, consistent with the
proposing to pay for ultrasound DSMT and MNT services to the list of Congressional mandate under section
screening for AAAs through the use of Medicare covered and reimbursed 5114 of the DRA to provide coverage
a new HCPCS code GXXX1, Ultrasound, services under the Medicare FQHC and adequate access to these services in
B-scan and/or real time with image benefit, effective for services provided the FQHC setting.
documentation; for abdominal aortic • We are proposing to redesignate
on or after January 1, 2006. Although
aneurysm (AAA) screening. We are and revise current paragraph (a)(4) as
this statutory change has already been
proposing that payment for this service new paragraph (c).
implemented in administrative
be made at the same level as CPT code instructions, we are proposing to F. Proposed Payment for Covered
76775 Ultrasound, retroperitoneal (e.g., conform the regulations to the new Outpatient Drugs and Biologicals (ASP
renal, aorta, nodes), B-scan and/or real statutory requirement. Issues)
time with image documentation; FQHCs certified as DSMT and MNT [If you choose to comment on issues
limited. CPT code 76775 is used to bill providers have been allowed to bundle in this section, please include the
for the service when it is provided as a the cost of those services into their caption ‘‘ASP Issues’’ at the beginning
diagnostic test, and we believe the FQHC payment rates. But before the of your comments.]
service associated with the proposed enactment of the DRA, the provision of Medicare Part B covers a limited
HCPCS code reflects equivalent these services would not generate a number of prescription drugs and
resources and work intensity to those separate FQHC visit payment. Effective biologicals. For the purposes of this
contained in CPT code 76775. for services furnished on or after proposed rule, the term ‘‘drugs’’ will
January 1, 2006, FQHCs that are hereafter refer to both drugs and
In addition, since the DRA provides certified providers of DSMT and MNT
that the Medicare Part B deductible will biologicals. Medicare Part B covered
services can receive per visit payments drugs not paid on a cost or prospective
not apply with respect to ultrasound for covered services furnished by
screening for abdominal aortic payment basis generally fall into the
registered dietitians or nutrition following three categories:
aneurysm (as defined in section professionals. In other words, if all • Drugs furnished incident to a
1861(bbb) of the Act), we are proposing relevant program requirements are met, physician’s service.
to revise § 410.160 to include an these services are included under the • DME drugs.
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exception from the Medicare Part B Medicare FQHC benefit as billable • Drugs specifically covered by
deductible for the ultrasound screening visits. statute (certain immunosuppressive
for abdominal aortic aneurysm as In order to conform the regulations, drugs, for example).
described in proposed § 410.19. we are proposing to amend Beginning in CY 2005, the vast
(Conditions for coverage of an § 405.2446(b) to expand the scope of majority of Medicare Part B drugs not
ultrasound screening for abdominal FQHC services to include certified paid on a cost or prospective payment
aortic aneurysms.) providers of DSMT and MNT services basis are paid under the ASP

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49000 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

methodology. The ASP methodology is consultants. These comments addressed a. Fees Not Considered Price
based on data submitted to us quarterly a variety of aspects of calculating and Concessions
by manufacturers. In addition to the reporting ASPs. On September 16, 2004, Section 1847A(c)(5)(A) of the Act
payment for the drug, Medicare we published the Manufacturer’s states that the ASP is to be calculated by
currently pays a furnishing fee for blood Submission of Average Sales Price Data the manufacturer on a quarterly basis.
clotting factors, a dispensing fee for for Medicare Part B Drugs and As a part of that calculation,
inhalation drugs, and a supplying fee to Biologicals (ASP) final rule (69 FR manufacturers are to take into account
pharmacies for certain Part B drugs. 55763) addressing only the comments price concessions such as—
In January 2006, the drug coverage pertaining to the methodology for • Volume discounts;
available to Medicare beneficiaries estimating lagged price concessions. We • Prompt pay discounts;
expanded with the implementation of have also addressed ASP calculation • Cash discounts;
Medicare Part D. The Medicare Part D and reporting requirements in other • Free goods that are contingent on
program does not change Medicare Part proposed and final rules and any purchase requirement;
B drug coverage. information collection notices, • Chargebacks; and
This section of the preamble discusses including rulemaking to implement the • Rebates (other than rebates under
proposed changes and issues related to Competitive Acquisition Program for the Medicaid drug rebate programs).
the determination of the payment
Part B Drugs and Biologicals (CAP). (See If the data on these price concessions
amounts for covered Part B drugs and
70 FR 39069, 70 FR 45842, 70 FR 70215, are lagged, then the manufacturer is
furnishing blood clotting factor. This
and 70 FR 70477.) In addition, we required to estimate costs attributable to
section also discusses proposed changes
posted official agency guidance, these price concessions using the
to how manufacturers calculate and
including responses to frequently asked required ratio methodology as specified
report ASP data to us.
questions, on our Web site to implement in 42 CFR part 414, subpart J,
1. ASP Issues the ASP provisions in accordance with § 414.804(a)(3).
Section 303(c) of the MMA amended section 1847A(c)(5)(C) of the Act. Among the comments from drug
Title XVIII of the Act by adding new We intend to publish a final rule manufacturers and national associations
section 1847A. This new section revised addressing comments on the April 6, representing wholesalers and
the payment methodology for the vast 2004 IFC in the near future. We may distributors, we received requests for
majority of drugs and biologicals not publish the final rule as part of this clarification and detailed guidance on
paid on a cost or prospective payment rulemaking, or we may publish a the treatment of administrative fees,
basis furnished on or after January 1, separate final rule, in either case after service fees and fees paid to pharmacy
2005. The ASP reporting requirements the close of the comment period for this benefit managers (PBMs) in the ASP
are set forth in section 1927(b) of the proposed rule. Because the comments calculation. We posted guidance on our
Act. Manufacturers must submit ASP received during the comment period in Web site (http://questions.cms.hhs.gov/
data for each 11-digit National Drug response to the April 6, 2004 IFC were cgi-bin/cmshhs.cfg/php/enduser/
Code (NDC) to us quarterly. The std_adp.php?p_faqid=3323&p_
made during the initial months of
manufacturers’ submissions are due to created=1095344721&
manufacturers’ experience with
us not later than 30 days after the last p_sid=Ghuscgci&p_accessibility=0&
calculating and reporting ASPs and
day of each calendar quarter. The p_lva=&p_sp=cF9zcmNoPTEmcF9zb3J
prior to publication of payment amounts
methodology for developing Medicare 0X2J5PSZwX2dyaWRzb3J0
based on the ASP methodology, we
drug payment allowances based on the PSZwX3Jvd19jbnQ9M
believe there is good reason to provide
manufacturers’ submitted ASP data is zEmcF9wcm9kcz04LD
the public with the opportunity for
specified in the regulations in part 414, U2LDYwNCZwX2NhdHM9JnBfc
additional comments based on what is
subpart K. We update the Part B drug HY9My42MDQmcF9jdj0mcF9zZWFyY
now more than a year and a half of
payment amounts quarterly based on 2hfdHlwZT1hbnN3ZXJzLnNl
experience with the ASP reporting
the data we receive. YXJjaF9ubCZwX3BhZ2U9MQ**&p_li=&
requirements. Therefore, we seek p_topview=1) to clarify that in the
In this section of the preamble, we
comments on the ASP reporting absence of specific guidance in the
discuss our intent to issue a final rule
provisions in the April 6, 2004 IFC. In Social Security Act or Federal
to implement the provisions in the
particular, we seek comments on the regulations, the manufacturer may make
MMA related to the calculation and
issues discussed in the sections below. reasonable assumptions in its
submission of manufacturers’ ASP data,
and seek further comments on specific We note that we received many calculations of ASP, consistent with the
issues related to price concessions and comments in response to the April 6, general requirements and intent of the
certain fees. 2004 interim final rule on the use and Social Security Act, Federal regulations,
On April 6, 2004, we published the potential impacts of the ASP payment and its customary business practices.
Manufacturer’s Submission of Average methodology. As noted above, we are These assumptions should be submitted
Sales Price Data for Medicare Part B reopening the comment period on the along with the ASP data. In December
Drugs and Biologicals (ASP) interim issue of ASP reporting. Thus, comments 2004, we posted further guidance on our
final rule with comment period (IFC) about the use or appropriateness of the website addressing service fees and
(69 FR 17935) to implement the ASP ASP payment methodology are outside administrative fees paid to buyers
calculation and reporting requirements. the scope of this rulemaking and the (http://questions.cms.hhs.gov/cgi-bin/
Manufacturers were required to submit ASP reporting rule (CMS–1380–IFC). cmshhs.cfg/php/enduser/
mstockstill on PROD1PC63 with PROPOSAL_2

their initial quarterly ASP data to us Therefore, comments about the std_adp.php?p_faqid=3318&p_
shortly thereafter, beginning April 30, appropriateness and use of 106 percent created=1095343992&p_sid=a2qUcgci
2004. We received comments from drug of ASP as the basis for the Medicare Part &p_accessibility=0&p_lva=&p
manufacturers, pharmacies, physicians, B drug payment rates will be outside the _sp=cF9zcmNoPTEmcF9zb3J0X2J5PSZ
national associations of the scope of the comments considered for wX2dyaWRzb3J0PSZwX3Jvd19jbnQ9Mz
pharmaceutical industry, national the final ASP reporting rule we are EmcF9wcm9kcz04LDU2LDY
associations of physicians, and preparing to publish. wNCZwX2NhdHM9

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Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules 49001

JnBfcHY9My42MDQmcF9jdj0 service fee that we have proposed at would otherwise perform (or contract
mcF9zZWFyY2hfdH § 414.802. for), and that the fee is not passed on,
lwZT1hbnN3ZXJzLnNlYXJ In comments on the April 6, 2004 IFC, in whole or in part, to a client or
jaF9ubCZwX3BhZ2U9MQ**&p_li=&p groups representing wholesalers, customer of the entity. Our current
_topview=1 and http:// distributors and specialty pharmacies guidance provides that bona fide service
questions.cms.hhs.gov/cgi-bin/ provided some insight into the types of fees means expenses that would have
cmshhs.cfg/php/enduser/std_adp. activities that are performed in the generally been paid for by the
php?p_faqid=4136&p distribution of drugs. These commenters manufacturer at the same rate had these
_created=1109786814&p_sid=bxw-cgci suggested that costs for handling, services been performed by other
&p_accessibility=0&p_lva=& storage, inventory reporting, shipping, entities. We seek comments on
p_sp=cF9zcmNoPTE receiving, patient education, disease appropriate additional guidance or
mcF9zb3J0X2J5PSZwX2 management and data should be borne alternative methods for determining fair
dyaWRzb3J0PSZwX3Jvd19jbn by manufacturers and be excluded from market value for purposes of identifying
Q9MzEmcF9wcm9kcz04LDU2LDY the ASP calculation as bona fide bona fide service fees that are excluded
wNCZwX2NhdHM9JnBfcHY9 services. However, these commenters from the calculation of ASP, as well as
My42MDQmcF9jdj0mcF9zZWFyY2hfd did not provide detailed information comments on whether, and the extent to
HlwZT1hbnN3ZXJzLnNlYXJjaF9 about whether and how one would which, fees tied to performance of a
ubCZwX3BhZ2U9MQ**&p determine the extent to which these service, fixed fee, revenue generated by
_li=&p_topview=1). activities are bona fide services actually product sales, or other basis may
On July 6, 2005, we restated our performed on behalf of the manufacturer represent fair market prices for purposes
guidance on service fees in the preamble or otherwise. of identifying bona fide service fees that
of the Competitive Acquisition of Because the scope of appropriate are excluded from the calculation of
Outpatient Drugs and Biologicals Under services may vary across categories of ASP. In addition, we seek comments on
Part B (CAP) interim final rule with drugs, we are considering providing the appropriate methods for
comment (70 FR 39069). Subsequently, guidance on the types of services that determining whether a fee is passed on
we have received requests for may qualify as bona fide services for in whole or in part. We also seek
clarification on how fees paid to entities purposes of the ASP calculation. We are comments on how Medicare’s guidance
such as group purchasing organizations also considering providing further on the treatment of service fees for ASP
(GPOs) or PBMs must be treated for guidance on or revising the approach or calculation purposes may differ with the
purposes of the ASP calculation. methodology manufacturers must use to treatment of service fees for financial
We propose to further clarify in the determine the fair market value of bona accounting or other purposes, and any
final ASP reporting rule that, beginning fide services performed on their behalf implications that this may have for
with the ASP reporting for sales during and whether the service fee paid was manufacturers.
the first calendar quarter of 2007, bona passed on in whole or in part. In either
fide service fees that are paid by a case, we may implement our policy b. Estimation Methodology for Lagged
manufacturer to an entity, whether or through rulemaking or through program Exempted Sales
not the entity takes title to the drug, are instruction or other guidance (consistent Section 1847A(c)(2) of the Act
not considered price concessions under with our authority under section requires manufacturers to exclude from
§ 414.804(a)(2) insofar as, and to the 1847A(c)(5)(C) of the Act). the calculation of ASP those sales that
extent that, they satisfy the definition of We seek comments on the specific are exempt from the Medicaid best price
a bona fide service fee that we are types of services entities perform on (BP) calculation (for example, Federal
proposing at § 414.802. In § 414.802, we behalf of manufacturers that a sales, sales to State pharmacy assistance
propose to define bona fide service fees manufacturer would otherwise perform programs, sales to a prescription drug
as fees paid by a manufacturer to an (or contract for) and the necessity of plan for use under Medicare Part D). In
entity that represent fair market value those services in the efficient the comments on the April 6, 2004 IFC,
for a bona fide, itemized service actually distribution of drugs. We also seek commenters requested more guidance
performed on behalf of the manufacturer comments on activities that should not on the method manufacturers should
that the manufacturer would otherwise be considered bona fide services use to exclude exempted sales that are
perform (or contract for) in the absence performed on behalf of manufacturers. known on a lagged basis. Manufacturers
of the service arrangement, and that are To better understand which services identify exempted sales based on direct
not passed on, in whole or in part, to a may be considered bona fide services sales and through chargeback and rebate
client or customer of an entity, whether performed on behalf of the manufacturer data that may not be sufficiently
or not the entity takes title to the drug. that the manufacturer would otherwise available at the time the ASP is
Our current guidance, which provides perform (or contract for), we seek to calculated. In the absence of specific
that bona fide service fees means understand the bona fide services that guidance on how to account for lagged
expenses that would have generally may be appropriate for all or specific exempted sales (that is, exempted sales
been paid for by the manufacturer at the types of products, as well as the specific identified through chargeback or rebate
same rate had these services been services that may be applicable to processes), manufacturers have relied
performed by other entities, would unique products or circumstances. We upon assumptions in accordance with
continue unless we provide an also seek to understand the costs and their customary business practices to
alternative approach as discussed relative costs of services performed on develop their approach for excluding
below. Further, we propose to clarify in behalf of manufacturers. these sales from the ASP calculation. In
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the final ASP reporting rule that fees, To exclude a bona fide service fee our work with manufacturers that
including service fees, administrative from the ASP calculation, a submit ASP data, we understand that
fees and other fees, paid to GPOs or manufacturer must determine whether some manufacturers have used a ratio
PBMs are not considered price the fee paid to an entity represents fair methodology for estimating exempted
concessions under § 414.804(a)(2) market value for a bona fide service sales known on a lagged basis which is
insofar as, and to the extent that, they actually performed on behalf of the similar to the ratio methodology
satisfy the definition of a bona fide manufacturer that the manufacturer manufacturers must use to estimate

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49002 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

price concessions known on a lagged exempted sales are appropriately • State-owned or operated nursing
basis. removed from the ASP calculation. In facilities.
To establish a uniform approach, in addition, using an estimation • Any other facility or entity that the
§ 414.804(a)(4), we propose to require, methodology to remove lagged Secretary determines is a safety net
in the final ASP reporting rule, that all exempted sales reduces the likelihood provider to which sales of such drugs at
manufacturers use a 12-month (or less, of quarter to quarter variations in the a nominal price would be appropriate
if applicable) rolling average ratio ASP. based on the factors described in section
methodology to estimate exempted sales We seek comments on the proposed 1927(c)(1)(D)(ii) of the Act.
known on a lagged basis (through methodology for excluding exempted Because section 1847A(c)(2)(B) of the
chargebacks or rebates) in order to more sales known on a lagged basis from the Act requires manufacturers to exclude
accurately exclude these sales from the ASP calculation and estimate of lagged from the ASP calculation sales that are
ASP calculation. Specifically, for price concessions. We also solicit merely nominal in amount, as applied
exempted sales known on a lagged suggestions on appropriate alternative for purposes of section
basis, the manufacturer sums the lagged methodologies that may be less 1927(c)(1)(C)(ii)(III) of the Act, except as
exempted sales for the most recent 12- complex. the Secretary may otherwise provide,
month period available (or the number the DRA changes will have implications
c. Nominal Sales for ASP reporting beginning January 1,
of months the NDC has been sold for
NDCs with less than 12 months of sales, Section 1847A(c)(2)(B) of the Act 2007 (unless we provide an alternative
except for redesignated NDCs as requires manufacturers to exclude from policy for determining nominal sales as
described in section d below). The the ASP calculation sales that are permitted under section 1847A(c)(2)(B)
manufacturer then calculates a merely nominal in amount, as applied of the Act). One implication is that the
percentage using this summed amount for purposes of section limitations set forth in section
as the numerator and the sales (the 1927(c)(1)(C)(ii)(III) of the Act, except as 1927(c)(1)(D) of the Act will continue
number of units after non-lagged the Secretary may otherwise provide. the exclusion of nominal sales to certain
exempted sales have been subtracted Effective January 1, 2007, the DRA (Pub. entities while requiring that sales to
from total sales) for the same period (12 L. 109–171) modifies section entities not identified under section
months or less, if applicable) as the 1927(c)(1)(C)(ii)(III) of the Act. 1927(c)(1)(D) of the Act are included in
denominator. The result is a rolling Limitations on nominal sales have been the ASP calculation, even if such sales
average percentage estimate for lagged added in new section 1927(c)(1)(D) of are at very low prices. Another
exempted sales that is applied to the the Act. The DRA also modified the implication is the AMP calculation will
sales (the number of units after non- average manufacturer price (AMP) exclude customary prompt pay
lagged exempted sales have been calculation and frequency of AMP discounts extended to wholesalers, yet
subtracted from total sales) for the reporting. Therefore, we are proposing prompt pay discounts will continue to
quarter being reported. The product that to clarify the method manufacturers be a type of price concession that
results from multiplying the rolling must follow, beginning in 2007, to manufacturers must include in their
average percentage estimate of lagged identify nominal sales for ASP reporting ASP calculations. The change in
exempted sales and sales (the number of purposes and to exclude nominal sales treatment of customary prompt pay
units after non-lagged exempted sales from the calculation of the ASP. We also discounts extended to wholesalers in
have been subtracted from total sales) are seeking comments on whether we the AMP calculation may result in a
determines the number of lagged should establish an alternative higher number of sales that are at less
exempted sales (in units) to be excluded definition of nominal sales for ASP than 10 percent of the AMP than in past
from the denominator of the ASP purposes. ASP reporting periods (notwithstanding
calculation. Manufacturers must make a In the preamble to the ASP reporting the new limitation on what is
corresponding adjustment to the interim final rule, we stated sales to an considered a nominal sale under section
numerator of the ASP calculation to entity that are nominal in amount are 1927(c)(1)(D) of the Act). Still another
ensure that the total in dollars for the defined in the Medicaid drug rebate implication is that the frequency of
reporting quarter does not include agreement (see sample agreement at AMP reporting will include monthly
revenue related to lagged exempted http://www.cms.hhs.gov/ reporting; thus, for ASP purposes, there
sales excluded from the denominator MedicaidDrugRebateProgram/ is further need to clarify how nominal
using the proposed estimation downloads/rebateagreement.pdf). That sales are to be identified in 2007.
methodology. Further, manufacturers is, for ASP purposes, a nominal sale is Separate Medicaid rulemaking will
must remove the dollar value of lagged a sale at a price less than 10 percent of address the DRA provisions related to
exempted sales from their estimates of the AMP in the same quarter for which AMP reporting.
lagged price concessions by subtracting the AMP is computed. Effective January We believe the DRA modifications to
the dollar value of estimated lagged 1, 2007, the DRA revises the AMP section 1927 of the Act noted above will
exempted sales from the denominator as calculation (to omit customary prompt have minimal effect on reported ASPs.
specified in § 414.804(a)(3)(i). pay discounts extended to wholesalers), We would expect that the exclusion of
Our proposed methodology for added a monthly AMP reporting customary prompt pay discounts
excluding lagged exempted sales is requirement, and established limitations extended to wholesalers from AMP
similar to the methodology on nominal sales (only sales to certain would lead to a modest increase in
manufacturers are required to use to entities may qualify as nominal sales). AMP, and as a result a modest increase
estimate price concessions known on a Section 1927(c)(1)(D) of the Act limits in the number of sales that would
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lagged basis, and was recommended by the nominal sales exclusion to nominal qualify as nominal under the current
manufacturers. We believe requiring sales made to the following entities: ASP reporting regulations. At the same
similar methods to estimate both lagged • 340B covered entities as described time, we anticipate that the limitation
exempted sales and lagged price in section 340B(a)(4) of the Public on nominal sales in section
concessions is reasonable and reduces Health Services Act (PHS Act). 1927(c)(1)(D) of the Act will result in a
potential errors in the manufacturers’ • Intermediate care facilities for the modest reduction in the number of sales
ASP calculations, while ensuring that mentally retarded (ICFs/MR). that qualify as nominal sales for

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purposes of ASP reporting because we manufacturer repeats the series of estimating lagged excluded sales
believe that the entities outlined in calculations until no remaining ASP described in section b. above.
section 1927(c)(1)(D) of the Act eligible sales are below the nominal
(2) Redesignated NDCs
generally represent the types of entities threshold. Consistent with current
to which manufacturers may offer sales Medicaid reporting, for 2005 and 2006, From time to time, a manufacturer
at a nominal amount. Consequently, we manufacturers must identify nominal may change the NDC assigned to a
would expect these two countervailing sales by performing the following steps specific product and package size while
changes would have a minimal overall once: continuing or offering price concessions
impact on nominal sales that would be • The manufacturer calculates the that span across sales of the product
excluded from the ASP calculation. For AMP for the reporting quarter to under its prior and redesignated NDCs.
2007 and beyond, we propose to revise identify the dollar amount that For example, an NDC may be changed
§ 414.804(a)(4) to clarify that represents 10 percent of the AMP for to reflect a change in the labeler code
manufacturers must continue to use the that reporting period. while lagged price concessions in place
Medicaid threshold (less than 10 • The manufacturer then identifies under the prior NDC remain in effect
percent of AMP) to determine nominal and carry over to the redesignated NDC.
sales below this amount and excludes
sales that are excluded (subject to the Another example would be a
these sales from the ASP calculation.
limitations in section 1927(c)(1)(D) of manufacturer that modifies its package
• Beginning in 2007, the limitations design or other non-drug feature of the
the Act) from the ASP calculation. in section 1927(c)(1)(D) of the Act must
Further, we propose that, in identifying NDC and assigns a new NDC to reflect
also be met to exclude the sale. the revised packaging.
nominal sales, manufacturers must use
the AMP for the calendar quarter that is d. Other Price Concession Issues We propose to clarify in the final ASP
the same calendar quarter for the ASP reporting rule that, when an NDC is
In our ongoing work with changed (except when a product is
reporting period. For these reasons, we manufacturers that submit ASP data,
are proposing to continue the current repackaged or relabeled by a different
some manufacturers have posed manufacturer or relabeler or is privately
methodology for identifying and questions or raised concerns about how
excluding nominal sales (that is, sales labeled) and lagged price concessions
the estimate of lagged price concessions offered for the prior NDC remain in
that are exempt from the Medicaid best is done prior to having 12 months of
price calculation under section effect, the manufacturer must use 12
data for a NDC and, when a product is months (or the total number of months
1927(c)(1)(C)(ii)(III) of the Act) from the
redesignated with a new NDC, whether of sales of the prior and redesignated
manufacturer’s calculation of the ASP.
price concessions from the prior NDC NDCs if the total number of months of
We believe this approach helps
must be included in calculating the ASP sales is less than 12 months) of sales
maintain continuity in the ASP
for the new NDC. Manufacturers and and price concession data from the prior
calculation and minimizes
other stakeholders have also asked us and redesignated NDCs to estimate
manufacturers’ reporting burden, as
about how Medicare’s ASP guidance lagged price concessions applicable to
Medicare continues to follow the
concerning price concessions is to be the redesignated NDC. In establishing
Medicaid approach for identifying
applied when drugs are sold under this methodology, we are relying on our
nominal sales and manufacturers can
bundling arrangements. authority under section 1847A(c)(5)(A)
use a single method for identifying
nominal sales for both ASP and AMP In response, we are proposing of the Act.
purposes. clarifications and seeking comment on We seek comments on our proposed
We seek comments on our proposal to these issues. refinements to the estimation of lagged
continue use of the AMP as the basis for (1) Price Concessions for NDCs With price concessions for NDCs with less
identifying nominal sales excluded from Less Than 12 Months of Sales than 12 months of sales and when a
the ASP calculation and on whether an manufacturer redesignates the NDC
alternative threshold for identifying To address situations when a NDC assigned to a product. We also solicit
nominal sales for ASP calculation with price concessions known on a suggestions for potentially clarifying
purposes is necessary or desirable to lagged basis has not been sold for a full these policies further.
ensure the accuracy of the ASP payment 12 months, we propose to revise
§ 414.804(a)(3) to specify that the period (3) Bundled Price Concessions
methodology. Specifically, we seek
comments on whether sales at less than used to estimate lagged price We have heard a few concerns about
10 percent of the ASP (instead of the concessions is the total number of how Medicare’s ASP guidance
AMP) should be used to identify months the NDC has been sold. We concerning price concessions is to be
nominal sales for ASP purposes (with propose to require that manufacturers applied when drugs are sold under
the new requirement in section use less than 12 months of data in the bundling arrangements (for example,
1927(c)(1)(D) of the Act allowing only estimation methodology for lagged price when a purchaser’s price for one or
sales to certain entities to be considered concessions for NDCs with less than 12 more drugs is contingent upon the
nominal sales still being applicable). We months of sales (except when the purchase of other drugs or items). We
also seek comments on our belief that manufacturer has redesignated the would like to better understand how
the new limitations on nominal sales product’s NDC, as discussed below). bundling affects sales of Part B drugs
and change to the AMP calculation will Manufacturers may include the current and the ASP calculation, and any
have minimal impact on reported ASPs. ASP reporting quarter in the most recent concerns stakeholders may have on this
Subsequent to the April 6, 2004 IFC, 12 month period (or less for NDCs with issue. Therefore, we are soliciting
mstockstill on PROD1PC63 with PROPOSAL_2

we received requests for clarification on less than 12 months of sales) so long as comments on a number of these issues.
a technical aspect related to the the manufacturer follows this approach We note that we expect manufacturers
identification of nominal sales. in calculating the ASP for all of its of drugs reimbursed by Medicare Part B
Specifically, some manufacturers have reported NDCs. Using less than 12 to comply with all applicable laws,
asked whether nominal sales are months in the estimation methodology regulations, and legal decisions
identified by performing a series of for lagged price concessions is including, but not limited to the Stark
calculations once or whether the consistent with our proposal for law, other relevant anti-kickback laws,

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49004 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

antitrust laws, and laws governing fair may affect the impact of potential applicable threshold is specified as 5
trade practices. Our discussion of this apportionment methodologies on the percent for CY 2005. For CY 2006 and
issue in this proposed rule should not ASP calculation. subsequent years, section
be construed as an endorsement or 1847A(d)(3)(B) of the Act establishes
2. Clotting Factor Furnishing Fee
authorization of any pricing practices that the applicable threshold is ‘‘the
that contravene any laws, legal Section 303(e)(1) of the MMA added percentage applied under this
decisions, or regulations. section 1842(o)(5) of the Act which subparagraph subject to such
Thus far, we have not provided requires the Secretary, beginning in CY adjustment as the Secretary may specify
specific guidance in the ASP context on 2005, to pay a furnishing fee, in an for the WAMP or the AMP, or both.’’ In
the issue of apportioning price amount the Secretary determines to be CY 2006, we specified an applicable
concessions across drugs that are sold appropriate, to hemophilia treatment threshold percentage of 5 percent for
under bundling arrangements. In the centers and homecare companies for the both the WAMP and AMP. We based
absence of specific guidance, the items and services associated with the this decision on the limited data
manufacturer may make reasonable furnishing of blood clotting factor. available to support a change in the
assumptions in its calculations of ASP, Section 1842(o)(5)(C) of the Act current threshold percentage.
consistent with the general specifies that the furnishing fee for For CY 2007, we propose to specify an
requirements and the intent of the clotting factor for years after CY 2006 applicable threshold percentage of 5
Social Security Act, Federal regulations, and subsequent years will be equal to percent for the WAMP and the AMP. At
and its customary business practices. the fee for the previous year increased present, the OIG is continuing its
Manufacturers must include by the percentage increase in the comparison of both the WAMP and the
assumptions in their ASP submissions. consumer price index (CPI) for medical AMP. Since, at this time we do not have
We are now considering providing care for the 12 month period ending data that suggest another level is more
guidance, through rulemaking or with June of the previous year. In the appropriate, we believe that continuing
through program instruction or other CY 2006 PFS final rule, we announced the 5 percent applicable threshold
guidance (consistent with our authority that, based on the percentage increase in percentage for both the WAMP and
under section 1847A(c)(5)(C) of the Act) the CPI of 4.2 percent for the 12-month AMP is appropriate.
on the methodology manufacturers must period ending June 2005, the furnishing
There are a number of operational
use for apportioning price concessions fee is $0.146 per unit clotting factor for
issues associated with Medicare’s
across Part B drugs sold under bundling CY 2006.
arrangements for purposes of the The CPI data for the 12-month period authority to substitute a lower payment
calculation of ASP. As we consider this ending in June 2006 is not yet available. amount for a drug if the OIG finds and
issue, our goal is to ensure that the ASP In the FY 2007 PFS final rule, we will informs the Secretary, at such times as
is an accurate reflection of market prices include the actual figure for the percent the Secretary may specify, that the ASP
for Part B drugs and that the treatment change in the CPI for medical care for exceeds the WAMP or AMP by more
of bundled price concessions in the ASP the 12-month period ending June 2006, than the established threshold
calculation does not create and the updated furnishing fee for CY (currently 5 percent). We would
inappropriate financial incentives. 2007 calculated based on that figure. welcome public comment on
We are soliciting comments on a operational issues such as the timing
number of issues, including how 3. Widely Available Market Prices and frequency of the ASP, AMP, and
frequently Part B drugs are sold under (WAMP) and AMP Threshold WAMP comparisons and effective date
bundling arrangements, the different Section 1847A(d)(1) of the Act states and duration of the rate substitution.
structures of bundling arrangements that that ‘‘the Inspector General of HHS shall 4. Payment for Drugs Furnished During
may exist (for example, the number of conduct studies, which may include CY 2006 and Subsequent Years in
products included in a bundling surveys to determine the widely Connection With the Furnishing of
arrangement; whether the price available market prices (WAMP) of Renal Dialysis Services if Separately
concessions are contingent on the drugs and biologicals to which this Billed by Renal Dialysis Facilities
purchase of only one product, the section applies, as the Inspector
purchase of multiple products, or the General, in consultation with the In the November 21, 2005 PFS final
inclusion of one or more products on a Secretary, determines to be rule (70 FR 70116), we stated that
formulary; and the timing of the price appropriate.’’ Section 1847A(d)(2) of the payment for a drug furnished during CY
concessions), and the extent to which Act states that, ‘‘Based upon such 2006 in connection with renal dialysis
sales of Part B drugs are bundled with studies and other data for drugs and services and separately billed by
sales of non-Part B drugs or non-drug biologicals, the Inspector General shall freestanding renal dialysis facilities and
products. We also seek comment on compare the ASP under this section for hospital-based facilities would be based
what effect bundling arrangements may drugs and biologicals with— on section 1847A of the Act. We
have on the ASP calculation, on • The widely available market price intended this to mean CY 2006 and
beneficiary access to high quality, (WAMP) for these drugs and biologicals subsequent years. Therefore, in this
appropriate care (including access to (if any); and proposed rule, we are not proposing a
drugs that may not have clinical • The average manufacturer price policy change, but rather, we are
alternatives), and on costs to the (AMP) (as determined under section clarifying that this policy will apply to
Medicare program and beneficiaries. In 1927(k)(1) of the Act for such drugs and CY 2006 and subsequent years until
addition, we seek comments on whether biologicals.’’ otherwise specified.
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additional guidance on apportioning Section 1847A(d)(3)(A) of the Act


G. Proposed Provisions Related To
bundled price concessions for purposes states that, ‘‘The Secretary may
Payment for Renal Dialysis Services
of the calculation of ASP is needed and disregard the ASP for a drug or
Furnished by End-Stage Renal Disease
potential methodologies that Medicare biological that exceeds the WAMP or
(ESRD) Facilities
could consider requiring. Furthermore, the AMP for such drug or biological by
we seek comment on how variation in the applicable threshold percentage (as [If you choose to comment on issues
the structure of bundling arrangements defined in subparagraph (B)).’’ The in this section, please include the

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caption ‘‘ESRD PROVISIONS’’ at the Before January 1, 2005, payment to 2. CY 2006 Revisions
beginning of your comments.] both independent and hospital-based In the November 21, 2005 Federal
Since August 1, 1983, payment for facilities for the anti-anemia drug, Register (70 FR 70161), we published
dialysis services furnished by ESRD Erythropoietin (EPO) was established the CY 2006 PFS final rule with
facilities has been based on a composite pursuant to section 1881(b)(11) of the comment period (70 FR 70161)
rate payment system that provides a Act at $10.00 per 1,000 units. For implementing additional revisions to
fixed, prospectively determined amount independent ESRD facilities, payment payments to ESRD facilities under
per dialysis treatment, adjusted for for all other separately billable drugs section 623 of the MMA. For CY 2006,
geographic differences in area wage and biologicals was based on the lower we further revised the drug payment
levels. In accordance with section of actual charges or 95 percent of the methodology applicable to drugs
1881(b)(7) of the Act, separate average wholesale price (AWP). furnished by ESRD facilities. All
composite rates have been established Hospital-based ESRD facilities were separately billed drugs and biologicals
for hospital-based and independent paid based on the reasonable cost furnished by both hospital-based and
ESRD facilities. The composite rate is methodology for separately billed drugs independent ESRD facilities are now
designed to cover a package of goods and biologicals (other than EPO) paid based on ASP+6 percent.
and services needed to furnish dialysis furnished to dialysis patients. Changes We recalculated the 2005 drug add-on
treatments that include certain routinely to the payment methodology for adjustment to reflect the difference in
provided drugs, laboratory tests, separately billed ESRD drugs and payments between the pre-MMA AWP
supplies, and equipment. Unless biologicals that were established by the pricing and the revised pricing based on
specifically included in the composite MMA and were effective January 1, ASP+6 percent. The recalculation did
rate, other injectable drugs and 2005 are described in sections G.1. and not affect the actual add-on adjustment
laboratory tests medically necessary for G.2. below. These changes affected applied to payments in 2005, but
the care of the dialysis patient are payments in both CYs 2005 and 2006. provided an estimate of what the
separately billable. The base composite adjustment would have been had the
rates per treatment, effective on August 1. CY 2005 Revisions
2006 payment methodology been in
1, 1983, were $123 for independent On November 15, 2004, we published effect in 2005. The drug add-on
ESRD facilities and $127 for hospital- adjustment was then updated to reflect
the CY 2005 PFS final rule with
based ESRD facilities. The Congress has the expected growth in expenditures for
comment period (69 FR 66319 through
enacted a number of adjustments to the separately billable drugs in CY 2006.
66334), that revised payments to ESRD
composite rate since that time. The As of January 1, 2006, we also
facilities based on changes enacted by
current 2006 base composite rates are implemented a revised geographic
the MMA. The November 15, 2004 final
$130.40 for independent ESRD facilities adjustment authorized by section
rule with comment period implemented
and $134.53 for hospital-based ESRD 1881(b)(12) of the Act. As part of that
section 1881(b) of the Act, as amended
facilities. change, we—
by section 623 of the MMA. Changes
Section 623 of the MMA amended • Revised the labor market areas to
effective January 1, 2005, included
section 1881 of the Act to require incorporate the new CBSA designations
implementation of a case-mix adjusted
changes to the composite rate payment established by the Office of Management
payment system that incorporates
methodology, as well as to the pricing and Budget (OMB);
services that comprise the composite
methodology for separately billable • Eliminated the wage index ceiling
rate; an update of 1.6 percent to the
drugs and biologicals furnished by and reduced the floor to .8500; and
composite rate component of the
ESRD facilities. • Revised the labor portion of the
payment system; and a drug add-on of
Section 1881(b)(12) of the Act, as composite rate to which the geographic
8.7 percent to the composite rate for the
added by MMA, required the adjustment is applied.
difference between current payments for
establishment of a basic case-mix We also provided a 4-year transition
separately billable drugs and payments
adjusted prospective payment system from the previous wage-adjusted
based on the revised drug pricing for
(PPS) that would include the services composite rates to the current wage-
2005 which used acquisition costs. The
comprising the composite rate and an adjusted rates. For CY 2006, only 25
final rule also implemented case-mix
add-on to the composite rate component percent of the payment is based on the
adjustments to the composite rate for a
for the difference between current revised geographic adjustments, and the
limited number of patient
payments for separately billed drugs remaining 75 percent of payment is
and the revised drug pricing specified in characteristics (age, low body mass
based on the old Metropolitan Statistical
the statute. In addition, section index (BMI), and body surface area
Area-based (MSA-based) payments.
1881(b)(12) of the Act required that the (BSA)), effective April 1, 2005.
In addition, section 5106 of the DRA
composite rate be adjusted for a limited In addition, to implement section (Pub. L. 109–171), provided for a 1.6
number of patient characteristics (case- 1881(b)(13) of the Act, we revised percent update to the composite rate
mix) and section 1881(b)(12)(D) of the payments for drugs billed separately by component of the basic case-mix
Act gave the Secretary discretion to independent ESRD facilities, paying for adjusted payment system, effective
revise the wage indices and the urban the top 10 ESRD drugs based on January 1, 2006. As a result, the current
and rural definitions used to develop acquisition costs (as determined by the base composite rate is $130.40 for
them. Finally, section 1881(b)(12)(E) of OIG) and for other separately billed independent ESRD facilities and
the Act imposed a budget neutrality drugs at the average sales price +6 $134.53 for hospital-based facilities. The
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requirement, so that aggregate payments percent (hereafter referred to as ASP+6 drug add-on adjustment (including the
under the basic case-mix adjusted percent). Hospital-based ESRD facilities growth update) for 2006 is 14.5 percent.
composite payment system for 2005 continued to receive cost-based
would equal the aggregate payments payments for all separately billable 3. Provisions of the Proposed Rule
that would have been made for the same drugs and biologicals except for EPO For CY 2007, we are proposing the
period if section 1881(b)(12) of the Act which was paid based on average following provisions which are
did not apply. acquisition costs. described in more detail below:

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49006 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

• A method to annually calculate the a. Estimating Growth in Expenditures a good measure of drug pricing growth,
growth update to the drug add-on for Drugs and Biologicals for CY 2007 but does not capture the growth in per
adjustment required by section In developing the growth update to patient drug utilization that must also
1881(b)(12) of the Act, as well as an the drug add-on for CY 2006 we be part of an accurate estimate of growth
estimated growth update adjustment to conducted a trend analysis of prior in ESRD drug expenditures. However, if
the add-on amount of 0.6 percent for CY years’ ESRD drug expenditure data the PPI is used in conjunction with an
2007. (2001 through 2004). All 4 years of data estimate of per patient growth in drug
• An update to the wage index used for the trend analysis reflected utilization, we believe this measure
adjustments to reflect the latest hospital expenditures associated with payment would provide a simple and accurate
wage data, including a budget neutrality for separately billed drugs and approach to updating the drug add-on
adjustment of 1.053069 to the wage that could be readily used in subsequent
biologicals under the AWP
index for CY 2007. years. Moreover, using the PPI would
methodology. We could, therefore,
significantly reduce any data bias that is
develop growth estimates for CY 2006
4. Proposed Growth Update to the Drug inherent in using historical drug
using comparable historical expenditure
Add-On Adjustment to the Composite expenditure data that do not reflect
data. To extend the trend analysis for
Rates current drug payment methodologies.
CY 2007, we would need to include
As discussed in detail below, we are
Section 623(d) of the MMA added drug expenditure data from CY 2005.
proposing to estimate growth in per
section 1881(b)(12)(B)(ii) of the Act However, in CY 2005, section
patient utilization of drugs by using
which required the establishment of an 1881(b)(13)(A)(ii) of the Act required
historical data from 2004 and 2005.
add-on to the composite rate to account that we use a different drug payment Another approach to estimating the
for changes in the drug payment methodology, based on average growth in ESRD drug expenditures is to
methodology stemming from enactment acquisition costs, rather than the AWP continue using historical trend analysis
of the MMA. Section 1881(b)(12)(C) of methodology used in prior years. by making adjustments to the available
the Act provides that the drug add-on Therefore, ESRD drug expenditure data data to permit year to year comparisons.
must reflect the difference in aggregate for CY 2005 are not comparable to This would be accomplished by making
payments between the revised drug expenditure data for CY 2001 through an adjustment to the CY 2005 data based
payment methodology for separately CY 2004 for trend analysis purposes. on average acquisition price (AAP)
billable ESRD drugs (acquisition costs in This data issue will extend to using the weighted average difference
CY 2005; ASP+6 percent in CY 2006) subsequent years’ data as well, as we are between AWP prices and AAP prices.
and the AWP payment methodology in now paying for separately billable drugs We would use trend analysis to project
effect in CY 2004. using ASP+6 percent. Because we do the growth in drug expenditures for CY
not have comparable data on which to 2007.
In addition, section 1881(b)(12)(F) of
base continuing trend analysis, we While we believe this approach is
the Act requires that, beginning in CY
believe it is necessary to re-evaluate our reasonably accurate for developing the
2006, we establish an annual update to
methodology for updating the drug add- CY 2007 growth estimates, since only
the drug add-on to reflect estimated
on adjustment. one year of data would require
growth in expenditures for separately In order to address the issue of data
billable drugs and biologicals furnished adjustment, we are concerned about
comparability described above, we applying this methodology to future
by ESRD facilities. This growth update considered using available drug proxy
applies only to the drug add-on portion updates. Future year updates would
measures to predict growth in ESRD require multiple year to year
of the case-mix adjusted payment drug expenditures for CY 2007. We note
system. adjustments in prices. Moreover,
that section 1881(b)(12)(F) of the Act historical AWP data does not provide an
The CY 2006 drug add-on adjustment specifies that the drug update must accurate measure of price changes for
to the composite rate is 14.5 percent. reflect ‘‘the estimated growth in EPO under the revised drug payment
The drug add-on adjustment for CY expenditures for drugs and biologicals methodology, since EPO pricing was
2006 incorporates an inflation that are separately billable * * *.’’ By held constant during that historical
adjustment of 1.4 percent. This referring to ‘‘expenditures’’, we believe period.
computation is explained in detail in the statute contemplates that the update In addition, our estimate of the
the CY 2006 PFS final rule with would account for both increases in weighted average difference between
comment period (70 FR 70162). We note drug prices as well as increases in AAP prices and AWP prices (and ASP
that the drug add-on adjustment of 14.7 utilization of those drugs. versus AWP prices in CY 2006) was
percent that was published in November One available proxy measure that based on a projection of price levels. It
21, 2005 PFS final rule with comment reflects both price and utilization is the is likely that the weighted average
period did not account for the 1.6 national health expenditure projection difference would change based on
percent update to the composite rate for prescription drugs that is developed actual pricing data for each of those
portion of the basic case-mix adjustment by CMS. However, because of years. To be consistent with the statute,
payment system that was subsequently uncertainties regarding the impact of the we expect to update the established
enacted by the DRA, effective January 1, Medicare Part D prescription drug adjustment to reflect estimated growth
2006. Since we compute the drug add- program on expenditures, we are in drug expenditures, but we do not
on adjustment as a percentage of the concerned that the current estimates for anticipate re-computing the drug add-on
weighted average base composite rate, CY 2007 will likely change, as actual adjustment annually. Adjusting our
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the drug add-on percentage was Part D expenditure data become assumptions to estimate projected
decreased to account for the higher available. Therefore, we do not believe growth without changing the underlying
composite payment rate resulting in a this measure would be an appropriate assumptions in the add-on adjustment
14.5 percent add-on adjustment for CY proxy measure for this purpose. would create inconsistencies between
2006. This adjustment was necessary to Another widely recognized proxy the two elements. Therefore, we are
ensure that the total drug add-on dollars measure is the producer price index proposing to discontinue use of older
remained constant. (PPI) for prescription drugs. The PPI is historical drug spending data to

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estimate the growth update to the drug for drug expenditures in aggregate, for After removing the enrollment and
add-on adjustment. We will reconsider each of top ten separately billable drugs, price effects from the expenditure data,
our methodology when we have and within each for independent and we believe the residual growth would
sufficient historical data reflecting the hospital-based ESRD facilities. All reflect the per patient utilization
revised drug payment methodology components were then combined to growth. To do this, we divided the
using ASP pricing. estimate aggregate CY 2005 ESRD drug product of the enrollment growth of 3
For the reasons discussed above, we expenditures. The net adjustment to the percent (1.03) and the price reduction of
are proposing to develop an estimate of CY 2005 claims data was an increase of 12 percent (1.00 ¥ .12 = .88) into the
the growth in expenditures for ESRD 13 percent to the 2005 expenditure data. total drug expenditure decrease between
drugs and biologicals using the PPI for This adjustment allows us to more 2004 and 2005 of 9 percent (1.00¥.09
prescription drugs as a measure of price accurately compare the 2004 and 2005
increases in conjunction with two years = .91). The result is a utilization factor
data, to estimate utilization growth. equal to 1.00 (.91/(1.03 * .88) = 1.00).
of historical data from 2004 and 2005 as The next step is to remove the
a basis for estimating utilization growth enrollment and price growth As we observed no growth in per
at the per patient level. We believe that components from that total. As patient utilization of drugs between
this approach will best reflect the discussed earlier in this section, in 2004 and 2005, we are, therefore,
estimated growth in expenditures for developing the per patient utilization projecting no growth in per patient
ESRD drugs and biologicals. growth for this proposed rule, we utilization for CY 2007.
b. Estimating Growth in Per Patient limited our analysis to the latest 2 years 1. Applying the Proposed Growth
Drug Utilization of available ESRD drug data, that is, Update to the Drug Add-on Adjustment
2004 and 2005. We believe that per
To isolate and project the growth in In CY 2006, we estimated the growth
per patient utilization of ESRD drugs for patient utilization growth between these
update by trending drug expenditures
CY 2007, we need to remove the years would be a better proxy for future
forward based on four years of AWP
enrollment and price growth growth, as it best represents current
payment data (CY 2001 through CY
components from historical drug utilization trends. Furthermore, because
of the implementation of the new EPO 2004). We then applied the estimated
expenditure data and consider the growth update percentage to the total
residual utilization growth. We propose utilization monitoring policy that took
effect on April 1, 2006 (Medicare Claims amount of drug add-on dollars
to use total drug expenditure data from established for CY 2005 to come up with
CYs 2004 and 2005 to estimate per Processing Manual, Chapter 8, section
60–4ff, p. 51–53), we believe that per a dollar amount for the CY 2006 growth
patient utilization growth for CY 2007. update. In addition, we projected the
We first needed to estimate total drug patient utilization of ESRD drugs will
remain relatively stable or decline growth in dialysis treatments for CY
expenditures. For this proposed rule, we
slightly in future years. We note that 2006 based on the projected growth in
used the final CY 2004 ESRD claims
data and the latest available CY 2005 EPO accounts for nearly 70 percent of ESRD enrollment. We divided the
ESRD facility claims, updated through ESRD drug expenditures. projected total dialysis treatments for
December 31, 2005, that is, claims with To calculate the per patient utilization CY 2006 into the projected dollar
dates of service from January 1 through growth, we removed the enrollment amount of the CY 2006 growth to
December 31, 2005, that were received, component by using the growth in develop the per treatment growth
processed, paid, and passed to the enrollment data between 2004 and 2005. update amount. This growth update
National Claims History File as of This was approximately 3 percent. To amount, combined with the CY 2005 per
December 31, 2005. For the final rule, remove the price effect we used a two- treatment drug add-on amount, resulted
we will use more updated CY 2005 step process. First we calculated a in an average drug add-on amount per
claims with dates of service for the same weighted average between EPO and treatment of $18.88 (or a 14.5 percent
time period. This updated CY 2005 data non-EPO price growth factors to account adjustment to the composite rate) for CY
file will include claims that are for the growth in pre-MMA pricing 2006.
received, processed, paid, and passed to between 2004 and 2005. Since EPO was Beginning in CY 2007, we are
the National Claims History File as of priced at $10 per thousand units prior proposing to annually update the per
June 30, 2006. to the enactment of the MMA, there is treatment drug add-on amount of $18.88
While the December 2005 update of no growth for EPO. For the non-EPO
established in CY 2006 and convert the
CY 2005 claims used in this proposed drugs, we used the PPI as a proxy for the
update to an adjustment factor as
rule is the most recently available growth between the 2 years to maintain
stipulated in section 1881(b)(12)(F) of
claims data, we recognize that it is not consistency with the established
the Act. As explained above, we believe
a fully complete year as claims with methodology for calculating the drug
dates of service towards the end of the add-on adjustment which used the PPI this approach is more accurate than
year have not all been processed. To to estimate the price growth in recalculating the per treatment add-on
more accurately estimate the update to separately billable drugs (November 15, adjustment each year using an estimate
the drug add-on, we need aggregate drug 2004, CY 2005 PFS final rule with of growth in treatments. We note that
expenditures. Based on an analysis of comment period, 69 FR 66321). Next, we had received comments that our
the 2004 claims data, we inflated the CY we incorporated the estimated negative projections of treatment growth used to
2005 drug expenditures to estimate the 13 percent weighted price difference calculate the CY 2006 adjustment may
June 30, 2006 update of the 2005 claims between 2005 AWP and 2005 AAP have been overstated, however, we
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file. We used the relationship between pricing as was published in the CY 2005 believe that the use of enrollment data
the December 2004 and the June 2005 PFS final rule with comment period (69 was and remains the best measure
versions of 2004 claims to estimate the FR 66319 through 66334). This two-step available to predict treatment growth.
more complete 2005 claims that will be process to account for the price effect By proposing to apply the update to the
available in June 2006. We applied that from 2004 to 2005 led to an overall 12 CY 2006 per treatment add-on amount,
ratio to the 2005 claims data from the percent reduction in price between 2004 this estimation component is eliminated
December 2005 claims file. We did this and 2005. for CY 2007 and future years.

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49008 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

2. Proposed Update to the Drug Add-On One drug, darbepoetin alfa (Aranesp) Bulletin 03–04. OMB’s revisions had no
Adjustment accounted for the majority of all effect on the classification of counties
payments for new drugs. Therefore, this which comprise the urban and rural
As discussed above, we estimate no was the only new ESRD drug studied. areas used to develop the ESRD wage
growth in per patient utilization of The OIG report found that use of this index values. However, Bulletins 05–02
ESRD drugs for CY 2007. Using the drug was limited to a small number of and 06–01 changed the titles of several
projected CY 2007 PPI for prescription facilities (only 157 facilities reported of the MSAs and Metropolitan Divisions
drugs of 4.9 percent, we are projecting using this drug with concentrated use in used in connection with the ESRD
that the combined growth in per patient approximately 55 of these facilities). urban wage index. Table 5 below, which
utilization and pricing for CY 2007 Because of the recent changes we made contains the proposed wage index
would result in an update equal to the to the drug payment methodology and values for the ESRD urban areas,
PPI or 4.9 percent (1.0*1.049 = 1.049). the lack of comparable historical data, includes all of the changes announced
This update factor would be applied to the OIG report made no estimate of an by OMB in the February 22, 2005 and
the CY 2006 average per treatment drug expenditure growth rate for this drug. December 5, 2005 bulletins.
add-on amount of $18.88 (reflecting a Darbepoetin alfa (Aranesp) is
14.5 percent adjustment in CY 2006), currently paid as a separately billable b. Updated Wage Index Values
resulting in a proposed weighted drug at ASP+6 percent. Because of the In the CY 2006 PFS final rule with
average increase to the composite rate of recent (CY 2006) implementation of the comment period, we stated that we
$.93 for CY 2007 or a 0.6 percent ASP+6 percent drug reimbursement intended to update the wage index
increase in the CY 2006 drug add-on methodology, the small number of values annually (70 FR 70167). Current
percentage. Thus, the total proposed facilities using this drug for ESRD ESRD wage index values for CY 2006
drug add-on adjustment to the patients, and the lack of historical data were developed from FY 2002 wage and
composite rate for CY 2007, including for trending purposes, we have no data employment data obtained from the
the growth update, would be 15.2 to indicate that any difference in Medicare hospital cost reports. The
percent (1.145*1.006 = 1.152). payment methods for Aranesp (between values are calculated without regard to
In addition, we are proposing to 2004 and 2006) would affect our geographic reclassifications authorized
continue to use this method to estimate calculation of the drug add-on or of the under sections 1886(d)(8) and (d)(10) of
the growth update to the drug add-on growth update. Moreover, since Aranesp the Act and utilize pre-floor hospital
component of the case-mix adjusted was approved in 2001 for use in ESRD data that is unadjusted for occupational
payment system until we have at least patients, we believe that expenditures mix.
for Aranesp were reflected in the The methodology for calculating the
three years worth of ASP-based
historical data used to establish the CY 2006 wage index values was
historical drug expenditure data that
2005 drug add-on under a generic drug described in the CY 2006 PFS final rule
could be used to conduct a trend
code. Therefore, we are proposing to with comment period (70 FR 70168). We
analysis to estimate the growth in drug
make no additional changes to the drug propose to use the same methodology
expenditures. Given the time lag in the
add-on adjustment for CY 2007. for CY 2007, with the exception that FY
availability of ASP drug expenditure
2003 hospital data will be used to
data, we expect that the earliest we 5. Proposed Update to the Geographic develop the CY 2007 ESRD wage index
could consider using trend analysis to Adjustments to the Composite Rates values. For a detailed description of the
update the drug add-on adjustment Section 1881(b)(12)(D) of the Act, as development of the proposed CY 2007
would be 2010. We propose to amended by section 623(d) of the MMA, ESRD wage index values based on FY
reevaluate our methodology for gave the Secretary the authority to 2003 hospital data, see the FY 2007
estimating the growth update at that revise the wage indexes previously IPPS proposed rule entitled, ‘‘Proposed
time. applied to the ESRD composite rates. Changes to the Hospital Inpatient
c. OIG Report on New Drug Codes The wage indexes are calculated for Prospective Payment Systems and Fiscal
each urban and rural area. The purpose Year 2007 Rates,’’ (April 25, 2006, 71 FR
Section 623(c)(1) of the MMA of the wage index is to adjust the 24080). Section III F. (Computation of
mandated that the OIG conduct two composite rates for differing wage levels the Proposed FY 2007 Unadjusted Wage
studies to determine the difference covering the areas in which ESRD Index) of the preamble to that proposed
between the Medicare payment amount facilities are located. rule describes the cost report schedules,
for separately billable ESRD drugs and line items, data elements, adjustments,
the facilities’’ acquisition costs for these a. Updates to CBSA Definitions
and wage index computations. The
drugs, as well as estimating the growth In the CY 2006 PFS final rule with wage index data affecting ESRD
rate of expenditures for these drugs. The comment period (70 FR 70167), we composite rates for each urban and rural
initial study, ‘‘Medicare Reimbursement announced our adoption of the OMB’s locale may also be accessed on the CMS
for Existing End Stage Renal Disease CBSA-based geographic area website at: http://www.cms.hhs.gov/
Drugs’’ (OEI–03–04–00120) was designations to develop revised urban/ AcuteInpatientPPS/WIFN/list.asp.
completed in May 2004, and reported rural definitions and corresponding The wage data are located in the
on existing ESRD drugs. This report was wage index values for purposes of section entitled, ‘‘FY 2007 Proposed
used to set the CY 2005 reimbursement calculating ESRD composite rates. Rule Occupational Mix Adjusted and
rates for ESRD drugs billed by OMB’s CBSA-based geographic area Unadjusted Average Hourly Wage and
independent dialysis facilities (69 FR designations were described in Bulletin Pre-reclassified Wage Index by CBSA’’.
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66322). The second study (‘‘Medicare 03–04 originally issued June 6, 2003. On
Reimbursement for New ESRD Drugs’’ February 22, 2005 and December 5, (1) Wage Index Values for Areas With
(OEI–03–06–00200)) focused on new 2005, OMB released Bulletins 05–02 No Hospital Data
drugs. New drugs for the purpose of this and 06–01, respectively. Those bulletins In CY 2006, while adopting the CBSA
study were defined as an ESRD drug contained updates to the metropolitan designations, we identified a small
that did not have a BILLING CODE prior and micropolitan statistical area number of ESRD facilities in both urban
to January 1, 2004. designations initially announced in and rural geographic areas where there

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is no hospital wage data on which to • Massachusetts. to mitigate the impact on composite


base the calculations of the CY 2006 Under this alternative methodology, rates resulting from our adoption of
ESRD wage index values. Our CY 2005 the States in Census Division I for CBSA-based geographic designations
policy and CY 2006 proposal for each which rural wage index values are (70 FR 70169). Beginning January 1,
area are discussed separately below. available, as shown above, would be 2006, during each year of the transition,
The first situation was rural used; this would result in a simple an ESRD facility’s wage-adjusted
Massachusetts. Because there were no average rural wage index value of composite rate (that is, without regard to
reasonable proxies for rural data within 1.0227 (1.0770 after applying budget any case-mix adjustments) will be a
Massachusetts, we used the prior year’s neutrality factor (BNF)). Although this blend of its old MSA-based wage-
acute care hospital wage index value for methodology would result in a rural adjusted payment rate and its new
rural Massachusetts. For CY 2007, we Massachusetts wage index that is CBSA-based wage adjusted payment
propose to continue to use this value currently greater than the value under rate for the transition year involved. For
and request public input on an the current proposed policy (1.0216,
each transition year, the share of the
alternative methodology. 1.0758 after applying BNF), we believe
blended wage-adjusted base payment
Since there may be additional rural this methodology may be able to
accurately reflect future increases or rate that is derived from the MSA-based
areas in the future similarly impacted by and CBSA-based wage index values is
a lack of hospital wage data on which decreases of wage data for the States
within the applicable Census Division. shown in Table 4 below. In CY 2006, the
to derive a hospital wage index, we are first year of the transition, we
considering alternative methodologies Rural Puerto Rico is similar to rural
Massachusetts in that there are ESRD implemented a 75/25 blend. CY 2007 is
for imputing a rural wage index for the second year of the 4-year transition
areas in States where no hospital wage facilities where there are no acute care
hospitals and, therefore, no hospital period. Consistent with the transition
data are available. We believe that an
data. However, the situation for blends announced in the November 21,
evaluation of alternative methodologies
facilities in rural Puerto Rico is different 2005 PFS final rule with comment
for imputing a rural wage index in these
areas should adhere to four basic policy in that the floor would be applied to period (70 FR 70170), we are proposing
criteria. First, an alternative rural Puerto Rico ESRD facilities. All a 50/50 blend between an ESRD
methodology should retain our current areas in Puerto Rico that have an index facility’s MSA-based composite rate,
longstanding policy to use pre-floor, are eligible for the floor because they and its CY 2007 CBSA-based rate
pre-reclassified hospital wage data to have wage-index values that are below reflecting its revised wage index values.
compute wage index values for post .8000. For CY 2007, we propose to apply
In CY 2006, we also eliminated the
acute care facilities, including ESRD the floor to rural Puerto Rico.
wage index cap of 1.30, and stated that
facilities. Second, any methodology to The third situation involves an urban
area in Hinesville, GA (CBSA 25980). we would implement a gradual
impute a rural wage index should use reduction in the wage index floor of .90.
For CY 2006, we used a wage index
rural wage data to derive the rural wage Prior to January 1, 2006, the wage
value based on wage index values in all
index value. Third, any methodology to indexes were restricted to values no less
of the other urban areas within the same
impute a rural wage index should be than .90 and no greater than 1.30,
State to serve as a reasonable proxy for
easy to evaluate. Fourth, any meaning that payments to facilities in
the urban areas without hospital wage
methodology to impute a rural wage areas where labor costs fell below 90
index data. Specifically, we used the
index would be able to update wage percent of the national average, or
average wage index value for all urban
data from year-to-year. exceeded 130 percent of that average,
areas within the State of Georgia as the
We arrived at one alternative that were not adjusted beyond the 90 percent
urban wage index for purposes of
meets all of the above policy criteria. or 130 percent level. Although we stated
calculating the value for Hinesville for
Under this alternative, we would that the ESRD wage index values should
CY 2006. For CY 2007, we are proposing
impute a rural wage index value by not be constrained by the application of
to continue using this method for
using a simple average CBSA-based floors and ceilings, we also expressed
Hinesville, GA (CBSA 25980).
rural wage index value at the Census
We solicit comments on maintaining concern that the immediate elimination
Division level. Census Divisions are
our current policy for establishing wage of the floor could adversely affect ESRD
defined by the U.S. Census Bureau and
index values for rural and urban areas beneficiary access to care. Therefore, we
may be found at (www.census.gov/geo/
without hospitals, the alternative reduced the floor to .85 in CY 2006.
www/us_regdiv.pdf). As stated above,
approach outlined above in developing
for CY 2007, hospital wage data are not For CY 2007, we are proposing to
wage index values for rural areas
available to compute a rural wage index reduce the wage index floor to .80. As
without hospitals for CY 2007 and
for ESRD facilities in rural we stated in the CY 2006 PFS final rule
subsequent years, and other methods
Massachusetts, and this alternative with comment period, we intend to
that meet the policy criteria for
methodology could be applied in this reassess the continuing need for a wage
imputing wage index values. We will
case. Massachusetts is located in Census index floor in CY 2008 and CY 2009 (CY
also continue to evaluate existing
Division I (New England). The States in 2006 PFS final rule with comment
hospital wage data and, possibly, wage
this Census Division, and their period, November 21, 2005, 70 FR
data from other sources, such as the
respective rural wage index values 70169 through 70170). The proposed
Bureau of Labor Statistics, to determine
(using hospital cost report wage data for wage index floors, caps, and blended
if other methodologies of imputing a
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FY 2003) include— shares of the composite rates applicable


wage index value where hospital wage
• Connecticut (1.1753); data are not available may be feasible. to all ESRD facilities during CYs 2007
• Maine (0.8410); through 2009 are shown in Table 4
• New Hampshire (1.0800); (2) Second Year of the Transition below. They are identical to the values
• Vermont (0.9944) In the CY 2006 PFS final rule with shown in Table 20 of the CY 2006 PFS
• Rhode Island (all five counties comment period, we indicated that we final rule with comment period (70 FR
classified as urban); and would apply a 4-year transition period 70170) for the applicable years.

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TABLE 4.—WAGE INDEX TRANSITION BLEND


Old MSA New CBSA
CY payment Floor Ceiling (percent) (percent)

2007 ............................................................................. .80 * .................................. None ................................ 50 50


2008 ............................................................................. Reassess ......................... None ................................ 25 75
2009 ............................................................................. Reassess ......................... None ................................ 0 100
* Each wage index floor is multiplied by a budget neutrality adjustment factor. For CY 2007 the budget neutrality adjustment is 1.053069 result-
ing in an actual wage index floor of 0.8425.

An example of how the wage-adjusted that aggregate payments to ESRD Using treatment counts from the 2005
composite rates would be blended facilities in CY 2007 should be the same claims and facility-specific CY 2006
during CY 2007 and the two subsequent as aggregate payments that would have composite rates, we computed the
transition years follows. been made if we had not made any estimated total dollar amount each
Example: An ESRD facility has a wage- changes to the geographic adjusters. We ESRD provider would have received in
adjusted composite rate (without regard to note that this budget neutrality CY 2006 (the first year of the 4-year
any case-mix adjustments) of $135.00 per adjustment only addresses the impact of transition). The total of these payments
treatment in CY 2006. Using CBSA-based changes in the geographic adjustments. became the target amount of
geographic area designations, the facility’s A separate budget neutrality adjustment expenditures for all ESRD facilities for
CY 2007 wage-adjusted composite rate, was developed for the case-mix CY 2007. Next, we computed the
reflecting its wage index value as shown in adjustments, currently in effect. Since estimated dollar amount that would
Table 5 below, would be $145.00. During the we are not proposing any changes to the have been paid to the same ESRD
remaining 3 years of the four-year transition
period to the new CBSA-based wage index
case-mix measures for CY 2007, the facilities using the proposed ESRD wage
values, this facility’s blended rate through current case-mix budget neutrality will index for CY 2007 (the second year of
2009 would be calculated as follows: remain in effect for CY 2007. For CY the 4-year transition). The total of these
CY 2007 .50 × $135.00 + .50 × $145.00 2007, we again propose to apply a BNF payments became the second year new
= $140.00 directly to the ESRD wage index values, amount of wage-adjusted composite rate
CY 2008 .25 × $135.00 + .75 × $145.00 as we did in CY 2006. As we explained expenditures for all ESRD facilities.
= $142.50 in the CY 2006 PFS final rule with After comparing these two dollar
CY 2009 0 × $135.00 + 1.0 × $145.00 comment period (70 FR 70170 through amounts (target amount divided by
= $145.00 70171), we believe this is the simplest second year new amount), we calculated
We note that this hypothetical approach because it allows us to an adjustment factor that, when
example assumes that the calculated maintain our base composite rates multiplied by the applicable CY 2007
wage-adjusted composite rate of $145.00 during the transition from the current ESRD wage index shown in Tables 5
for CY 2007 does not change in CYs wage adjustments to the revised wage and 6 below, will result in payments to
2008 and 2009. In actuality, the wage- adjustments described earlier in this each facility that will remain within the
adjusted composite rate would change section. Because the ESRD wage index target amount of composite rate
because of annual revisions to the wage is only applied to the labor-related expenditures when totaled for all ESRD
index. However, the example serves portion of the composite rate, we facilities. The proposed budget
only to demonstrate the effect on the computed the BNF adjustment based on neutrality adjustment factor for the CY
composite rate of the CBSA-based wage that proportion (53.711 percent). 2007 wage index is 1.053069.
index values which will be phased-in In order to compute the proposed CY To ensure budget neutrality we also
during the remaining 3 years of the 2007 wage index BNF, we used the must apply the BNF to the wage index
transition period. wage index values in Tables 5 and 6 floor of 0.8000 which results in a
below, 2005 outpatient claims (paid and proposed adjusted wage index floor of
c. Budget Neutrality Adjustment processed as of December 31, 2005), and 0.8425 for CY 2007.
Section 1881(b)(12)(E)(i) of the Act, as geographic location information for each
d. ESRD Wage Index Tables
added by section 623(d) of the MMA, facility which may be found through
requires that any revisions to the ESRD Dialysis Facility Compare. Dialysis The following two tables show the
composite rate payment system as a Facility Compare can be found by going proposed CY 2007 ESRD wage index,
result of the MMA provision (including to the following Web site: http:// including the BNF adjustment, for urban
the geographic adjustment) be made in www.cms.hhs.gov/ areas (Table 5) and rural areas (Table 6).
a budget neutral manner. This means DialysisFacilityCompare/. BILLING CODE 4120–01–P
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TABLE 6.—PROPOSED CY 2007 ESRD WAGE INDEX FOR RURAL AREAS BASED ON CBSA LABOR MARKET AREAS
CBSA code Nonurban area Wage index

1 .................................................................................................. Alabama ..................................................................................... 0.8425


2 .................................................................................................. Alaska ........................................................................................ 1.1247
3 .................................................................................................. Arizona ....................................................................................... 0.9398
4 .................................................................................................. Arkansas .................................................................................... 0.8425
5 .................................................................................................. California .................................................................................... 1.1902
6 .................................................................................................. Colorado ..................................................................................... 0.9838
7 .................................................................................................. Connecticut ................................................................................ 1.2377
8 .................................................................................................. Delaware .................................................................................... 1.0239
10 ................................................................................................ Florida ........................................................................................ 0.9051
11 ................................................................................................ Georgia ...................................................................................... 0.8425
12 ................................................................................................ Hawaii ........................................................................................ 1.1022
13 ................................................................................................ Idaho .......................................................................................... 0.8566
14 ................................................................................................ Illinois ......................................................................................... 0.8769
15 ................................................................................................ Indiana ....................................................................................... 0.8927
16 ................................................................................................ Iowa ............................................................................................ 0.9159
17 ................................................................................................ Kansas ....................................................................................... 0.8425
18 ................................................................................................ Kentucky .................................................................................... 0.8425
19 ................................................................................................ Louisiana .................................................................................... 0.8425
20 ................................................................................................ Maine ......................................................................................... 0.8856
21 ................................................................................................ Maryland .................................................................................... 0.9417
22 ................................................................................................ Massachusetts ........................................................................... 1.0758
23 ................................................................................................ Michigan ..................................................................................... 0.9532
24 ................................................................................................ Minnesota ................................................................................... 0.9653
25 ................................................................................................ Mississippi .................................................................................. 0.8425
26 ................................................................................................ Missouri ...................................................................................... 0.8425
27 ................................................................................................ Montana ..................................................................................... 0.9062
28 ................................................................................................ Nebraska .................................................................................... 0.9154
29 ................................................................................................ Nevada ....................................................................................... 0.9435
30 ................................................................................................ New Hampshire ......................................................................... 1.1373
31 ................................................................................................ 1 New Jersey ..............................................................................

32 ................................................................................................ New Mexico ............................................................................... 0.8790


33 ................................................................................................ New York ................................................................................... 0.8688
34 ................................................................................................ North Carolina ............................................................................ 0.9055
35 ................................................................................................ North Dakota .............................................................................. 0.8425
36 ................................................................................................ Ohio ............................................................................................ 0.9134
37 ................................................................................................ Oklahoma ................................................................................... 0.8425
38 ................................................................................................ Oregon ....................................................................................... 1.0288
39 ................................................................................................ Pennsylvania .............................................................................. 0.8774
41 ................................................................................................ 1 Rhode Island ............................................................................

42 ................................................................................................ South Carolina ........................................................................... 0.8425


43 ................................................................................................ South Dakota ............................................................................. 0.9038
44 ................................................................................................ Tennessee ................................................................................. 0.8425
45 ................................................................................................ Texas ......................................................................................... 0.8425
46 ................................................................................................ Utah ............................................................................................ 0.8587
47 ................................................................................................ Vermont ...................................................................................... 1.0472
48 ................................................................................................ Virgin Islands ............................................................................. 0.8425
49 ................................................................................................ Virginia ....................................................................................... 0.8425
50 ................................................................................................ Washington ................................................................................ 1.0827
51 ................................................................................................ West Virginia .............................................................................. 0.8425
52 ................................................................................................ Wisconsin ................................................................................... 0.9970
53 ................................................................................................ Wyoming .................................................................................... 0.9805
1 All counties in the States of New Jersey and Rhode Island are urban.

H. Private Contracts and Opt-Out of BIPA (Pub.L. 106–554), section purposes of opting out of Medicare,
Provision—Practitioner Definition 1802(b)(5)(C) of the Act, which refers to current law permits registered dietitians
[If you choose to comment on issues the definition of ‘‘practitioner’’ at or nutrition professionals to opt-out of
in this section, please include the section 1842(b)(18)(C) of the Act, did Medicare. Because the definition of
caption ‘‘PRIVATE CONTRACTS AND not include registered dietitians or practitioner located in the current
OPT-OUT’’ at the beginning of your nutrition professionals among the regulations at § 405.400 does not
comments.] practitioners who may choose to opt-out include registered dietitians or nutrition
Section 4507 of the BBA of 1997 of Medicare. Section 105(d) of BIPA professionals, we are proposing to
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amended section 1802 of the Act to amended the definition of practitioner amend that section so that it is
permit certain physicians and located at section 1842(b)(18)(c) of the consistent with section 1802(b)(5)(C) of
practitioners to opt-out of Medicare if Act to include registered dietitians or the Act.
certain conditions were met, and to nutrition professionals. Because section
provide through private contracts 1802(b)(5)(C) of the Act references
services that would otherwise be section 1842(b)(18)(c) of the Act in order
covered by Medicare. Before enactment to define the term practitioner for

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49054 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

I. Proposed Changes to Reassignment existing requirements for purchased beneficiary. However, section 1842(b)(6)
and Physician Self-Referral Rules tests and purchased test interpretations. of the Act, also provides exceptions,
Relating to Diagnostic Tests Section 1842(n) of the Act contains known as the reassignment exceptions,
[If you choose to comment on issues certain limitations on billing for the TC to this general rule. These exceptions
in this section, please include the of diagnostic tests described in section allow us to make payment to an
caption ‘‘REASSIGNMENT AND 1861(s)(3) of the Act (other than clinical individual or an entity other than the
PHYSICIAN SELF-REFERRAL’’ at the diagnostic laboratory tests paid under beneficiary or the physician or other
beginning of your comments.] section 1833(a)(2)(D) of the Act, which person who performed the service for
Historically, Medicare rules have are subject to the special rules set forth the beneficiary. For example, the
prohibited the markup of the TC of in section 1833(h)(5)(A) of the Act). reassignment exceptions allow us to
certain diagnostic tests that are Section 1842(n)(1)(A) of the Act make payment to an employer of a
performed by outside suppliers and provides that if the test was not physician, such as a group practice or a
billed to Medicare by a different performed by the billing physician and hospital, to which the physician
also was not performed or supervised by employee has reassigned his or her right
individual or entity. In addition,
a physician with whom the billing to payment.
Medicare rules restrict who may bill
physician shares a practice, Medicare Prior to the MMA, a physician or
Medicare for the PC (hereafter, also other individual supplier could reassign
payment is the lower of the costs (net of
referred to as the ‘‘interpretation’’) of his or her right to bill and receive
any discount) charged by the performing
diagnostic tests. Recent changes to our payment under a contractual
supplier to the billing physician, or the
rules on reassignment of the right to arrangement, rather than an employee-
performing supplier’s reasonable charge
receive Medicare payment may have led employer relationship, only if the
(or other applicable limit). This is
to some confusion as to whether the services being paid for were performed
commonly known as the anti-markup
anti-markup and purchased on the premises of the contracting
provision. Section 1842(n)(2) of the Act
interpretation requirements apply to further provides that a physician may hospital, critical access hospital, clinic,
certain situations where a reassignment not bill a beneficiary any amount other or other facility. Section 952 of the
has occurred pursuant to a contractual than the amount specified in section MMA, however, amended section
arrangement. 1842(n)(1)(A) of the Act and any 1842(b)(6)(A)(ii) of the Act to extend the
Likewise, we are concerned about the applicable deductible and coinsurance. reassignment exception to contractual
existence of certain arrangements that Under section 1842(n)(3) of the Act, if arrangements regardless of whether the
are not within the intended purpose of a physician knowingly, willfully, and services are performed on the premises
our physician self-referral rules, which repeatedly bills a Medicare beneficiary of the billing entity. Section 952 of the
allow physician group practices to bill for more than the amount allowed under MMA permits us to recognize this type
for services furnished by a contractor section 1842(n)(2) of the Act, he or she of reassignment to the extent that the
physician in a ‘‘centralized building.’’ is subject to civil monetary penalties contractual arrangement between the
We are concerned that allowing and assessments, and exclusion from physician or other individual supplier
physician group practices or other Medicare and Medicaid for up to 5 and the billing entity (excluding a
suppliers to purchase or otherwise years. Our regulations implementing billing agent, which cannot receive
contract for the provision of diagnostic section 1842(n) of the Act appear at reassigned benefits) meets program
tests and then to realize a profit when § 414.50 and § 402.1(c)(15). integrity and other safeguards as the
billing Medicare may lead to patient and In addition, our Claims Processing Secretary may determine to be
program abuse in the form of Manual (Pub. 100–4) outlines certain appropriate. A motivating factor behind
overutilization of services and result in conditions regarding who can submit a the passage of section 952 of the MMA
higher costs to the Medicare program. claim for purchased diagnostic test appears to have been the desire by the
Therefore, we are proposing to amend intepretations. As set forth in Chapter 1, Congress to permit us to allow hospital
our reassignment regulations to clarify Section 30.2.9.1 of the Claims emergency department staffing
how the purchased test and purchased Processing Manual, the following companies that employ physicians on a
test interpretation rules apply in the requirements must be satisfied in order contract basis to bill Medicare (if the
case of a reassignment made under the to submit a claim for a purchased staffing companies enroll in Medicare).
contractual arrangement exception set diagnostic test interpretation: Our proposed implementation of
forth at § 424.80(d)(2). Specifically, in • The test must be ordered by a section 952 of the MMA appeared in the
our reassignment regulations, we physician or medical group that is Revisions to Payment Policies Under the
propose to incorporate provisions independent of the person or entity Physician Fee Schedule for Calendar
similar to those that currently appear in performing the TC of the test, and also Year 2005 proposed rule, 69 FR 47488,
§ 414.50 of our regulations on purchased must be independent of the physician or 47524 through 47525 (August 5, 2004).
tests, and we are considering medical group performing the We proposed program safeguards,
incorporating provisions on purchased interpretations. whereby the parties to the contractual
test interpretations that currently appear • The physician or medical group arrangement would have joint and
in our manual instructions. In addition, performing the interpretations does not several liability for any Medicare
we are proposing to change the see the patient. overpayments, and the physician or
definition of ‘‘centralized building’’ at • The purchaser (or employee, other individual supplier would have
§ 411.351 of the physician self-referral partner, or owner of the purchaser) unrestricted access to billings submitted
regulations to place certain restrictions performs the TC of the test, and the on his or her behalf by the entity
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on what types of space ownership or interpreting physician must be enrolled receiving reassigned payments. In that
leasing arrangements will qualify for in the Medicare program. proposed rule, we stated our awareness
purposes of the physician self-referral Section 1842(b)(6) of the Act generally that the changes to the reassignment
in-office ancillary services exception prohibits Medicare payment to anyone rules authorized by section 952 of the
and physician services exception. other than the Medicare beneficiary or MMA may create new fraud and abuse
Our proposals regarding the the physician or other person who vulnerabilities, which may not become
reassignment regulations are based on performed the service for the apparent until the program has

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experience with new contractual reassigning benefits to another physician employee, a locum tenens
arrangements. We solicited comments physician if the physicians do not physician, or an on-call physician while
on these potential program practice in substantially the same the physician is providing on-call
vulnerabilities and on possible medical specialty. Some commenters services for members of the group
additional safeguards to protect against also stated that our regulations need to practice. ‘‘Physician in the group
such vulnerabilities. state more clearly that all requirements practice’’ means a member of the group
Comments submitted in response to of the purchased diagnostic test rules practice, as well as an independent
the CY 2005 PFS proposed rule and purchased test interpretation rules contractor physician during the time the
expressed concern over the recent need to be met. independent contractor is furnishing
growth of ‘‘pod’’ or ‘‘condo’’ laboratories In the CY 2005 PFS final rule, we patient care services for the group
(hereinafter ‘‘pod labs’’). In a typical responded that we shared the practice to the group practice’s patients
pod lab arrangement involving commenters concerns, although we in the group practice’s facilities. (See
pathology services, an entity leases declined to incorporate the suggested § 411.351.)
space in a medical building and then revisions at that time. We said that we Another significant exception, at
subdivides the space into separate areas would be paying close attention to this § 411.355(b), is for the provision of in-
or cubicles, which are equipped with issue, and that we might initiate future office ancillary services. This exception
microscopes and a minimal amount of rulemaking to address arrangements that allows group practice physicians to refer
other laboratory equipment. The entity are fraudulent or abusive. (See 69 FR patients for DHS to other members of
subleases each space to a physician 66316, November 15, 2004.) In that final their group or to nonphysician staff,
group practice, even though the space rule, we amended our reassignment provided that certain supervision,
may be located many miles away from regulation at § 424.80(a) to state that location, and billing requirements are
any medical office of the group practice nothing in § 424.80 alters an satisfied. Specifically, the DHS must be
and is often located in a different state. individual’s or entity’s obligations furnished personally by the referring
The entity hires a histologist who under other Medicare statutes or rules, physician, a member of the group
performs the TC of the pathology including, but not limited to, the practice, or an individual who is
service, by preparing a microscopic physician self-referral law (section 1877 supervised by the referring physician or
slide of each specimen for review by a of the Act), the anti-kickback statute by a physician in the group practice. In
pathologist. The entity also makes (section 1128B(b)(1) of the Act), the addition, the DHS must be furnished
arrangements with a pathologist, who regulations regarding purchased in—(1) the ‘‘same building’’ where
performs the PC of the pathology service diagnostic tests, and the regulations group physicians perform a certain
and who also supervises the pod lab. regarding services and supplies amount of physician services (as set
In one type of arrangement, the provided incident to a physician’s forth in § 411.355(b)(2)), including
pathologist and histologist perform their service. physician services unrelated to the
services for the different group practices At about the same time as we provision of DHS; or (2) in a
by moving from cubicle to cubicle. Each published our proposed rule for ‘‘centralized building.’’ We define
group practice pays the pathologist a fee implementing section 952 of the MMA, ‘‘centralized building,’’ in pertinent
for every slide reviewed and pays the we published an IFC concerning part, as all or part of building that is
entity a management fee, which covers exceptions to the physician self-referral owned or leased on a full-time basis 24
the rental of the pod lab and the law in section 1877 of the Act (69 FR hours per day, 7 days per week. In the
histologist’s salary. The group practice 16054). Section 1877 of the Act ‘‘Phase II’’ physician self-referral IFC,
then bills Medicare for the entire prohibits a physician from making we reaffirmed our earlier position, set
pathology service, typically at a markup referrals for DHS, as defined in section forth in the ‘‘Phase I’’ final rule with
from what the group practice paid the 1877(h)(6) of the Act, payable by comment period that, a group practice
pathologist for the professional service Medicare to an entity with which he or may have more than one centralized
and the entity for its services. In another she (or an immediate family member) building (69 FR at 16075).
common arrangement, the histologist has a financial relationship (ownership In response to the Phase II IFC,
performs the TC of the pathology service or compensation), and it prohibits the several commenters strongly criticized
for the entity and the entity bills entity from billing Medicare, another the centralized building prong of the in-
Medicare for that service, while the payor, or the beneficiary for those office ancillary services exception. They
group practice bills for the referred services, unless an exception requested that the rule be changed to
interpretation that was performed by its applies. The statute establishes a require full-time use of the facility and
independent contractor pathologist, number of specific exceptions to these the addition of a commercially
who has reassigned to the group prohibitions and grants the Secretary reasonable test. According to the
practice his or her right to receive the authority to create regulatory commenters, the Phase II IFC
Medicare payment. exceptions for financial relationships encourages numerous abusive
The commenters stated that pod lab that pose no risk of fraud or abuse. arrangements that are designed solely to
arrangements are subject to fraud, waste One significant exception is at permit medical groups to bill in
and abuse, including, but not limited to § 411.355(a) for the provision of circumvention of the prohibition in
the following: ‘‘physician services’’ as defined in section 1877 of the Act. Commenters
• Generation of medically § 410.20(a). Under this exception, objected to medical groups establishing
unnecessary biopsies. professional physician services that are satellite DHS facilities, sometimes in
• Kickbacks. DHS must be furnished personally by different States, specifically to capture
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• Fee-splitting. another physician who is a member of ancillary income. Several commenters


• Referrals that would otherwise be the referring physician’s group practice, identified pod labs that rent space to
prohibited under the physician self- or by a physician in the same group urology groups as among the types of
referral statute. practice as the referring physician, or by abusive arrangements that are
The commenters provided several someone under the supervision of one proliferating. Several other commenters
suggestions. One commenter suggested of these physicians. A ‘‘member’’ of a requested clarification that the in-office
that we prohibit a physician from group practice is a physician owner, a ancillary services exception did not

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override our policies on reassignment physician or medical group performing provision should apply to the
and purchased diagnostic tests. the interpretation. reassignment of the PC of diagnostic
According to the comments, some of the • The physician or medical group tests performed under a contractual
arrangements do not satisfy the rules performing the interpretation does not arrangement, and if so, how to
regarding purchased diagnostic tests. On see the patient. determine the correct amount that
the other hand, a professional • The physician or medical group should be billed to the Medicare
association complained that the billing for the interpretation must have program.
requirement that the centralized performed the TC of the test. In addition to our proposed changes
building be occupied exclusively by the We believe that we are comfortably to the reassignment rules, we are
medical group is too restrictive. within our authority to place the proposing to change the definition of
As noted above, we stated, in proposed restrictions on reassignments ‘‘centralized building’’ in § 411.351 for
response to the comments on the made before a contractual arrangement, purposes of our physician self-referral
proposed rule implementing section 952 in order to guard against patient and regulations. We are persuaded by the
of the MMA, that we might address program abuse, and we also believe that commenters who responded to the
suspect arrangements in a future we would be within our authority to Phase II IFC that our present definition
rulemaking. After additional adopt the conditions on billing for a may encourage the unnecessary
consideration, including consideration reassigned PC before a contractual ordering of ancillary services. Section
of the comments we received in arrangement that we continue to 1877(b)(1) of the Act, in conjunction
response to the Phase II IFC, we are now consider. with section 1877(h)(4)(vi) of the Act,
We note that there is no right to effect states that the Secretary may define by
proposing to amend our regulations on
a reassignment under section 1842(b)(6) regulation what constitutes a ‘‘group
reassignment and physician self-referral
of the Act (rather, this section allows, practice’’ for purposes of the physician
in this proposed rule.
but does not require us to make services exception. Similarly, section
We are proposing to amend § 424.80 payment to someone other than the
of our regulations to clarify that any 1877(b)(2) of the Act authorizes the
beneficiary or the physician or other Secretary to determine additional terms
reassignment pursuant to the person who performed the service), and
contractual arrangement exception is and conditions relating to the
that section 952 of the MMA permits us supervision and location requirements
subject to program integrity safeguards to recognize reassignments under the
that relate to the right to payment for of the in-office ancillary services
contractual arrangement exception only exception as may be necessary to
diagnostic tests. First, we would amend to the extent that the arrangement meets
§ 424.80 of our regulations to provide prevent a risk of program or patient
program integrity and other safeguards abuse. Accordingly, we propose to
that if the TC of a diagnostic test (other as the Secretary may determine to be
than clinical diagnostic laboratory tests modify the definition of ‘‘centralized
appropriate. Moreover, we believe that building’’ to include a minimum square
paid under section 1833(a)(2)(D) of the our current rules on purchased footage requirement of 350 square feet.
Act, which are subject to the special diagnostic tests generally should be Our modified definition would be
rules set forth in section 1833(h)(5)(A) applicable to both situations in which relevant to both the physician services
of the Act) is billed by a physician or the billing entity is purchasing the test exception and the in-office ancillary
medical group (the ‘‘billing entity’’) without a formal reassignment as well services exception. That is because,
under a reassignment involving a as situations in which the physician under § 411.351, a ‘‘physician in the
contractual arrangement with a performing the test has reassigned his or group practice’’ includes an
physician or other supplier who her right to Medicare payment to the independent contractor physician
performs the service, the amount billed billing physician or medical group. during the time he or she is providing
to Medicare by the billing entity, less Although we welcome comments on services to the group’s patients in the
the applicable deductibles and all aspects of our proposals, we are group’s facilities. Thus, to the extent
coinsurance, may not exceed the lowest particularly interested in soliciting that an independent contractor
of the following amounts: comments on the amendments we have physician would qualify as a ‘‘physician
• The physician or other supplier’s proposed, as well as those we are still in the group’’ on the basis of furnishing
net charge to the billing physician or considering involving reassigned services to a group’s patients in a
medical group. interpretations, to § 424.80(d). In centralized building, the space owned
• The billing physician’s or medical particular, we are soliciting comments or leased by the group would need to
group’s actual charge. as to whether diagnostic tests in the comply with the proposed modification
• The fee schedule amount for the DHS category of radiology and certain to the definition of ‘‘centralized
service that would be allowed if the other imaging services should be building’’ in order for the group to rely
physician or other supplier billed excepted from any those provisions; on the physician services exception or
directly. whether the proposal in whole or in part the in-office ancillary services exception
Second, we would also require that, should apply only to pathology services; when billing Medicare for services
in order to bill for the TC, the billing whether any of these provisions should furnished by the independent contractor
entity would be required to perform the apply to services performed on the physician.
interpretation. Third, we are premises of the billing entity and if so, Although we believe that the
considering further amendments to how to define the premises arrangements we seek to address
§ 424.80(d) that would impose certain appropriately. We are also soliciting through our proposed change to the
conditions on when a physician or suggested regulatory text for the definition of ‘‘centralized building’’
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medical group can bill for a reassigned proposal under consideration involving primarily involves independent
PC of a diagnostic test. We are purchased test interpretations, as well contractor physicians, the proposed
considering the following conditions: as any other comments regarding the definition would also apply to services
• The test must be ordered by a appropriate scope of the provisions performed by physicians who are
physician that is financially under consideration. employees of a group practice.
independent of the person or entity In addition, we are soliciting The proposed minimum square
performing the test and also of the comments on whether an anti-markup footage requirement would not apply to

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space owned or rented in a building in square footage limits and requirements provides that payment may not be made
which no more than three group of having necessary equipment on site to anyone other than the beneficiary or
practices own or lease space in the would make it not financially feasible the physician or other person who
‘‘same building,’’ as defined in for pod labs to exist. provided the service. There are certain
§ 411.351 (that is, in a building with the With respect to our proposed change exceptions to this prohibition whereby
same street address) and share the same to the definition of ‘‘centralized payment may be made to others. These
‘‘physician in the group practice’’ (as building,’’ we seek comments on are commonly referred to as the
defined in § 411.351). The purpose of whether there should be a minimum reassignment exceptions and are found
the square foot minimum and the square foot requirement, and if so, at section 1842(b)(6)(A) of the Act.
exception is to prevent abusive whether the minimum should be 350 Taking these two statutory provisions
arrangements such as pod labs, while square feet or an amount more or less together, we are permitted, but not
not disqualifying legitimate, stand-alone than that. In addition, we seek required, to make payment to someone
physician offices that are unusually comments regarding whether there other than the beneficiary, or the
small. The following examples are should be an exception to any minimum physician or other person who
intended to illustrate how the proposed square foot requirement, and if so, the furnished the service, but only if we
exception might apply: circumstances under which an have determined that Medicare has
+ Example 1—A space of 200 square exception should apply. received all necessary information to
feet located in a building in which only With respect to our proposal that the determine the amounts due the
two other group practices lease space ‘‘centralized building’’ permanently provider. Where Medicare makes
could qualify as a centralized building, contain the necessary equipment to payment to an entity rather than to the
irrespective of whether all three group perform substantially all of the DHS that physician or other person who
practices contract with the same is furnished in the ‘‘centralized furnished the service, there is a
individual as a ‘‘physician in the group building,’’ we seek comments on heightened concern that payment may
practice.’’ whether this test should be imposed, not be correct. By allowing physicians
+ Example 2—A space of 200 square and whether at least 90 percent or some and other individual suppliers who
feet is located in a building in which other minimum percentage or reassign benefits to an entity such as a
seven other group practices lease space. measurement is appropriate. We are also group practice to have access to the
Dr. Jones has a contractual relationship considering whether to require that, for billing information concerning the
with three group practices as a space to qualify as a ‘‘centralized services they allegedly furnish, we
‘‘physician in the group practice.’’ Dr. building,’’ the group practice must believe we will reduce the risk of
Smith also has a contractual employ, in that space, a nonphysician inappropriate billing.
relationship with three group practices. employee or independent contractor Moreover, as noted in section I.2. of
No physician has a contractual who will perform services exclusively this proposed rule, section 952 of the
relationship as a ‘‘physician in the for the group for at least 35 hours per MMA amended section 1842(b)(6)(A)(ii)
group practice’’ with four or more group week. We seek comments on whether of the Act to allow a physician or other
practices that are located in that we should have this requirement or person who was in a contractual
building. The space could qualify as a similar requirement, or whether this arrangement rather than in an
‘‘centralized building.’’ requirement would be unduly employee-employer relationship to
We would also require the space to burdensome on a small group practice, reassign his or her right to bill and
contain, on a permanent basis, the and whether this requirement would be receive payment, irrespective of
necessary equipment to perform likely to reduce the number of existing whether the services were performed on
substantially all of the DHS that are pod labs and to discourage the the premises of the entity. Section 952
performed in this space, in order to development of new pod labs. Finally, of the MMA permits reassignment to the
meet the definition of a ‘‘centralized we seek comments on whether a group extent that the contractual arrangement
building.’’ That is, we wish to prevent practice should be allowed to maintain between the physician or other
the situation in which an entity would a ‘‘centralized building’’ in a State individual supplier and the billing
routinely move equipment as needed different from the State(s) in which it entity meets program integrity and other
from one group’s space to another has an office that meets the criteria of safeguards that the Secretary may
group’s space (for example, from cubicle § 411.355(b)(2)(i), and if so, whether determine to be appropriate.
to cubicle). We believe these situations space that is located in a different State In the FY 2005 Physician Fee
are abusive and contrary to the purpose must be within a certain number of Schedule proposed rule, published
of concept of the ‘‘centralized building’’ miles from an office of the group August 5, 2005 (69 FR 47488, 47524
concept, but we recognize that there practice that meets the criteria of through 47525), we stated our
may be an occasional need to bring § 411.355(b)(2)(i), in order to qualify as awareness that changes in the
specialized equipment into the space on a ‘‘centralized building.’’ reassignment rules based on section 952
a temporary basis. of the MMA may create new fraud and
We believe that the proposed J. Supplier Access to Claims Billed on abuse vulnerabilities, which may not
clarification to our reassignment rules, Reassignment become apparent until the program has
in tandem with our proposed changes to Section 1833(e) of the Act provides experience with new contractual
the definition of ‘‘centralized building’’ that, ‘‘no payment shall be made to any arrangements. We proposed program
for purposes of our physician self- provider of services or other person safeguards, whereby the parties to the
referral rules would prevent abusive under this part unless there has been contractual arrangement would have
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arrangements while preserving furnished such information as may be joint and several liability for any
legitimate small physician offices. In necessary in order to determine the Medicare overpayments, and the
particular, we anticipate that amounts due such provider or other physician or other individual supplier
restrictions on marking up the TC of person under this part for the period would have unrestricted access to
diagnostic tests as well as the limits we with respect to which the amounts are billings submitted on their behalf by the
are considering for who can bill for the being paid or for any prior period.’’ entity receiving reassigned payments. In
PC of diagnostic tests, combined with Section 1842(b)(6) of the Act generally response to the August 5, 2005 proposed

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49058 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

rule, we received a comment that our regulations to state that the supplier a. Coverage Conditions and Frequency
questioned the need for the two program who reassigns his or her right to bill and Standards
integrity safeguards (joint and several receive Medicare payment to an entity We established conditions for
liability and unrestricted access to has unrestricted access to claims coverage and frequency standards for
billing records) as a requirement for a information submitted by that entity for medically necessary BMMs for five
reassignment of claims involving a services supposedly furnished by the categories of Medicare beneficiaries in
contractual arrangement. The individual supplier, irrespective of § 410.31.
commenter believed that it was whether the supplier is an employee or In § 410.31(a), we defined ‘‘bone mass
premature for CMS to implement these independent contractor of the entity. If measurement’’ based on the statutory
program safeguards, that CMS already definition in section 4106 of the BBA.
adopted, our proposal would also mean
imposes joint and several liability In accordance with the ‘‘reasonable and
that if an entity receiving the reassigned
through Medicare participation necessary’’ provisions of section
agreements and the signing of the benefits were to refuse to provide the
billing information to the employee 1862(a)(1)(A) of the Act, we established
enrollment form for billing reassigned
supplier requesting the information, the the conditions for coverage of BMMs in
claims (the CMS–855–R form), and
entity’s right to receive reassigned § 410.31(b) of the regulations. Consistent
questioned why the program safeguards
benefits may be revoked under 42 CFR with § 410.32 (Diagnostic x-ray tests,
applied only to independent contractors
424.82(c)(3) (which is currently the case diagnostic laboratory tests, and
and not to employees. (69 FR 66316
with respect to an entity’s refusal to diagnostic tests: Conditions), we
through 66317 (November 15, 2004).)
In response to the commenter, we provide billing information to an provided that coverage be available for
stated that those program integrity independent contractor supplier). the BMM only if it is ordered by the
safeguards were necessary to monitor physician or a qualified nonphysician
the billings of entities with which we K. Coverage of Bone Mass Measurement practitioner (as defined in § 410.32(a))
have had billing problems (for example, (BMM) Tests treating the beneficiary following an
billing for services never furnished and evaluation of the beneficiary’s need for
[If you choose to comment on issues the test, including a determination as to
upcoding resulting in Medicare
in this section, please include the the medically appropriate procedure to
overpayments) in the past, and that the
caption ‘‘BONE MASS MEASUREMENT be used for the beneficiary. We believed
reason the safeguards applied to
independent contractors and not to TESTS’’ at the beginning of your that BMMs were not demonstrably
employees, was that the billing comments.] reasonable and necessary unless (among
problems identified thus far involved In an IFC entitled ‘‘Medicare Coverage other things) they are ordered by the
certain entities (which, for the most of and Payment for Bone Mass physician treating the beneficiary
part, contracted with, rather than Measurements’’ published in the following a careful evaluation of the
employed, emergency room (ER) Federal Register on June 24, 1998 (63 beneficiary’s medical need, and they are
physicians). We also stated that we FR 34320), we implemented section employed to manage the beneficiary’s
would study whether the same program care.
4106 of the BBA by establishing a new
integrity safeguards applicable to To ensure that the BMM is performed
regulatory section, 42 CFR 410.31 (Bone
independent contractors should also as accurately and consistently in
Mass Measurement: Conditions for accordance with appropriate quality
apply to employees. Coverage and Frequency Standards).
Prior to January 1, 2005, the effective assurance guidelines as possible, we
Section 4106 of the BBA statutorily required that it be performed under the
date of the program integrity safeguards
defined BMM and individuals that are appropriate supervision of a physician
for the contractual arrangement
reassignment exception, we received qualified to receive a BMM. The June as defined in § 410.32(b)(3). To ensure
public inquiries asking why employees 24, 1998 IFC, under the ‘‘reasonable and that the BMM is medically appropriate
do not have unrestricted access to necessary’’ provisions of 1862(a)(1)(A) for the five categories specified in the
billing records. Since the January 1, of the Act, also established conditions law, we provided that it be reasonable
2005 effective date of the program for coverage of the tests that must be and necessary for diagnosing, treating,
integrity safeguards, we have received ordered by physicians or nonphysician or monitoring the condition of the
an inquiry from an ER physician practitioners. Lastly, as directed by beneficiary who meets the coverage
employee of a medium-sized ER section 4106 of the BBA, we established requirements specified in § 410.31(d).
physician staffing company, who was frequency standards governing the time Furthermore, in § 410.31(c), we set
denied access to billing records for period when qualified individuals forth limitations on the frequency for
services that he claims to have would be eligible to receive covered covering a BMM. Generally, we cover a
furnished, and who had his BMMs. BMM for a beneficiary if at least 23
employment terminated. We also note months have passed since the month the
that the MMA Conference Report, in its 1. Provisions of the June 24, 1998 IFC last BMM was performed. However, we
discussion of section 952 of the MMA, allow for coverage of follow-up BMMs
As stated earlier in this section, the
states that the Conference Committee performed more frequently than once
June 24, 1998 IFC implemented section
supports appropriate program integrity every 23 months when medically
efforts for any entities billing the 4106 of the BBA by establishing necessary. We listed the following
Medicare program, including entities conditions for coverage and frequency examples of situations where more
with independent contractors as well as standards for BMMs to ensure that they frequent BMMs procedures may be
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employees. Having reconsidered the are paid for uniformly throughout the medically necessary to include:
issue, we find no valid reason why an Medicare program and that they are • Monitoring beneficiaries on long-
employee should not have access to reasonable and necessary for Medicare term glucocorticoid (steroid) therapy of
records on billings for services beneficiaries who are eligible to receive more than 3 months.
furnished by that employee. Therefore, these measurements. This section • Allowing for a confirmatory
we are proposing to change the title of summarizes the provisions discussed in baseline bone mass measurement (either
§ 424.80(d) and amend § 424.80(d)(2) of the June 24, 1998 IFC. central or peripheral) to permit

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Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules 49059

monitoring of beneficiaries in the future e. Conforming Changes recommendations and other guidelines
if the initial test was performed with a In the June 24, 1998 IFC, to allow for for using BMD and interpreting BMD
technique that is different from the appropriate placement in the CFR of the results for diagnosis are based on DXA
proposed monitoring method. BMM coverage requirements, we measurements of the hip or spine.’’ The
redesignated § 410.31 (Prescription report further states, ‘‘Incorporating
b. Beneficiaries Who May Be Covered
drugs used in immunosuppressive these techniques for bone assessment
In § 410.31(d), we amended our therapy) as § 410.30. into future clinical trials and
regulations to conform to the statutory observational studies will help in better
requirement that the following 2. Additional Scientific Evidence understanding their appropriate use as a
categories of beneficiaries may receive In 2004, the Surgeon General issued a means of predicting the risk of bone
Medicare coverage for a medically report, Bone Health and Osteoporosis disease and fracture.’’
necessary BMM: (U.S. Department of Health and Human 3. Proposed Changes to the June 24,
• A woman who has been determined Services, Bone Health and Osteoporosis: 1998 IFC
by the physician or a qualified A Report of the Surgeon General.
nonphysician practitioner treating her to Rockville, MD: U.S. Department of We received 18 public comments on
be estrogen-deficient and at clinical risk Health and Human Services, Office of the June 24, 1998 IFC. The majority of
for osteoporosis, based on her medical the Surgeon General, 2004). This report the comments had specific
history and other findings. provides scientific evidence related to recommendations for changes to the
• An individual with vertebral the prevention, assessment, diagnosis, IFC. In addition to responding to
abnormalities as demonstrated by an x- and treatment of bone disease. The comments that we may receive on our
ray to be indicative of osteoporosis, report states that identification of those proposed revisions to § 410.31, it is our
osteopenia, or vertebral fracture. at risk of bone disease and fracture is intent to address all these previous
• An individual receiving (or important so that appropriate comments in the CY 2007 PFS final
expecting to receive) glucocorticoid interventions can be implemented. rule.
(steroid) therapy equivalent to 7.5 mg of Based on the comments received on
However, as the report states,
prednisone, or greater, per day, for more the IFC, the Surgeon General’s report,
‘‘Assessing the risk of bone disease and
than 3 months. and other evidence, we are proposing
fracture remains a challenge. Not all of
changes to § 410.31. We encourage
• An individual with primary the risk factors have been identified,
comments on these proposals.
hyperparathyroidism. and the relative importance of those that
• An individual being monitored to are known remains unclear.’’ a. Proposed ‘‘BMM’’ Definition
assess the response to or efficacy of an As bone strength is not measured (§ 410.31(a))
FDA-approved osteoporosis drug directly, bone mineral density (BMD) We are proposing to revise the
therapy. remains the single best predictor of definition of ‘‘bone mass measurement’’
fracture risk, with the most widely at § 410.31(a)(2) to remove coverage for
c. Waiver of Liability
accepted method for measuring BMD the use of SPA, which uses isotope
Section 410.31(e) provides that being the dual energy x-ray sources to measure BMD. Many medical
Medicare payment would be denied for absorptiometry (DXA) for a bone density experts indicate that SPA has largely
a BMM in accordance with section study at the axial skeleton (for example, been replaced by the newer techniques
1862(a)(1)(A) of the Act if the regulatory hips and spine). As there are many of DXA, which are believed to be
standards are not satisfied. Existing sources of variability in the superior in accuracy and precision.
regulations concerning limitation on measurement of BMD, a quality control Medicare claims data in recent years
liability are set forth in §§ 411.400 system related to both the methodology continue to show a steady decline in the
through 411.406 and are applicable to and reporting of test results is important use of the SPA procedure by the
denial of BMMs under § 410.31. to ensure the validity of DXA analysis. beneficiary population. Further, there is
In addition to DXA of the axial a lack of evidence to support continued
d. Payments for BMMs
skeleton, bone mass can also be use of SPA, an older procedure where
Medicare payments for covered measured using other techniques. These the metrics have not been correlated
BMMs are paid for under the PFS (42 other techniques include DXA bone with fracture rate.
CFR part 414) as required by statute. In density study for the appendicular We are proposing to revise the
the June 24, 1998 IFC, we revised the skeleton (for example, radius, wrist, definition of a ‘‘bone mass
definition of ‘‘physician services’’ in heel); quantitative computerized measurement’’ to read, ‘‘Is performed
§ 414.2 to include bone mass tomography (QCT), bone mineral with either a bone densitometer (other
measurements. When BMM procedures density study for the axial skeleton or than a single-photon or dual-photon
are furnished to hospital inpatients and appendicular skeleton; radiographic absorptiometry) or with a bone
outpatients, the TCs of these procedures absorptiometry (photodensitometry, sonometer system that has been cleared
are payable under existing payment radiogrammetry); single-photon for marketing for this use by the FDA
methods for hospital services. These absorptiometry (SPA); single energy x- under 21 CFR part 807, or approved for
methods include payments under the ray absorptiometry (SXA) for the marketing by the FDA for this use under
prospective payment system, on a appendicular skeleton; and ultrasound 21 CFR part 814.’’
reasonable cost basis, or under a special bone mineral density study for the We are specifically requesting
provision for determining payment rates appendicular skeleton. With regard to comments on this proposal regarding
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for hospital outpatient radiology these techniques (except for SPA which the evidence of benefit for SPA,
services. was not discussed), the 2004 Surgeon particularly in comparison with other
In the June 24, 1998 IFC, we revised General report states, ‘‘While these alternatives.
§ 414.50(a), regarding physician billing methods do assess bone density and
for purchased diagnostic tests, to clarify may provide an indication of fracture b. Conditions for Coverage (§ 410.31(b))
that the section does not apply to risk, it is important to note that the We are proposing to revise the
payment for BMMs. WHO [World Health Organization] conditions for coverage for BMMs in

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49060 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

§ 410.31(b) by requiring that for a is comparable to forearm measurements (§ 410.31(a)(2)), the conditions for
medically necessary BMM to be covered for predicting fractures at other sites coverage (§ 410.31(b)), the examples of
for an individual being monitored to (Evidence Report/Technology exceptions to the standards on
assess the response to or efficacy of an Assessment No 28, Agency for frequency of coverage (§ 410.31(c)(2)),
FDA-approved osteoporosis drug Healthcare Research and Quality the category of individuals receiving (or
therapy (§ 410.31(d)(5)) the individual (AHRQ), January 2001). expecting to receive) glucocorticoid
would be required to meet the present (steroid) therapy (§ 410.31(d)(3)), and
c. Bone Mass Measurement: Standards
conditions for coverage under the addition of a new subparagraph
on Frequency of Coverage (§ 410.31(c))
§ 410.31(b), and the monitoring would (§ 410.31(f)) on use of the NCD process.
have to be performed by the use of an To conform the examples of a BMM
exception to the standards on frequency L. Independent Diagnostic Testing
dual energy x-ray absorptiometry system
of coverage in § 410.31(c)(2) to the Facility (IDTF) Issues
(axial system).
We recognize that in the June 24, 1998 regulation change we are proposing in [If you choose to comment on issues
IFC, we allowed the physician or § 410.31(b)(3), we are proposing to in this section, please include the
qualified nonphysician practitioner revise the confirmatory baseline test caption ‘‘IDTF ISSUES’’ at the beginning
treating the beneficiary more flexibility example in § 410.31(c)(2)(ii) to read, of your comments.]
in ordering those diagnostic ‘‘Allowing for a confirmatory baseline
1. Proposed IDTF Changes in the
measurements, but we are proposing to measurement to permit monitoring of
Physician Fee Schedule Proposed Rule
limit that flexibility with respect to the beneficiaries in the future if the
type of BMM that is used for monitoring requirements of paragraph (b)(3) of this During the course of a national review
individuals receiving osteoporosis drug section are met.’’ in 2003–2004, the Office of Inspector
therapy and other purposes (as General (OIG) found a potential $71
d. Bone Mass Measurement: million in improper payments made to
discussed later in this section) because Beneficiaries Who May Be Covered
of new evidence and other information IDTFs (Review of Claims Billed by
(§ 410.31(d)) Independent Diagnostic Testing
received since publication of the June
24, 1998 IFC that supports the need for The Congress has recognized that Facilities for Services Provided to
requiring the use of the DXA individuals receiving long-term Medicare Beneficiaries During Calendar
measurement (axial skeleton) in those glucocorticoid steroid therapy are Year 2001 (A–03–03–00002)). The OIG
circumstances. In addition to the 2004 qualified individuals for purposes of found that erroneous payments were
Surgeon General’s Report that section 1861(rr)(1) of the Act. Therapy made as the result of poor or missing
recognized the superiority of the DXA to prevent bone loss in most patients documentation or the lack of medical
(axial skeleton) for measuring bone mass beginning long-term therapy has been necessity. Moreover, in recent years,
over time, the International Society for recommended at a prednisone CMS and its contractors have
Clinical Densitometry currently equivalent of ≥ 5 mg/day for at least 3 determined that a number of IDTFs in
recommends that if an individual has a months (McIlwain, 2003). Based on our California and other States are
low bone mass using a peripheral review of the current evidence, we are perpetrating schemes to defraud the
measurement (appendicular skeleton) proposing to reduce the dosage Medicare program.
he or she should have a DXA (axial equivalent in § 410.31(d)(3) from an Since 2000, the number of IDTFs in
skeleton) performed for monitoring or average of 7.5 mg/day of prednisone for California has increased by 40 percent,
confirmatory diagnostic purposes. at least 3 months to an average of 5.0 which is a far greater percentage
Therefore, we are also proposing to mg/day of prednisone for the same increase than the Medicare population
revise § 410.31(b) by adding a period. in that State. The number of IDTFs
requirement that in the case of any billing Medicare in California alone
e. Use of the NCD Process (§ 410.31(f)) increased more than 400 percent from
individual who qualifies for a bone
mass measurement as provided for in To facilitate future consideration of 2000 to 2005. The increased use of IDTF
§ 410.31(d) and who receives a coverage of additional BMM systems for services has not lowered the use of
confirmatory baseline BMM to permit purposes of proposed paragraphs diagnostic testing within other settings.
monitoring in the future, Medicare may § 410.31(b)(2) and (b)(3), which would The increased rates of utilization within
cover a medically necessary BMM for limit coverage of BMMs for monitoring IDTFs is likely to be unrealistic due to
that individual, if the present conditions individuals receiving osteoporosis drug an increase in the need of diagnostic
for coverage under § 410.31(b) are met, therapy and for performing confirmatory testing within California’s Medicare
and the BMM is performed by a dual baseline measurements, we are population. Also, these IDTFs are
energy x-ray absorptiometry system proposing to allow CMS, through the growing at a rate faster than CMS can
(axial skeleton) (if the initial NCD process, to identify additional survey these facilities. The actual
measurement was not performed by this BMM systems for those purposes. By growth of IDTFs is not a problem,
system). using the NCD process, we could however, the results of the OIG audit
As indicated previously, the most conduct a timely assessment of FDA- make it clear that we need to closely
widely accepted method for measuring approved BMMs. Use of an NCD to add monitor IDTFs and establish standards
bone mineral density (BMD) is the use coverage of effective BMM systems for to ensure quality care for Medicare
of DXA (Surgeons General’s Report these purposes is authorized by the beneficiaries. To address the erroneous
2004) at axial skeletal sites. DXA (axial reasonable and necessary provision of payments identified by the OIG above,
skeleton) measures BMD at the hip and sections 1862(a)(1)(A) and 1871(a)(2) of we are proposing to establish IDTF
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spine (sites likely to fracture in patients the Act. supplier standards similar to those we
who have osteoporosis). DXA is precise, In summary, in view of the 18 adopted for Durable Medical
safe, and low in radiation exposure, and comments and our review of the post- Equipment, Prosthetics, Orthotics, and
permits more accurate and reliable 1998 medical literature, we have Supplies (DMEPOS) Suppliers on
monitoring of individuals over time. decided to propose several revisions to October 11, 2000 (see 42 CFR 424.57).
DXA of the femoral neck is the best § 410.31 relative to the definition of the We are proposing that each IDTF be
validated test to predict hip fracture and term ‘‘Bone Mass Measurement’’ required to be in compliance with the

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Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules 49061

proposed fourteen suppler standards compliance with applicable industry accommodations, and the storage of
discussed in section L.2. below in order standards. Specifically, we are seeking both business records and current
to obtain or retain enrollment in the public comment regarding the medical records;
Medicare program. Accordingly, at organizations or entities that may • Have all applicable testing
proposed § 410.33(h), we are proposing currently establish testing specifications equipment available at the physical site,
that if an IDTF fails to meet one or more for diagnostics equipment. Further, if excluding portable equipment. A catalog
of the proposed standards at the time of these organizations or entities do not of portable equipment, including
enrollment or at the time of re- exist, we invite public comment equipment serial numbers, would be
enrollment, then its enrollment regarding establishment of a supplier maintained at the physical site. In
application would be denied. Also, if at standard that relies on the addition, portable equipment would be
any time we determine that an enrolled manufacturer’s maintenance and made available for inspection within
IDTF no longer meets the proposed calibration standards. two business days of our inspection
supplier standards, its billing privileges While we understand that these request. The IDTF would be required to
would be revoked. proposed additional standards could maintain a current inventory of the
We believe that these supplier lead certain IDTFs to withdraw from the equipment (including serial/registration
standards are needed to ensure that Medicare program rather than comply numbers), provide this information to
minimum quality standards are met to with the new standards, we believe that the designated fee-for-service contractor
protect beneficiaries as well as the legitimate businesses would not oppose and notify the contractor of any changes
Medicare Trust Fund. These standards these changes. Moreover, we emphasize in equipment;
are merely good business practices that services provided by an IDTF are • Maintain a primary business phone
which will help to ensure that suppliers also readily available to beneficiaries under the name of the business. The
are providing a quality care to Medicare through other avenues such as business phone would be located at the
beneficiaries. Examples of the kind of physicians’ offices, outpatient designated site of the business. The
standards are a primary business phone laboratories, outpatient radiology telephone number or toll free numbers
number and address. Another example facilities, and outpatient clinics. We would be available in a local directory
is a posting of standards for review by believe that the implementation of these and through directory assistance;
patients and the public. proposed standards would improve the • Have a comprehensive liability
We are proposing to adopt, for IDTFs, quality of services provided to Medicare insurance policy of at least $300,000 or
a number of standards we adopted for beneficiaries by IDTFs without any 20 percent of its average annual
DMEPOS suppliers, including supplier associated access concerns. Medicare billings, whichever amount is
standard number 6 which requires a
2. Proposed Performance Standards for greater, that covers both the place of
supplier to maintain a comprehensive
IDTFs business and all customers and
liability insurance policy of $300,000 or
20 percent of its average annual The IDTF would be required to meet employees of the IDTF. The insurance
Medicare billings, whichever amount is the following standards as of January 1, policy would be carried by a non-
greater, that covers both the place of 2007 and any newly or reenrolling IDTF relative owned company. The policy
business and all customers and would be required to certify in its would be required to list the serial
employees of the IDTF. enrollment application that it meets and numbers of any and all equipment used
Furthermore, we are proposing in the would continue to meet the standards. by the IDTF;
new performance standard number 7 At § 410.33, we are proposing to revise • Agree not to directly solicit
that an IDTF agrees not to directly the regulation to specify that the IDTF patients, which includes, but is not
solicit patients. This provision does not would be required to— limited to, a prohibition on telephone,
preclude the IDTF from public • Operate its business in compliance computer, or in-person contracts. The
advertisement or marketing its services with all applicable Federal, State, and IDTF would accept only those patients
to physicians and other suppliers, local licensure and regulatory referred for diagnostic testing by an
however it does prohibit recruitment of requirements with regard to the health attending physician, who is furnishing a
beneficiaries through direct solicitation. and safety of patients; consultation or treating a beneficiary for
Additionally, the IDTF would be • Provide complete and accurate a specific medical problem and who
required to grant CMS, or its designated information on its enrollment uses the results in the management of
fee-for-service contractors, including application as stated in the the beneficiary’s specific medical
our agents, to have access to the IDTF ‘‘Requirements for Providers and problem. Nonphysician practictioners
physical location, all equipment, and Suppliers to Establish and Maintain may order tests as set forth in
beneficiary medical records during Enrollment final rule’’ (April 21, 2006 § 410.32(a)(3);
normal business hours. For portable (42 FR 20754)). Any change in • Answer beneficiaries’ questions and
equipment, an IDTF would be required enrollment information would be respond to their complaints.
to maintain a catalog of portable required to be reported to the designated Documentation of those contacts would
equipment and be able to produce the fee-for-service contractor on the be maintained at the physical site;
cataloged equipment within two Medicare enrollment application within • Openly post these standards for
business days. If the IDTF denies this 30 calendar days; review by patients and the public;
access, the IDTF’s Medicare enrollment • Maintain a physical facility on an • Disclose to the government, any
would be immediately revoked. appropriate site. For the purposes of this person having ownership, financial or
To ensure that equipment used by an proposed standard, a post office box or control interest, or any other legal
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IDTF is maintained and operates commercial mailbox would not be interest in the supplier at the time of
properly, we are seeking public considered a physical facility. The enrollment or within 30 days of a
comment regarding IDTF supplier physical facility would be required to change;
standard number 11, which would contain space for equipment appropriate • Have its testing equipment
require that an IDTF must have its to the services designated on the calibrated per equipment instructions
testing equipment calibrated per enrollment application, facilities for and in compliance with applicable
equipment instructions or in hand washing, adequate patient privacy national standards;

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49062 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

• Have technical staff on duty with slide is the PC service. If this service is N. Public Consultation for Medicare
the appropriate credentials to perform furnished by the hospital pathologist for Payment for New Outpatient Clinical
tests. The IDTF would be required to a hospital patient, it is separately Diagnostic Laboratory Tests
produce the applicable Federal or State billable. If the independent laboratory’s [If you choose to comment on issues
licenses and/or certifications of the pathologist furnishes the PC service, it in this section, please include the
individuals performing these services; is usually billed with the TC service as caption ‘‘CLINICAL DIAGNOSTIC LAB
• Have proper medical record storage a combined service.) TESTS’’ at the beginning of your
and be able to retrieve medical records In the ‘‘Revisions to Payment Policies comments.]
upon request from CMS or its Under the Physician Fee Schedule for Section 1833(h) of the Act requires
designated fee-for-service contractor Calendar Year 2000’’ final rule the Secretary to establish fee schedules
within 2 business days; and published in the Federal Register on for clinical laboratory tests under
• Permit CMS, including its agents or November 2, 1999 (64 FR 59380 and Medicare Part B. In this section of the
its designated fee-for-service 59408 through 59409), we stated that we preamble, we are proposing to
contractors, to conduct unannounced, would implement a policy to pay only implement section 942(b) of the MMA
on-site inspections to confirm the the hospital for the TC of physician which specifies annual procedures for
IDTF’s compliance with these proposed pathology services furnished to hospital consulting the public on how to
standards. The IDTF would be required patients. Before that proposal, any establish payment for new clinical
to provide access, during regular independent laboratory could bill the laboratory test codes to be included in
business hours, to CMS and carrier under the PFS for the TC of the annual update of the clinical
beneficiaries, as well as maintain a physician pathology services for laboratory fee schedule.
visible sign posting the normal business hospital patients. As pointed out in the
hours of the IDTF. November 2, 1999 final rule, this policy 1. BIPA (Pub. L. 106–554)
3. Supervision has contributed to the Medicare Section 531(b) of BIPA mandated that
program paying twice for the TC service, we establish, no later than 1 year after
To ensure quality care is provided to
first through the inpatient prospective the date of enactment, procedures that
Medicare beneficiaries, we are
payment rate to the hospital where the permit public consultation for payment
proposing to revise § 410.33(b)(1) to
patient is an inpatient and again to the determinations for new clinical
read that physicians will be limited to
independent laboratory that bills the diagnostic laboratory tests under
providing supervision to ‘‘no more than
carrier, instead of the hospital, for the Medicare Part B in a manner consistent
three (3) IDTF sites.’’
TC service. with the procedures established for
4. Place of Service Therefore, in that final rule at implementing ICD–9–CM coding
In addition to proposing the § 415.130, we provided that, for services modifications. In the November 23,
establishment of specific supplier furnished on or after January 11, 2001, 2001 Federal Register (66 FR 58743), we
standards for IDTFs, at proposed the carriers would no longer pay claims specified the procedures to implement
§ 410.33(i), we are proposing to define to the independent laboratory under the section 531(b) of BIPA.
the ‘‘point of the actual delivery of physician fee schedule for the TC of These procedures were most recently
service’’ as the correct ‘‘Place of physician pathology services for used to determine the payments for new
Service’’ for the claim form in the case hospital patients. 2006 clinical laboratory fee schedule
of diagnostic testing performed outside Ordinarily, the provisions in the final codes. First, we convened a public
the IDTF’s physical location. For PFS are implemented in the following meeting to solicit expert input on the
example, when an IDTF performs a year. However, in this case, the change nature of the new tests before rate
diagnostic test at a beneficiary’s to § 415.130 was delayed one year (until determinations were made. We have
residence, we believe that it is January 1, 2001), at the request of the held these meetings each year since
reasonable to establish the beneficiary’s industry, to allow independent 2002 to receive this expert input on the
residence as the ‘‘Place of Service.’’ laboratories and hospitals sufficient next year’s codes. Our most recent
Previously, there has been no set time to negotiate arrangements. meeting was announced in the Federal
procedure, so therefore, we believe that Moreover, our full implementation of Register on May 27, 2005 (70 FR 30734)
the information is gathered at the § 415.130 was further delayed through and occurred on July 18, 2005. In that
collection point from the beneficiary, CY 2006. meeting, we requested that presenters
and this is the point service. While most We continue to believe, however, that address the new test codes, each test’s
diagnostic tests are performed in an hospital prospective payment amounts purpose, method, cost, and a
office setting, we are seeking public already compensate hospitals for the TC recommendation for one of two methods
comment regarding the types of services of physician pathology tests and that (crosswalking or gapfilling) for
that can be safely and appropriately additional payment under the PFS is determining payment for the new
used in a residential setting. inappropriate. Therefore, we are clinical laboratory codes. Crosswalking
proposing to amend § 415.130 to and gapfilling are discussed below in
M. Independent Laboratory Billing for provide that, for services furnished after section N.2.d.
the TC of Physician Pathology Services December 31, 2006, an independent Following the public meeting, we
to Hospital Patients laboratory may not bill the carrier for posted, on our Website, a summary of
[If you choose to comment on issues physician pathology services furnished the new codes and the payment
in this section, please include the to a hospital inpatient or outpatient. recommendations that were presented
caption ‘‘INDEPENDENT LAB Under proposed § 415.130(d), we would during the public meeting. The
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BILLING’’ at the beginning of your pay under the PFS for the TC of a summary also displayed our tentative
comments.] physician pathology service furnished payment determinations and indicated a
The TC of physician pathology by an independent laboratory for comment period for interested parties to
services refers to the preparation of the services provided to an inpatient or submit written comments. After
slide involving tissue or cells that a outpatient of a ‘‘covered hospital’’ on or reviewing the comments received, we
pathologist will interpret. (In contrast, before December 31, 2006. A ‘‘covered issued Medicare Transmittal 750, 2006
the pathologist’s interpretation of the hospital’’ is defined in § 415.130(a)(1). Annual Update for Clinical Laboratory

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Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules 49063

Fee Schedule, which provided all + A list of final determinations of the measuring an existing analyte specific
instructions and final rate payment amounts for tests, together test).
determinations for the 2006 clinical with the rationale for each
c. Proposed Procedures for Public
laboratory fee schedule including the determination, the data on which the
Consultation for Payment for a New
new codes and fees, on November 18, determinations are based, and responses
Clinical Diagnostic Laboratory Test
2005. to comments and suggestions from the
(§ 414.406)
2. Medicare Prescription Drug, public.
We believe that our current process For a clinical laboratory test that is
Improvement, and Modernization Act of assigned a new or substantially revised
2003 (MMA) (Pub. L. 108–173) for providing for public consultation on
the establishment of payment amounts code on or after January 1, 2005, we
Further legislation affecting public for new clinical laboratory tests is would establish a local fee schedule
consultation for new clinical laboratory consistent with the requirements of amount only after the following:
tests was enacted at section 942(b) of the section 1833(h)(8)(B) of the Act. We • We make available to the public
MMA (Pub. L. 108–173), which added currently make available to the public (through an Internet Web site and other
section 1833(h)(8) to the Act. Section through a posting on the CMS Web site appropriate mechanisms) a list that
1833(h)(8)(A) of the Act requires the a list of new laboratory test codes for the includes codes for which establishment
Secretary to establish by regulation next calendar year. We publish a of a payment amount is being
procedures for determining the basis for Federal Register notice of a meeting to considered for the next calendar year.
and amount of payment for a clinical receive public comments and • We publish a Federal Register
diagnostic laboratory test that is recommendations and convene the notice of a meeting to receive public
assigned a new or substantially revised meeting with appropriate CMS officials comments and recommendations (and
Healthcare Common Procedure Coding in attendance. We take into account the data on which recommendations are
System (HCPCS) code on or after input received at the public meeting and based) on the appropriate basis, as
January 1, 2005. We refer to these tests we make available to the public on the specified in proposed new § 414.408, for
as ‘‘new tests.’’ CMS Web site a list of the proposed establishing payment amounts for the
Section 1833(h)(8)(B) of the Act list of codes made available to the
determinations and seek comment. We
provides that determinations of public.
then make available to the public our
payment amounts for new tests shall be • Not less than 30 days after
final determinations in the instructions
made only after the Secretary— publication of the notice in the Federal
• Makes available to the public that we provide to our claims processing
Register, we convene a meeting, that
(through an Internet Web site and other contractors to implement the Medicare
includes representatives of CMS
appropriate mechanisms) a list that Part B clinical laboratory fee schedule
officials involved in determining
includes codes for which establishment each year.
payment amounts, to receive public
of a payment amount is being The most significant change required comments and recommendations (and
considered for the next calendar year; by section 1886(h)(8)(A) of the Act with data on which the recommendations are
• On the same day the list of codes respect to our procedures for public based).
is made available, publishes a Federal consultation is that we codify this • Taking into account the comments
Register notice of a meeting to receive process in regulations. Therefore, in this and recommendations (and
public comments and recommendations proposed rule, we are proposing to accompanying data) received at the
(and data on which recommendations codify our current process for public public meeting, we develop and make
are based) on the appropriate basis for consultation for new clinical diagnostic available to the public (through an
establishing payment amounts for the laboratory tests paid under the Medicare Internet Web site and other appropriate
list of codes made available to the Part B clinical laboratory fee schedule at mechanisms)—
public; proposed new Subpart F—Payment for + A list of proposed determinations
• Not less than 30 days after New Clinical Diagnostic Laboratory with respect to the appropriate basis for
publication of the notice in the Federal Tests (§ 414.402 through § 414.406). establishing a payment amount for each
Register, convenes a meeting that a. Proposed Basis and Scope (§ 414.400) code, together with an explanation of
includes representatives of CMS the reasons for each determination, the
officials involved in determining This proposed new subpart would data on which the determinations are
payment amounts, to receive public implement provisions of section based, and a request for public written
comments and recommendations (and 1833(h)(8) of the Act—procedures for comments on the proposed
data on which the recommendations are determining the basis for, and amount determination within a specified time
based); and of, payment for a new clinical period; and
• Taking into account the comments diagnostic laboratory test with respect to + A list of final determinations of the
and recommendations (and which a new or substantially revised payment amounts for tests, together
accompanying data) received at the Healthcare Common Procedure Coding with the rationale for each
public meeting, develops and makes System code is assigned on or after determination, the data on which the
available to the public (through an January 1, 2005. determinations are based, and responses
Internet Web site and other appropriate b. Proposed Definition (§ 414.402) to comments and suggestions from the
mechanisms)— public.
+ A list of proposed determinations As specified in section 942(b) of the
with respect to the appropriate basis for MMA, we propose to define the term d. Proposed Payment for a New Clinical
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establishing a payment amount for each ‘‘Substantially Revised Healthcare Diagnostic Laboratory Test—
code, together with an explanation of Common Procedure Coding System Crosswalking and Gapfilling (§ 414.408)
the reasons for each determination, the Code’’ to mean a code for which there We are proposing to add a new
data on which the determinations are has been a substantive change to the § 414.408 to indicate when, in
based, and a request for public written definition of the test or procedure to establishing the payment amount for a
comments on the proposed which the code applies (such as a new new clinical laboratory test, one of two
determination; and analyte or a new methodology for payment methods can be utilized. The

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49064 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

first payment method, called gives the Secretary authority to establish panel. The following are some examples
‘‘crosswalking,’’ is used if a new test is procedures for determining the payment of LOINC records:
determined to be comparable to an amount for laboratory tests for which
existing test, multiple existing test new or substantially revised HCPCS LOINC code LOINC name (component:
codes, or a portion of an existing test codes were established on or after property: timing: specimen: scale)
code. We propose that a new test code January 1, 2005. Under this authority, 2951–2 SODIUM:SCNC:PT:SER/
would be assigned the related existing we propose, in new § 414.408(b), to pay PLAS:QN
local fee schedule amounts and national for a new gapfilled laboratory test under 2955–2 SODIUM:SCNC:PT:UR:QN
limitation amount. our existing methodology for the first 2956–1 SODIUM:SRAT:24H:UR:QN
In new § 414.408, we propose to use year (the carrier would establish a 2164–2 CREATININE RENAL
the second method, called ‘‘gapfilling,’’ gapfill amount.) Beginning in the CLEARANCE:VRAT:24H:UR:QN
when no comparable, existing test is second year, the test would be paid at 1514–9 GLUCOSE∧2H POST 100 G
available. Currently when using this the national limitation amount. This GLUCOSE
method, manual instructions are would result in consistent payment in PO:MCNC:PT:SER/PLAS:QN
provided to each Medicare carrier to geographic areas for a new test using the
determine a payment amount for its median of the carrier gapfill amounts. 3665–7 GENTAMICIN∧
geographic area(s) for use in the first TROUGH:MCNC:PT:SER/PLAS:QN
year, and the carrier-specific amounts 3. Other Laboratory Issues 17863–2 CALCIUM.IONIZED:
are used to establish a national This section discusses other MCNC:PT:SER/PLAS:QN
limitation amount for following years. laboratory issues related to quality and 2863–9 ALBUMIN:MCNC:PT:SNV:
Consistent with our current process, the glucose monitoring in SNFs. QN:ELECTROPHORESIS
sources of information carriers examine The parts of the LOINC name refer
a. Quality to different aspects of the test result.
in determining gapfill amounts, if
available, include— In addition to providing payments, The component is the analyte (for
• Charges for the test and routine Medicare’s clinical laboratory fee example, sodium). The property is the
discounts to charges; schedule for both new and existing tests characteristic of the analyte that is
• Resources required to perform the should foster the provision of quality measured, evaluated or observed (for
test; care and the prevention of avoidable example SCNC = substance
• Payment amounts determined by health care costs. We are exploring the concentration). Timing indicates
other payers; and development of measures related to the whether the measurement is an
• Charges, payment amounts, and quality and efficiency of care, including observation at a moment of time, or an
resources required for other tests that those involving clinical laboratory fee observation integrated over an extended
may be comparable or otherwise schedule services. Physicians’ decisions duration of time (for example, PT =
relevant. are central to the health care their point in time). The specimen is the type
Currently, our manual instructions patients receive and are informed by of sample (for example, SER/PLAS =
allow carriers to consider other sources appropriate clinical laboratory testing. serum or plasma). The scale is the type
of information as appropriate, including We want to work with physicians, of scale (for example QN = quantitative).
clinical studies and information providers and the clinical laboratory For further detail, please see the
provided by clinicians practicing in the community to identify ways to promote LOINC Web site at http://
area, manufacturers, or other interested utilization decisions that clearly www.loinc.org.
parties. Carriers are also instructed to increase the quality of care while On September 23, 2005 (70 FR 55900–
establish carrier specific amounts on or avoiding unnecessary costs for 56025), we published the proposed rule
before March 31 of the year and to beneficiaries and the Medicare program. ‘‘HIPAA Administrative Simplification:
revise their carrier specific amount, if As part of its strategies to improve Standards for Electronic Health Care
necessary, on or before September 1 of quality of care, CMS could require those Claims Attachments.’’ This rule
the year. In this manner, a carrier may who perform laboratory tests to submit proposed standards for electronically
revise its carrier specific amount based laboratory values using common requesting and supplying particular
on additional information, but there is vocabulary standards, such as those types of additional health care
also a specific time frame to perform found in the Logical Observation information in the form of an electronic
this revision so that we have adequate Identifiers Names and Codes (LOINC) attachment to support submitted health
time to receive and use the carrier database. care claims data. The proposed rule
specific amounts for the calculation of The LOINC database currently specified a standard attachment form for
the next year’s clinical laboratory fee contains about 41,000 observational reporting laboratory results (among
schedule. terms, of which nearly 31,000 are other standards) and proposed adoption
Currently for new gapfilled laboratory observational terms related to laboratory of LOINC as the standard code set for
tests, the payment amount beginning in testing. The laboratory subset of the reporting such results.
the second year is based on the lower of LOINC database provides universal While the laboratory claims
the carrier specific amount determined names and codes for identifying the attachment standard and use of LOINC
in the first year or the national results of clinical laboratory tests and it could provide a means for reporting test
limitation amount. In accordance with facilitates the exchange and pooling of result data, we recognize that there are
section 1833(h) of the Act, the national clinical laboratory results for clinical significant operational and other
limitation amount is set at the median care, outcomes management and challenges that would need to be
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of the carrier-specific amounts. research. Note that LOINC describes addressed before Medicare could begin
In light of new MMA provisions, the test result, but does not provide it. to collect laboratory values in a
however, we are proposing, in new It is, therefore, only one possible comprehensive fashion using common
§ 414.408, to prospectively eliminate component of a comprehensive system vocabulary standards and that these
payment of new gapfilled tests at a of collecting clinical laboratory fee test challenges need to be met in partnership
carrier specific amount after the first results. Each LOINC record with the clinical laboratory community.
year. Section 1833(h)(8)(A) of the Act corresponds to a single test result or We look forward to working

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collaboratively with the clinical c. Other Lab Issues—Proposed Clinical collection. The date of service of a test
laboratory community on these issues. Diagnostic Laboratory Date of Service may affect payment because, if the date
(DOS) for Stored Specimens of service falls during an inpatient stay
b. Blood Glucose Monitoring in SNFs
We are proposing to add a new or on a day on which the beneficiary
In response to inquiries regarding our had an outpatient procedure, payment
§ 414.410 to address concerns that have
policy on blood glucose monitoring in for the laboratory test usually is bundled
been raised regarding the date of service
SNFs, we are taking this opportunity to with the hospital service. To address
of a clinical diagnostic laboratory test
restate our long-standing policy on these concerns, we are proposing to
that use a stored (or ‘‘archived’’)
coverage of blood glucose monitoring change our current policy so that the
specimen. In the final rule of coverage
services and to propose to codify date of service would be the date the
and administrative policies for clinical
physician certification requirements for specimen is obtained from storage, even
blood glucose monitoring in SNFs. diagnostic laboratory services that we
published on November 23, 2001 (66 FR if the specimen is obtained less than 31
Generally, section 1862(a)(1)(A) of the days from the date it was collected,
Act requires that a service be reasonable 58792), we adopted a policy under
which the date of service for clinical without violating the unbundling rules
and necessary for diagnosis and as long as the following conditions are
treatment in order to be eligible for diagnostic laboratory services generally
is the date the specimen is collected. met:
coverage by Medicare. Our regulations • The test is ordered by the patient’s
at § 410.32(a) already require that, for For laboratory tests that use an archived
specimen, however, the date of service physician at least 14 days following the
any diagnostic test, including a clinical date of the patient’s discharge from the
diagnostic laboratory test, to be is the date the specimen was obtained
from the storage. In 2002, we issued hospital.
considered reasonable and necessary, it • The test could not reasonably have
must be both ordered by the physician Program Memorandum AB–02–134
been ordered while the patient was
and the ordering physician must use the which permitted contractors discretion
hospitalized.
result in the management of the in making determinations regarding the • The procedure performed while the
beneficiary’s specific medical problem. length of time a specimen must be beneficiary is a patient of the hospital is
Tests not ordered by the physician who stored to be considered archived. In for purposes other than collection of the
is treating the beneficiary are not response to comments requesting that specimen needed for the test.
reasonable and necessary. we issue a national standard to clarify • The test is reasonable and
In the context of blood glucose when a stored specimen can be medically necessary.
monitoring, we most recently stated this considered ‘‘archived,’’ in the These conditions are consistent with
policy in Transmittal AB–00–108, Procedures for Maintaining Code Lists the guidance in Chapter 16, sec 40.3 of
‘‘Glucose Monitoring’’, which is in the Negotiated National Coverage the Claims Processing Manual, which
available on our Web site at http:// Determinations for Clinical Diagnostic states that ‘‘When the hospital obtains
www.cms.hhs.gov/transmittals/ Laboratory Services final notice, laboratory tests for outpatients under
downloads/ab00108.pdf. This published in the Federal Register on arrangements with clinical laboratories
interpretation of § 410.32 is also the February 25, 2005 (70 FR 9355), we or other hospital laboratories, only the
basis for our policy in Chapter 7 of the defined an ‘‘archived’’ specimen as a hospital can bill for the arranged
Medicare Claims Processing Manual specimen that is stored for more than 30 services.’’
(‘‘Skilled Nursing Facility Part B calendar days before testing. The date of In addition, Chapter 3 of the Program
Billing’’ available on our Web site at service for these archived specimens is Integrity Manual contains instructions
http://www.cms.hhs.gov/manuals/ the date the specimen was obtained for additional documentation if further
downloads/clm104c07.pdf.) from storage. Specimens stored 30 days development of laboratory claims for
In addition, section 1835(a)(2)(B) of or less have a date of service of the date pre-or postpay are required. Although
the Act provides that, in the case of the specimen was collected. The we believe these changes will help to
certain ‘‘medical and other health February 25, 2005 final notice also maintain beneficiary access to care, we
services’’ (including clinical diagnostic clarified that the date of service for tests are concerned about the potential for
laboratory services), payment may be when the collection spanned more than these policy changes creating
made for Part B services that are two calendar days is the date the inappropriate incentives in the
furnished by a provider of services only collection ended. Instructions that development of technology and the
if a physician certifies—and recertifies implemented these policies were added implications for the unbundling of
where those services are furnished over to Chapter 16, section 40.8 of the services. We solicit comment on the
a period of time, with such frequency, Medicare Claims Processing Manual proposed changes and these concerns.
and accompanied by such supporting (Pub. 100–04) with the issuance of
material, as may be provided by Transmittal 800 (CR 4156), on December O. Proposal to Establish Criteria for
regulation—that those services were 30, 2005. National Certifying Bodies That Certify
medically necessary. The regulations Recently, we have received Advanced Practice Nurses
currently implementing this provision correspondence that expressed concern [If you choose to comment on issues
at § 424.24 do not specifically address that our policies have created some in this section, please include the
the issue of blood glucose monitoring in unintended consequences, especially in caption ‘‘Criteria for National Certifying
SNFs. Therefore, we are proposing to situations in which a specimen is taken Bodies-Advanced Practice Nurses’’ at
amend § 424.24 to provide that, for each in a hospital setting, but then later used the beginning of your comments.]
blood glucose test furnished to a for a test after the patient has left the Federal regulatory qualifications for
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resident of a SNF, the physician must hospital. Under the current manual nurse practitioners (NPs) at 42 CFR
certify that the test is medically instructions, if the specimen used for a 410.75 require that an individual be
necessary. We are also proposing to test ordered subsequent to the certified as an NP by a recognized
amend § 424.24 to clarify that a beneficiary’s discharge is obtained less national certifying body that has
physician’s standing order is not than 31 calendar days following the date established standards for NPs. Similarly,
sufficient to order routine blood glucose the specimen was collected, the date of Federal regulatory qualifications for
monitoring. service of the test is the date of clinical nurse specialists (CNSs) at 42

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49066 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

CFR 410.76 require that an individual NPs, we added, at that time, the added to the list of recognized or
be certified as a CNS by a national Oncology Nurses Certification approved national certifying bodies. In
certifying body that has established Corporation (ONCC) and the Critical anticipation of those requests, the
standards for CNSs and that is approved Care Certification Corporation (CCCC) to agency is interested in developing
by the Secretary. the list of recognized national certifying certification standards that would
Currently, there is not a list of bodies for advanced practice nurses. facilitate the process for making these
recognized or approved national The National Board on Certification of decisions.
certifying bodies for NPs and CNSs in Hospice and Palliative Care Nurses
regulations. However, Chapter 15, (NBCHPN) has requested that we now P. Chiropractic Services Demonstration
section 200 of the Benefit Policy follow the same course of action as we [If you choose to comment on issues
Manual, Pub. 100–02 contains a list of did for the ONCC and the CCCC by in this section, please include the
national certifying bodies that are adding its name to the list of recognized caption ‘‘Chiropractic Services
recognized by Medicare as being national certifying bodies. That is, Demonstration’’ at the beginning of your
appropriate for certification of NPs. NBCHPN believes that it is an comments.]
Although the manual provision appropriate national certifying body In the FY 2006 PFS final rule
regarding CNS services at Chapter 15, based on its certification experience, (November 21, 2005), we included a
section 210 of the Benefit Policy Manual principles, services, and the discussion of the 2-year demonstration
lists only the American Nurses certification exam that it administers to authorized by section 651 of the MMA
Credentialing Center as an approved advanced practice nurses who to evaluate the feasibility and
national certifying body for CNSs, we specialize in palliative care for hospice advisability of covering chiropractic
indicated that the list of recognized patients. services under Medicare. These services
certifying bodies in the manual The NBCHPN stated in information it extend beyond the current coverage for
provision for NP services would also sent to the agency that its organization manipulation to care for
apply for CNSs in the ‘‘Revisions to is a well-established certification body neuromusculoskeletal conditions
Payment Policies Under the CY 2003 with more than 12-years history of typical among eligible beneficiaries, and
Physician Fee Schedule and Inclusion certification and that it has been cover diagnostic and other services that
of Registered Nurses in the Personnel certifying advanced practice hospice a chiropractor is legally authorized to
Provision of the Critical Access Hospital and palliative nurses since 2003 in perform by the State or jurisdiction in
Emergency Services Requirement for partnership with the ANCC. Starting in which the treatment is provided. The
Frontier Areas and Remote Locations; 2005, the NBCHPN became sole demonstration is being conducted in
Payment Policies final rule (December proprietor of the Advanced Certified four sites, two rural and two urban. The
31, 2002, 67 FR 79987). The national Hospice and Palliative Nurse (ACHPN) demonstration must be budget neutral
certifying bodies that are listed under examination. Master’s level nurse as the statute requires the Secretary to
the manual instruction at section 200, practitioners and clinical nurse ensure that the aggregate payment made
and that currently apply for both NPs specialists sit for this ACHPN under the Medicare program does not
and CNSs (collectively, advanced examination that is based on a role exceed the amount which would be
practice nurses) are as follows: delineation study for the advanced paid in the absence of the
• American Academy of Nurse practice level of hospice and palliative demonstration.
Practitioners; nursing. Additionally, the NBCHPN Ensuring budget neutrality requires
• American Nurses Credentialing stated that it has met the requirements that the Secretary develop a strategy for
Center; of the American Board of Nursing recouping funds should the
• National Certification Corporation Specialties and is an active member of demonstration result in costs higher
for Obstetric, Gynecologic and Neonatal the Board of Specialties, as is the ANCC. than those that would occur in the
Nursing Specialties; The Executive Director of the NBCHPN absence of the demonstration. As we
• National Certification Board of stated that she believes that the absence stated in the FY 2006 PFS, we would
Pediatric Nurse Practitioners and of the NBCHPN from the current list of make adjustments in the national
Nurses; recognized national certifying bodies chiropractor fee schedule to recover the
• Oncology Nurses Certification presents a barrier for advanced practice costs of the demonstration in excess of
Corporation; nurses in the hospice palliative care the amount estimated to yield budget
• Critical Care Certification specialty because they are denied neutrality. We will assess budget
Corporation. enrollment on the basis that they do not neutrality by determining the change in
In the December 31, 2002 final rule, meet the certification qualification costs based on a pre/post comparison of
in response to a public comment, we requirement. The Web site for the costs and the rate of change for specific
stated, ‘‘it is not the agency’s intention NBCHPN can be found at diagnoses that are treated by
to be overly restrictive in our program www.nbchpn.com. chiropractors and physicians in the
requirements and consequently prevent We are soliciting public comments on demonstration sites and control sites.
qualified CNSs who specialize in areas whether it would be appropriate to We will not limit our analysis to
of medicine other than those certified by include the NBCHPN under the list of reviewing only chiropractor claims,
the American Nurses Credentialing recognized and approved national because the costs of the expanded
Center (ANCC) from participating under certifying bodies for NPs and CNSs chiropractor services may have an
the CNS benefit and from rendering care under manual instructions for both NPs impact on other Medicare costs.
to patients in need of specialized and CNSs. We are also soliciting public Any needed reduction would be made
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services. Furthermore, the intent of the comments on criteria or standards that in the 2010 and 2011 physician fee
revision to the certification requirement we could use to determine whether an schedules as it will take approximately
for CNSs is to recognize all appropriate organization is an appropriate national 2 years to complete the claims analysis.
national certifying bodies for CNSs as certifying body for advanced practice If we determine that the adjustment for
the program does for NPs.’’ Accordingly, nurses. CMS realizes that the agency budget neutrality is greater than 2
in an effort to recognize all appropriate may receive other requests in the future percent of spending for the chiropractor
national certifying bodies for CNSs and from organizations that wish to be to be fee schedule codes (comprised of the 3

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Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules 49067

currently covered CPT codes 98940, of participation in disease management Medicare program alone consumes 3.2
98941, and 98942), we would programs and following medical advice. percent of the GDP and by 2040, it will
implement the adjustment over a 2-year For these reasons, extreme caution consume 8.0 percent of the GDP.
period. However, if the adjustment is should be used in interpreting these Part of the reason health care costs are
less than 2 percent of spending under results. rising so quickly is that most consumers
the chiropractor fee schedule codes, we In summary, there are mixed signals of health care—the patients—are
would implement the adjustment over a about the potential of HIT to reduce frequently not aware of the actual cost
1-year period. We will include the costs. Some studies have indicated that of their care. Health insurance shields
detailed analysis of budget neutrality HIT adoption does not necessarily lead them from the full cost of services, and
and the proposed offset during the 2009 to lower costs and improved quality. In they have only limited information
rulemaking process. PT services addition, some industry experts have about the quality and costs of their care.
performed by chiropractors under the stated that factors such as an aging Consequently, consumers do not have
demonstration are subject to the PT population, medical advances, and the incentive or means to carefully shop
therapy cap. These services are included increasing provider expenses would for providers offering the best value.
under the cap because chiropractors are make any projected savings impossible. Thus, providers of care are not subject
subject to the same rules as medical In his 2004 State of the Union to the competitive pressures that exist in
doctors for therapy services under the Address, the President announced a other markets for offering quality
demonstration. plan to ensure that most Americans services at the best possible price.
have electronic health records within 10 Reducing the rate of increase in health
Q. Promoting Effective Use of Health care prices and avoiding health services
Information Technology (HIT) years.2 One part of this plan involves
developing voluntary standards and of little value could help to stem the
(If you choose to comment on issues promoting the adoption of interoperable growth in health care spending, and
in this section, please include the HIT systems that use these standards. potentially reduce the number of
caption ‘‘Promoting Effective Use of The 2007 Budget states that ‘‘The individuals who are unable to afford
HIT’’ at the beginning of your Administration supports the adoption of health insurance. Part of the President’s
comment.) health information technology (IT) as a health care agenda is to expand Health
We recognize the potential for health Savings Accounts (HSAs), which would
normal cost of doing business to ensure
information technology (HIT) to provide consumers with greater
patients receive high quality care.’’
facilitate improvements in the quality financial incentives to compare
Over the past several years, we have
and efficiency of health care services. providers in terms of price and quality,
undertaken several activities to promote
One recent RAND study found that and choose those that offer the best
the adoption and effective use of HIT in
broad adoption of electronic health value.
records could save more than $81 coordination with other Federal
In order to exercise those choices,
billion annually and, at the same time, agencies and with the Office of the
consumers must have accessible and
improve quality of care.1 The largest National Coordinator for Health
useful information on the price and
potential savings that the study Information Technology. One of those
quality of health care items and
identified was in the hospital setting activities is promotion of data standards
services. Typically, health care
because of shorter hospital stays for clinical information, as well as for
providers do not publicly quote or
promoted by better coordinated care; claims and administrative data.
publish their prices. Moreover, list
less nursing time spent on As noted above, the Administration
prices, or charges, generally differ from
administrative tasks; better use of supports the adoption of HIT as a
the actual prices negotiated and paid by
medications in hospitals; and better normal cost of doing business. The different health plans. Thus, even if
utilization of drugs, laboratory services, adoption and use of HIT may contribute consumers were financially motivated
and radiology services in hospital to improved processes and outcomes of to shop for the best price, it would be
outpatient settings. The study also care, including shortened illnesses and very difficult at the current time for
identified potential quality gains the avoidance of adverse drug reactions. them to access usable information.
through enhanced patient safety, R. Health Care Information For these reasons, DHHS is launching
decision support tools for evidence- Transparency Initiative a major health care information
based medicine, and reminder transparency initiative in 2006. This
mechanisms for screening and (If you choose to comment on issues effort builds on steps taken by CMS to
preventive care. Despite these large in this section, please include the make quality and price information
potential benefits, the study found that caption ‘‘Health Care Information available. For example, Medicare has
only about 20 to 25 percent of hospitals Transparency Initiative’’ at the provided unprecedented information
have adopted HIT systems. beginning of your comment.) about drug prices in the Medicare drug
It is important to note the caveats to The United States (U.S.) faces a benefit, and is now adding to these
the RAND study. The projected savings dilemma in health care. Although the efforts in other areas. Medicare payment
are across the health care sector, and rate of increase in health care spending information for common elective
any Federal savings would be a reduced slowed last year, costs are still growing procedures and other common
percentage. In addition, there are at an unsustainable rate. The U.S. admissions for all hospitals by county
significant assumptions made in the spends $1.9 trillion on health care, or 16 has been posted on our Web site at:
RAND study. National savings are percent of the gross domestic product http://www.cms.hhs.gov/
projected in some cases based on one or (GDP). By 2015, projections are that HealthCareConInit/01
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two small studies. Also, the study health care will consume 20 percent of Overview.asp#TopOfP.
assumes patient compliance, in the form GDP. As indicated in the 2006 Annual We will post geographically-based
Report of the Boards of Trustees, the Medicare payment information for
1 RAND News Release: Rand Study Says
common elective procedures for
Computerizing Medical Records Could Save $81 2 Transforming Health Care: The President’s

Billion Annually and Improve the Quality of Health Information Technology Plan, available at:
ambulatory surgery centers this summer
Medical Care, September 14, 2005, available at http://www.whitehouse.gov/infocus/technology/ and for common hospital outpatient and
http://rand.org/news/press.05/09.14.html. economic_policy200404/chap3.html. physician services this fall.

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49068 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

In addition, a number of tools (IDTF) that operates across State V. Regulatory Impact Analysis
providing usable healthcare information boundaries must maintain [If you choose to comment on issues
are already available to Medicare documentation that its supervising in this section, please include the
beneficiaries. Supported by the public- physicians and technicians are licensed caption ‘‘IMPACT’’ at the beginning of
private quality alliances, consumers can and certified in each of the States in your comments.]
access ‘‘Compare’’ Web sites through which it operates. The burden We have examined the impact of this
www.medicare.gov where they can associated with this requirement is the rule as required by Executive Order
evaluate important aspects of their time and effort it takes the IDTF to 12866 (September 1993, Regulatory
health care options for care at a hospital, collect and maintain the aforementioned Planning and Review), the Regulatory
nursing home, home health agency, and information. Flexibility Act (RFA) (September 19,
dialysis facility, as well as compare While subject to the PRA, we believe 1980 Pub. L. 96–354), section 1102(b) of
their costs and coverage when choosing this information collection requirement the Social Security Act, the Unfunded
a prescription drug plan. is exempt as defined in 5 CFR Mandates Reform Act of 1995 (Pub. L.
We are developing a project with the 1320.3(b)(2), because the time, effort, 104–4), and Executive Order 13132.
goals of providing more comprehensive and financial resources necessary to Executive Order 12866 (as amended
information on quality and costs, comply with the requirement would be by Executive Order 13258, which
including more complete measures of incurred by persons in the normal merely reassigns responsibilities of
health outcomes, satisfaction, and course of their activities (for example, in duties) directs agencies to assess all
volume of services that matter to compiling and maintaining business costs and benefits of available regulatory
consumers, and more comprehensive records) and is considered to be usual alternatives and, when regulation is
measures of costs for entire episodes of and customary. necessary, to select regulatory
care, not just payments for particular approaches that maximize net benefits
Section 410.33(g) discusses the
services and admissions. We intend for (including potential economic,
application certification standards that
the project to combine public and environmental, public health and safety
an IDTF must meet. An IDTF must
private health care data to measure cost effects, distributive impacts, and
complete an enrollment application and
and quality of care information at the equity). A regulatory impact analysis
certify the information contained in the
physician and hospital levels. Quality, must be prepared for proposed rules
application. The certification is part of
cost, pricing, and patient information with economically significant effects
an application that is subject to the
will be reported to consumers and (that is, a proposed rule that would have
PRA. The burden associated with this
purchasers of health care in a an annual effect on the economy of $100
requirement is the time and effort
meaningful and transparent way. million or more in any one year, or
necessary to complete the application.
III. Collection of Information This requirement is currently approved would adversely affect in a material way
Requirements in OMB No. 0938–0685, with a current the economy, a sector of the economy,
expiration date of April 30, 2009. productivity, competition, jobs, the
Under the Paperwork Reduction Act
If you comment on these information environment, public health or safety, or
of 1995, we are required to provide 60-
collection and recordkeeping State, local, or tribal governments or
day notice in the Federal Register and
requirements, please mail copies communities). As indicated in more
solicit public comment before a
directly to the following: detail below, we estimate that the PFS
collection of information requirement is
provisions included in this proposed
submitted to the Office of Management Centers for Medicare & Medicaid rule will redistribute more than $100
and Budget (OMB) for review and Services, Office of Strategic million in one year. We are considering
approval. In order to fairly evaluate Operations and Regulatory Affairs, this proposed rule to be economically
whether an information collection Regulations Development Group, significant because its provisions are
should be approved by OMB, section Attn: William N. Parham, III, [CMS– estimated to result in an increase,
3506(c)(2)(A) of the Paperwork 1321–P], Room C4–26–05, 7500 decrease or aggregate redistribution of
Reduction Act of 1995 requires that we Security Boulevard, Baltimore, MD Medicare spending that will exceed
solicit comment on the following issues: 21244–1850; and
• The need for the information $100 million. Therefore, this proposed
Office of Information and Regulatory rule is a major rule and we have
collection and its usefulness in carrying
Affairs, Office of Management and prepared a regulatory impact analysis.
out the proper functions of our agency.
Budget, Room 10235, New Executive The RFA requires that we analyze
• The accuracy of our estimate of the
Office Building, Washington, DC regulatory options for small businesses
information collection burden.
• The quality, utility, and clarity of 20503, Attn: Carolyn Lovett, CMS and other entities. We prepare a
the information to be collected. Desk Officer, [CMS–1321–P], regulatory flexibility analysis unless we
• Recommendations to minimize the carolyn_lovett@omb.eop.gov. Fax certify that a rule would not have a
information collection burden on the (202) 395–6974. significant economic impact on a
affected public, including automated IV. Response to Comments substantial number of small entities.
collection techniques. The analysis must include a justification
We are soliciting public comment on Because of the large number of public concerning the reason action is being
each of these issues for the following comments we normally receive on taken, the kinds and number of small
sections of this document that contain Federal Register documents, we are not entities the rule affects, and an
information collection requirements: able to acknowledge or respond to them explanation of any meaningful options
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individually. We will consider all that achieve the objectives with less
Section 410.33 Independent Diagnostic comments we receive by the date and significant adverse economic impact on
Testing Facility time specified in the DATES section of the small entities.
Section 410.33(e)(1) imposes a this preamble, and, when we proceed Section 1102(b) of the Act requires us
recordkeeping requirement on multi- with a subsequent document, we will to prepare a regulatory impact analysis
state entities. Specifically, an respond to the comments in the for any proposed rule that may have a
independent diagnostic testing facility preamble to that document. significant impact on the operations of

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a substantial number of small rural the added level of protection to budget neutrality of the impact of the
hospitals. This analysis must conform to beneficiaries that we expect to achieve multiple imaging policy adopted for CY
the provisions of section 603 of the as a result of this proposed rule justifies 2006. Section 5102(a) of the DRA
RFA. For purposes of section 1102(b) of the relatively small burden this exempts the CY 2006 and 2007 impact
the Act, we define a small rural hospital proposed rule would impose on all of the multiple imaging policy from
as a hospital that is located outside a small entities. budget neutrality. Because we are
Metropolitan Statistical Area and has The analysis and discussion provided proposing to maintain the current 25
fewer than 100 beds. We have in this section, as well as elsewhere in percent payment reduction for multiple
determined that this proposed rule this proposed rule, complies with the imaging procedures in CY 2007, there is
would have minimal impact on small RFA requirements. no additional impact resulting from our
hospitals located in rural areas. Of the Section 202 of the Unfunded proposals for CY 2007. Section 5102 of
222 hospital-based ESRD facilities Mandates Reform Act of 1995 also the DRA also exempts the estimated
located in rural areas, only 40 are requires that agencies assess anticipated savings from the application of the
affiliated with hospitals with fewer than costs and benefits before issuing any OPPS-based payment limitation on PFS
100 beds. rule that may result in expenditures in imaging services from the PFS budget
For purposes of the RFA, physicians, any year by State, local, or tribal neutrality requirement. We estimate that
nonphysician practitioners, and governments, in the aggregate, or by the the combined impact of the budget
suppliers are considered small private sector, of $120 million. Medicare neutrality exemptions in section 5102 of
businesses if they generate revenues of beneficiaries are considered to be part of the DRA would reduce PFS
$6 million or less. Approximately 95 the private sector for this purpose. expenditures by approximately 1.3
percent of physicians are considered to We have examined this proposed rule percent in CY 2007.
be small entities. There are about in accordance with Executive Order Table 7 below shows the specialty-
980,000 physicians, other practitioners 13132 and have determined that this level impact of section 5102 of the DRA
and medical suppliers that receive regulation would not have any and our most recent estimate (¥5.1
Medicare payment under the PFS. significant impact on the rights, roles, or percent) of the CY 2007 Medicare PFS
For purposes of the RFA, responsibilities of State, local, or tribal update. For reference purposes, we have
approximately 80 percent of clinical governments. A discussion concerning also included the specialty-level
diagnostic laboratories are considered the impact of this rule on beneficiaries impacts using the methodology from the
small businesses according to the Small is found later in this section. separate June 29, 2006 proposed notice
Business Administration’s size We have prepared the following (71 FR 37170), which solicited
standards. analysis, which, together with the comments on proposed changes to the
In addition, most ESRD facilities are information provided in the rest of this PE methodology as well as changes to
considered small entities, either based preamble, meets all assessment work RVUs for certain services based on
on nonprofit status or by having requirements. The analysis explains the the agency’s completion of a five-year
revenues of $29 million or less in any rationale for and purposes of this review of work RVUs. The CY 2007
year. We consider a substantial number proposed rule; details the costs and impact of the PE input changes
of entities to be affected if the proposed benefits of the rule; analyzes described in section II.A. of this
rule is estimated to impact more than 5 alternatives; and presents the measures proposed rule that were not included in
percent of the total number of small we propose to use to minimize the the June 29, 2006 proposed notice are
entities. Based on our analysis of the burden on small entities. As indicated minimal at the specialty level.
927 nonprofit ESRD facilities elsewhere in this proposed rule, we Additionally, the impacts in this
considered small entities in accordance propose to change our methodology for proposed rule reflect the use of updated
with the above definitions, we estimate calculating resource-based PE RVUs and physician time data from the AMA–
that the combined impact of the make a variety of other changes to our RUC.
proposed changes to payment for renal regulations, payments, or payment Our estimates of changes in Medicare
dialysis services included in this policies to ensure that our payment revenues for PFS services compare
proposed rule would have a 0.9 percent systems reflect changes in medical payment rates for CY 2006 with
increase in overall payments relative to practice and the relative value of proposed payment rates for CY 2007
current overall payments. services. We provide information for using CY 2005 Medicare utilization for
IDTFs are suppliers under the each of the policy changes in the all years. We are using CY 2005
Medicare program. For purposes of the relevant sections of this proposed rule. Medicare claims processed and paid
RFA, suppliers with annual sales of $6 We are unaware of any relevant Federal through March 30, 2005, that we
million or less are considered to be rules that duplicate, overlap or conflict estimate are 98 percent complete. To the
small entities. (Individuals and States with this proposed rule. The relevant extent that there are year-to-year
are not included in the definition of a sections of this proposed rule contain a changes in the volume and mix of
small entity.) We believe that our description of significant alternatives if services provided by physicians, the
proposed standards for IDTFs will help applicable. actual impact on total Medicare
bar fraudulent suppliers from revenues will be different than those
participating in the Medicare program A. Resource Based PE RVU Proposals shown here. The payment impacts
and provide an added level of for CY 2007 and Section 5102 of the reflect averages for each specialty based
protection to Medicare beneficiaries. DRA-Proposed Adjustments for on Medicare utilization. The payment
Therefore, we expect to have an impact Payments for Imaging Services impact for an individual physician
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on an unknown number of persons and As required by section 5102(a) of the would be different from the average,
entities who will effectively be DRA and described earlier in section based on the mix of services the
prevented from practicing their aberrant II.E.1. of this proposed rule, we are physician provides. The average change
billing activities. The vast majority of removing, from the PE RVUs under the in total revenues would be less than the
suppliers would not be significantly PFS the 0.3 percent increase made to the impact displayed here because
affected by this proposed rule. The PE RVUs in the CY 2006 PFS final rule physicians furnish services to both
reduction in program overpayments and with comment period to ensure the Medicare and non-Medicare patients

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49070 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

and specialties may receive substantial the financial responsibility of the in allowed charges attributed to section
Medicare revenues for services that are beneficiary.) These amounts have been 5102 of the DRA.
not paid under the PFS. For instance, summed across all services provided by • Combined impact of the June 29,
independent laboratories receive physicians, practitioners, or suppliers 2006 proposed notice methodology and
approximately 80 percent of their with a specialty to arrive at the total section 5102 of the DRA.
Medicare revenues from clinical allowed charges for the specialty.
laboratory services that are not paid • CY 2007 Update—The percentage
• Impact of Work and PE RVU
under the PFS. decrease in allowed charges attributed
Changes using the June 29, 2006
Table 7 shows only the payment to the most recent estimate of the CY
proposed notice methodology—For
impact on PFS services. The following 2007 PFS conversion factor update
references purposes, the combined CY
is an explanation of the information (¥5.1 percent).
2007 percentage increase or decrease in
represented in Table 7: • Combined impact with CY 2007
• Specialty—The physician specialty allowed charges attributed to changes in
the work and PE RVUs described in and update—The CY 2007 percentage
or type of practitioner/supplier.
• Allowed Charges—Allowed charges republished from the June 29, 2006 decrease in allowed charges attributed
are the Medicare Fee Schedule amounts proposed notice methodology. to the June 29, 2006 proposed notice
for covered services and include • Impact of section 5102 of the methodology, section 5102 of the DRA,
copayments and deductibles (which are DRA—The CY 2007 percentage decrease and the CY 2007 update.
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Table 8 below shows the impact on procedures of all of the changes procedures because they are the most
total payments for selected high-volume previously discussed. We selected these commonly provided by a broad
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49072 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

spectrum of physician specialties. There facility and nonfacility PE refer to of public comments, these figures may
are separate columns that show the Addendum A of this proposed rule. If change.
change in the facility rates and the we change any of the proposed
nonfacility rates. For an explanation of provisions following the consideration
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B. Geographic Practice Cost Indices updated GPCI data. In 2007, the in 4 of section II.B. in this proposed
(GPCI)—Payment Localities proposed GPCI and GAF values will rule.
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reflect new budget neutrality scalers C. Global Period for Remote


As discussed in section II.B. of the (developed by the Office of the Actuary)
preamble to this proposed rule, we are Afterloading High Intensity
and the removal of the 1.000 MMA floor Brachytherapy Procedures
proposing new GPCIs for 2007. In the from the physician work GPCI. The
November 15, 2004 PFS final rule, we negative impact of these changes on a As discussed in section II.D.1. of this
published 2005 and 2006 GPCI and GAF number of payment localities is shown proposed rule, we are proposing
values reflecting the 2 year phase-in of
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changes to the global period for these

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49074 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

services. We do not anticipate this add DSMT and MNT to the list of II.G. of this preamble. In order to
proposed change will have a significant Medicare covered and reimbursed understand the impact of the proposed
impact on Medicare expenditures. services under the Medicare FQHC changes affecting payments to different
benefit, effective for services provided categories of ESRD facilities, it is
D. DRA 5112—Proposed Addition of the
Ultrasound Screening for Abdominal on or after January 1, 2006. Although necessary to compare estimated
Aortic Aneurysm to Welcome to this statutory change has already been payments under the current year
Medicare Benefit implemented in administrative (current 2006 payments) to estimated
instructions, we are proposing to payments under the proposed revisions
As discussed earlier in section II.E.3. conform the regulations to meet the new
of this preamble, section 5112 of the to the composite rate payment system as
statutory requirement. FQHCs certified discussed in II.G. of this proposed rule
DRA authorizes coverage of an as DSMT and MNT providers have been
ultrasound screening for abdominal (proposed 2007 payments). To estimate
allowed to bundle the cost of those the impact among various classes of
aortic aneurysms effective January 1, services into their FQHC payment rates.
2007, subject to certain eligibility and ESRD facilities, it is imperative that the
But before the enactment of the DRA,
other limitations. We estimate that this estimates of current payments and
the provision of these services would
new benefit would result in an increase not generate a separate FQHC visit proposed payments contain similar
in Medicare expenditures to physicians payment. Effective for services inputs. Therefore, we simulated
and other practitioners and suppliers of furnished on or after January 1, 2006, payments only for those ESRD facilities
ultrasound services and related follow- FQHCs that are certified providers of that we are able to calculate both
up tests and treatment that may be DSMT and MNT services can receive current 2006 payments and proposed
required as a result of the coverage of per visit payments for covered services 2007 payments.
these screening examinations. However, furnished by registered dietitians or Due to data limitations, we are unable
this is not expected to have a significant nutrition professionals. In light of the to estimate current and proposed
cost impact on the Medicare program. fact there are a limited number of payments for 226 facilities that bill for
E. DRA 5113—Proposed Colorectal qualified centers for DSMT and MNT ESRD dialysis treatments. ESRD
Screening Exemption From Part B services, the increase in Medicare providers were grouped into the
Deductible expenditures should be negligible. categories based on characteristics
As discussed earlier in section II.E.4. G. Proposed Payment for Covered provided in the Online Survey and
of this preamble, beginning January 1, Outpatient Drugs and Biologicals (ASP Certification and Reporting (OSCAR)
2007, colorectal cancer screening Issues) file and the most recent cost report data
services as described in section from the Healthcare Cost Report
1861(pp)(1) of the Act are no longer The proposed changes discussed in
Information System (HCRIS). We also
subject to the Part B deductible. While section II.F. of this proposed rule, with
used the December 2005 update of CY
waiver of this deductible will be respect to payment for covered
2005 National Claims History file as a
beneficial to Medicare beneficiaries, we outpatient drugs and biologicals, are
estimated to have no impact on basis for Medicare dialysis treatments
do not anticipate that this change will and separately billable drugs and
have a significant cost impact on the Medicare expenditures. However, we
believe the changes will assist in biologicals. While the December 2005
Medicare program. update of the 2005 claims file is not
clarifying existing policy with respect to
F. Section 5114—Proposed Addition of ASP payment. complete, we wanted to use the most
Diabetes Outpatient Self-Management recent data available, and plan to use an
Training Services (DSMT) and Medical H. Proposed Provisions Related to updated version of the 2005 claims file
Nutrition Therapy (MNT) for the FQHC Payment for Renal Dialysis Services for the final rule.
Program Furnished by End State Renal Disease BILLING CODE 4120–01–P
(ESRD) Facilities
As discussed earlier in section E.4. of
this preamble, section 5114 of the DRA The ESRD related provisions in this
amended section 1861(aa)(3) the Act to proposed rule are discussed in section
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Table 9 above shows the impact of payments to hospital-based and column of Table 9 identifies the type of
this year’s proposed changes to CY 2007 independent ESRD facilities. The first ESRD provider, the second column
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49076 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

indicates the number of ESRD facilities I. Private Contracts and Opt-Out the definition of the term ‘‘Bone Mass
for each type, and the third column Provision Measurement’’ (§ 410.31(a)(2)), the
indicates the number of dialysis The changes discussed in this conditions for coverage (§ 410.31(b)), the
treatments. proposed rule, with respect to private examples of exceptions to the standards
The fourth column shows the effect of contracts and the opt-out provision, are on frequency of coverage
CY 2007 proposed changes to the ESRD currently estimated to have no (§ 410.31(c)(2)), and the category of
wage index as it affects the composite significant impact on Medicare individuals receiving glucocorticoid
rate payments to ESRD facilities. The expenditures. (steroid) therapy (§ 410.31(d)(3)). We are
fourth column compares aggregate ESRD also proposing the addition of a new
wage adjusted composite rate payments J. Proposals Related to Physician Self
paragraph (f) that would allow CMS,
in the second year of the transition (CY Referral Prohibitions
through the NCD process, to identify
2007) to aggregate ESRD wage adjusted As discussed in section II.I of this additional BMM systems for monitoring
composite rate payments in first year of proposed rule, we would clarify in
the transition (CY 2006). In the second individuals receiving osteoporosis drug
regulations at § 424.80(d) under the therapy and for performing confirmatory
year of the transition (CY 2007), ESRD contractual arrangement reassignment
facilities receive 50 percent of the CBSA baseline measurements. We do not
exception that, if a physician or other expect that this addition would have a
wage adjusted composite rate and 50 individual supplier reassigns his or her
percent of the MSA adjusted composite significant cost impact on the Medicare
right to bill for the TC of a diagnostic
rate. In the first year of the transition, program in the next several years.
test, the entity to which the
ESRD facilities receive 25 percent of the reassignment is made may not be paid Based on the projected impact of the
CBSA wage adjusted composite rate and more than the physician or other first three changes that would place
75 percent of the MSA adjusted individual supplier would have been greater reliance on the use of the more
composite rate. The overall effect to all paid for the TC. In addition, in order to expensive DXA (axial skeleton) devices,
ESRD providers in aggregate is zero bill for the TC of the diagnostic test, the we estimate that this revised benefit
because the proposed CY 2007 ESRD entity to which the reassignment is would result in an increase in Medicare
wage index has been multiplied by a made must perform the PC. We also payments for providers who use the
budget neutrality factor to comply with propose that, in order to bill for the PC DXA (axial skeleton) devices and a
the statutory requirement that any wage of a diagnostic test following a somewhat smaller decrease in payments
index revisions be done in a manner reassignment, the billing entity must to providers who use QCT (axial
that results in the same aggregate meet current requirements in our skeleton) and peripheral devices.
amount of expenditures as would have manual instructions. However, we do not expect that these
been made without any changes in the In addition, as discussed in section changes would have a significant cost
wage index. The decreases shown II.I., we also propose to revise impact on the Medicare program due to
among census regions is primarily due §§ 424.80(b) and (d) to provide that a the fact that at present a very small
to reducing the wage index floor, as physician or other individual supplier percentage of our total Medicare
there were areas in these areas with who reassigns his or her right to benefits payments for bone mass measurements
wage index values below the proposed has a right to review the bills for his or
floor. are being made to providers who use
her services, irrespective of whether the QCT or peripheral devices. In addition,
The fifth column shows the overall individual is an employee or an
effect of the proposed changes in we estimate that lowering the eligibility
independent contractor of the entity to standard for coverage of individuals on
composite rate payments to ESRD which the reassignment is made.
providers. The overall effect is steroid therapy from 7.5 mg/day to 5.0
We also propose the following
measured as the difference between CY mg/day of prednisone (the fourth
changes to the physician self-referral
2007 proposed payment with all provisions: change) would result in an increase in
changes as proposed in this rule and CY • A ‘‘centralized building’’ for Medicare payment for testing of
2006 current payment. This amount is purposes of the physician services additional patients, but this modest
computed by multiplying the wage exception and the in-office ancillary lowering of the steroid standard is not
adjusted composite rate with the drug services exception at §§ 411.355(a) and expected to have a significant cost
add-on for each provider times dialysis (b), respectively, would have to measure impact on the program.
treatments from 2005 claims. The CY at least 350 square feet and include
2007 proposed payment is transition M. Proposed IDTF Changes
permanent placement of the equipment
year two wage adjusted composite rate used in the provision of substantially all The costs associated with these
for each provider (with the proposed of the designated health services. We proposed changes would be as follows:
15.2 percent drug add-on) times dialysis believe that these changes would have
treatments from 2005 claims. The CY little effect on Medicare expenditures. 1. Liability Insurance Requirement
2006 current payment is transition year (§ 424.57(c)(10))
one wage adjusted composite rate for K. Supplier Access to Claims Billed on
each provider (with the current 14.5 Reassignment We estimate that only 10 percent of
percent drug add on) times dialysis The reassignment provisions IDTFs do not already have liability
treatments from 2005 claims. discussed in section II.J.2. of this insurance that meets this requirement.
The overall impact to ESRD providers preamble are currently estimated to Based on Medicare data as of June 2005,
in aggregate is 0.6 percent. This increase have no significant impact on Medicare 10 percent of the total number of IDTFs
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corresponds to the proposed 0.6 percent expenditures. is approximately 559 suppliers. Using
increase to the drug add-on. The the previously highest estimate received
variation seen in column 5 is due to L. Proposed Coverage of Bone Mass ($1,800 annually), results in an
variation in change in the wage index Measurement approximate additional liability
(column 4). All provider types receive As discussed in section II.K. of this insurance cost of $1 million annually
the same 0.6 percent increase to the preamble, we have decided to propose (559 times $1,800) to the IDTF industry
drug add on. several revisions to § 410.31 relative to due to this proposed rule.

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2. Primary Business Telephone Listed laboratories would pay the laboratories aggregate cost (savings) of the provision
Under the Name of the Business Locally at the same rates that the laboratories on the calculation of the Medicare Part
or Toll-free for Beneficiaries Proposed received by billing the Medicare carriers B premium rate (generally 25 percent of
Requirement (§ 424.57(c)(9)) under the physician fee schedule. the provision’s cost or savings).
To illustrate this point, as shown in
We estimate that only 1 percent of O. Public Consultation for Medicare Table 8, the 2006 national payment
IDTFs do not already meet this Payment for New Outpatient Clinical amount in the nonfacility setting for
requirement. Based on Medicare data as Diagnostic Laboratory Tests CPT code 99203 (Office/outpatient visit,
of June 2005, we determined that 1 This codification of our process for new), is $97.02 which means that
percent of IDTFs is approximately 56 public consultation for new clinical currently a beneficiary is responsible for
suppliers. Therefore, 56 times the diagnostic laboratory tests paid under 20 percent of this amount, or $19.40.
approximate $600 annual cost of the Medicare Part B clinical laboratory Based on the June 29, 2006 proposed
telephone service results in an fee schedule, if adopted, would not notice (71 FR 37170) and this proposed
additional cost of $33,600 annually. increase or decrease payment amounts rule, the 2007 national payment amount
Total Cost = $1 Million + $33,600 = for existing clinical diagnostic in the nonfacility setting for CPT code
approximately $1.04 million annually. laboratory tests because it would not 99203, as shown in Table 8, is $91.71
N. Independent Lab Billing for TC alter our current methodology for which means that, in 2007, the
Component of Physician Pathology calculating payment amounts for beneficiary coinsurance for this service
Services for Hospital Patients existing clinical diagnostic laboratory would be $18.34.
tests. For new tests, this proposal would Very few of the changes we are
The most current information on the primarily codify an existing process for proposing impact overall payments and,
number of affected hospitals and the the determination of payment amounts. therefore, would affect Medicare
impact on laboratories and hospitals Because any new laboratory tests to be beneficiaries’ coinsurance liability.
comes from a report issued by the gapfilled are unknown to us at the Proposals discussed above that do affect
General Accounting Office (GAO) in current time, we do not have any data overall spending, such as DRA 5102
September 2003. to estimate the impact of our proposal imaging provisions, would similarly
The GAO estimated that to pay for new gapfilled lab tests at the impact beneficiaries’ coinsurance.
approximately 95 percent of the total of median of the local carrier amounts for
all Medicare hospitals on the all carriers rather than the lower of that R. Accounting Statement
prospective payment system, as well as amount and the local carrier amount. As required by OMB Circular A–4
CAHs sent the TC of physician (available at http://
pathology services to independent P. Alternatives Considered
www.whitehouse.gov/omb/circulars/
laboratories and the independent This proposed rule contains a range of a004/a–4.pdf), in Table 10 below, we
laboratories billed the carrier under the policies, including some proposals have prepared an accounting statement
PFS. related to specific MMA provisions. The showing the classification of the
The GAO estimated that the median preamble provides descriptions of the expenditures associated with the
number of services sent by each hospital statutory provisions that are addressed, provisions of this proposed rule. This
to outside independent laboratories was identifies those policies when discretion table includes the impact of the
small, approximately 81 services. The has been exercised, presents rationale proposed changes in this rule on
GAO was unable to identify the number for our decisions and, where relevant, providers and suppliers.
of laboratories billing for the TC service alternatives that were considered. Expenditures are classified as
because a single laboratory may submit transfers to Medicare providers/or
claims under multiple provider Q. Impact on Beneficiaries
suppliers (that is, ESRD facilities and
numbers. In general, the impact on the There are a number of changes made physicians, other practitioners, clinical
individual hospital is small; however, in this proposed rule that would have laboratories and medical suppliers that
we do not know the impact on the an effect on beneficiaries. In general, we receive payment under the physician fee
individual independent laboratory believe these proposed changes, schedule or Medicare Part B). Based on
If the independent laboratories had particularly the DRA provisions that the proposals contained in this
not received payments from the carriers provide for an exception to the proposed rule, there would be an
for these TC services for hospital application of the Part B deductible estimated decrease in expenditures from
patients, the GAO estimates that with respect to colorectal cancer CY 2006 to 2007. This is a result of the
Medicare spending would have been screening tests and coverage of an CY 2007 increased payment to ESRD
$42 million less in 2001 and beneficiary ultrasound screening for the early facilities the reduction to the payments
cost sharing obligations for inpatient detection of AAAs, as part of the Initial for imaging services under the PFS
and outpatient services would have Preventive Physical Examination benefit required by section 5102 of the DRA and
been reduced by $2 million. (referred to as the Welcome to Medicare the ¥5.1 percent Medicare PFS
Based on what they learned from the benefit) would improve beneficiary conversion factor update required by the
hospital industry, the GAO thought that access to services that are currently statutory update formula.
Medicare beneficiaries’ access to covered or expand the Medicare benefit
pathology services would not likely be package to include new services. As TABLE 10.—ACCOUNTING STATEMENT:
affected if independent laboratories explained in more detail below, the CLASSIFICATION OF ESTIMATED EX-
could not longer bill the carrier for these regulatory provisions may affect
PENDITURES, FROM CY 2006 TO
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services. Hospital representatives beneficiary liability in some cases. Any


THE CY 2007 (IN MILLIONS)
indicated that they would likely changes in aggregate beneficiary liability
continue to use independent from a particular provision would be a Category Transfers
laboratories to provide TC pathology function of the coinsurance (20 percent
services. if applicable for the particular provision Annualized Monetized Estimated decrease
In is unclear if the hospitals after the beneficiary has met the Transfers. in expenditures of
contracting with independent deductible) and the effect of the $3,600

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49078 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

TABLE 10.—ACCOUNTING STATEMENT: PART 405—FEDERAL HEALTH medical nutrition therapy services as
CLASSIFICATION OF ESTIMATED EX- INSURANCE FOR THE AGED AND defined in part 410, subpart G of this
PENDITURES, FROM CY 2006 TO DISABLED chapter; or a qualified provider of
THE CY 2007 (IN MILLIONS)—Con- outpatient diabetes self-management
1. The authority citation for part 405 training services as defined in part 410,
tinued continues to read as follows: subpart H of this chapter.
Authority: Secs. 1102, 1861, 1862(a), 1871, (2) Medical visit. For purposes of this
Category Transfers 1874, 1881, and 1886(k) of the Social section, a medical visit is a face-to-face
Security Act (42 U.S.C. 1302, 1395x,
From Whom To Federal Government 1395y(a), 1395hh, 1395kk, 1395rr, and
encounter between a clinic or center
Whom? To ESRD Medicare 1395ww(k)), and sec. 353 of the Public patient and a physician, physician
Providers; physi- assistant, nurse practitioner, nurse
Health Service Act (42 U.S.C. 263a).
cians, other practi- midwife, or a visiting nurse; and for
tioners and sup- Subpart D—Private Contracts FQHCs only, a medical visit also
pliers who receive
payment under the
includes a separately billable medical
2. Section 405.400 is amended by nutrition therapy visit or a diabetes
Medicare Physician revising the definition of ‘‘Practitioner’’
Fee Schedule; and outpatient self-management training
to read as follows: visit.
Medicare Suppliers
billing for Part B § 405.400 Definitions. (3) Other health visit. For purposes of
drugs. this section, a other health visit is a
* * * * *
Practitioner means a physician face-to-face encounter between a clinic
In accordance with the provisions of assistant, nurse practitioner, clinical or center patient and a clinical
Executive Order 12866, this final rule nurse specialist, certified registered psychologist, clinical social worker, or
was reviewed by the Office of nurse anesthetist, certified nurse other health professional for mental
Management and Budget. midwife, clinical psychologist, clinical health services.
social worker, registered dietitian or (b) Encounters. Encounters with more
List of Subjects nutrition professional, who is currently than one health professional and
42 CFR Part 405 legally authorized to practice in that multiple encounters with the same
capacity by each State in which he or health professional that take place on
Administrative practice and she furnishes services to patients or the same day and at a single location
procedure, Health facilities, Health clients. constitute a single visit, except when
professions, Kidney diseases, Medical * * * * * one of the following conditions exist:
devices, Medicare, Reporting and (1) After the first encounter, the
recordkeeping requirements, Rural Subpart X—Rural Health Clinic and patient suffers illness or injury requiring
areas, X-rays. Federally Qualified Health Center additional diagnosis or treatment.
Services Payment for Rural Health (2) The patient has a medical visit and
42 CFR Part 410
Clinic and Federally Qualified Health other health visit(s), as defined in
Health facilities, Health professions, Center Services paragraph (a) of this section.
Kidney diseases, Laboratories, 3. Section 405.2446 is amended by (c) Payment. Medicare pays for more
Medicare, Reporting and recordkeeping adding paragraph (b)(10) to read as than one visit per day when the
requirements, Rural areas, X-rays. follows: conditions in paragraph (b) of this
42 CFR Part 411 section are met or a separate visit under
§ 405.2446 Scope of services.
paragraph (a)(1)(ii)(B) of this section is
Kidney diseases, Medicare, Physician * * * * * made.
Referral, Reporting and recordkeeping (b) * * *
requirements. (10) Medical nutrition therapy PART 410—SUPPLEMENTARY
services as specified in part 410, subpart MEDICAL INSURANCE (SMI)
42 CFR Part 414 G of this chapter, and diabetes BENEFITS
outpatient self-management training
Administrative practice and services as specified in part 410, subpart 5. The authority citation for part 410
procedure, Health facilities, Health H of this chapter. continues to read as follows:
professions, Kidney diseases, Medicare,
Reporting and recordkeeping. * * * * * Authority: Secs. 1102, 1834, and 1871 of
4. Section 405.2463 is revised to read the Social Security Act (42 U.S.C. 1302,
42 CFR Part 415 as follows: 1395m, and 1395hh).

Health facilities, Health professions, § 405.2463 What constitutes a visit. Subpart B—Medical and Other Health
Medicare, Reporting and recordkeeping (a) Visit—(1) General. (i) For RHCs, a Services
requirements. visit is a face-to-face encounter between
a clinic or center patient and a 6. Section 410.16 is amended in
42 CFR Part 424 physician, physician assistant, nurse paragraph (a) by revising paragraph (7)
practitioner, nurse midwife, visiting of the definition of ‘‘Initial preventive
Emergency medical services, Health physical examination’’ to read as
nurse, clinical psychologist, or clinical
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facilities, Health professions, Medicare, follows:


Reporting and recordkeeping social worker.
(ii) For FQHCs, a visit means—
requirements. (A) A face-to-face encounter, as § 410.16 Initial preventive physical
examination: Conditions for and limitations
For the reasons set forth in the described in paragraph (a)(1)(i) of this on coverage.
preamble, the Centers for Medicare & section; or
Medicaid Services proposes to amend (B) A face-to-face encounter between (a) * * *
42 CFR chapter IV as set forth below: a patient and a qualified provider of * * * * *

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Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules 49079

Initial preventive physical (b) Conditions for coverage of an (d)(5) of this section if the conditions
examination * * * ultrasound screening for abdominal under paragraph (b)(1) of this section
* * * * * aortic aneurysms. Medicare Part B pays are met and the monitoring is performed
(7) Education, counseling, and for one ultrasound screening for an by the use of a dual energy x-ray
referral, including a written plan such abdominal aortic aneurysm provided to absorptiometry system (axial skeleton).
as a checklist provided to the eligible beneficiaries, as described in (3) Medicare covers a medically
beneficiary for obtaining the appropriate this section, after a referral from a necessary confirmatory baseline bone
screening and other preventive services physician or a qualified nonphysician mass measurement for an individual
that are covered as separate Medicare practitioner as defined in § 410.16(a). defined under paragraph (d) of this
Part B benefits as described in section (c) Limitation on coverage of section, if the conditions under
1861(s)(10), section 1861(jj), section ultrasound screening for abdominal paragraph (b)(1) of this section are met
1861(nn), section 1861(oo), section aortic aneurysms. Payment may not be and the confirmatory baseline bone
1861(pp), section 1861(qq)(1), section made for an ultrasound screening for an mass measurement is performed by a
1861(rr), section 1861(uu), section abdominal aortic aneurysm that is dual energy x-ray absorptiometry system
1861(vv), section 1861(xx)(1), section performed for an individual who is not (axial skeleton) and the initial
1861(yy), and section 1861(bbb) of the an eligible beneficiary, as described in measurement was not performed by a
Act. the definition of ‘‘Eligible beneficiary’’ dual energy x-ray absorptiometry system
* * * * * in this section. (axial skeleton).
7. A new § 410.19 is added to read as 8. Section 410.31 is revised to read as (c) Standards on frequency of
follows: follows: coverage —(1) General rule. Except as
allowed under paragraph (c)(2) of this
§ 410.19 Ultrasound screening for § 410.31 Bone mass measurement: section, Medicare may cover a bone
Conditions for coverage and frequency
abdominal aortic aneurysms: Condition for mass measurement for a beneficiary if at
and limitation on coverage. standards.
least 23 months have passed since the
(a) Definitions: As used in this (a) Definition. As used in this section month the last bone mass measurement
section, the following definitions apply: unless specified otherwise, the was performed.
Eligible beneficiary means an following definition applies: (2) Exception. If medically necessary,
individual who— Bone mass measurement means a Medicare may cover a bone mass
(1) Has received a referral for an radiologic, radioisotopic, or other measurement for a beneficiary more
ultrasound screening for an abdominal procedure that meets the following frequently than allowed under
aortic aneurysm as a result of an initial conditions: paragraph (c)(1) of this section.
preventive physical examination (as (1) Is performed for the purpose of Examples of situations where more
defined in section 1861(ww)(1) of the identifying bone mass, detecting bone frequent bone mass measurement
Act); loss, or determining bone quality. procedures may be medically necessary
(2) Has not been previously furnished (2) Is performed with either a bone include, but are not limited to the
an ultrasound screening for an densitometer (other than single-photon following medical circumstances.
abdominal aortic aneurysm under the or dual-photon absorptiometry) or with (i) Monitoring beneficiaries on long-
Medicare program; and a bone sonometer system that has been term glucocorticoid (steroid) therapy of
(3) Is included in at least one of the cleared for marketing for this use by the more than 3 months.
following risk categories: FDA under 21 CFR part 807, or (ii) Allowing for a confirmatory
(i) Has a family history of an approved for marketing by the FDA for baseline measurement to permit
abdominal aortic aneurysm. this use under 21 CFR part 814. monitoring of beneficiaries in the future
(ii) Is a man age 65 to 75 who has (3) Includes a physician’s if the requirements of paragraph (b)(3) of
smoked at least 100 cigarettes in his interpretation of the results of the this section are met.
lifetime. procedure. (d) Beneficiaries who may be covered.
(iii) Is an individual who manifests (b) Conditions for coverage. (1) The following categories of beneficiaries
other risk factors in a beneficiary Medicare covers a medically necessary may receive Medicare coverage for a
category recommended for screening by bone mass measurement if the following medically necessary bone mass
the United States Preventive Services conditions are met: measurement:
Task Force regarding abdominal aortic (i) Following an evaluation of the (1) A woman who has been
aneurysms, as specified by the Secretary beneficiary’s need for the measurement, determined by the physician (or a
through a national coverage including a determination as to the qualified nonphysician practitioner)
determination process. medically appropriate procedure to be treating her to be estrogen-deficient and
Ultrasound screening for abdominal used for the beneficiary, it is ordered by at clinical risk for osteoporosis, based
aortic aneurysms means the following the physician or a qualified on her medical history and other
services furnished to an asymptomatic nonphysician practitioner (as these findings.
individual for the early detection of an terms are defined in § 410.32(a)) treating (2) An individual with vertebral
abdominal aortic aneurysm: the beneficiary. abnormalities as demonstrated by an x-
(1) A procedure using soundwaves (or (ii) It is performed under the ray to be indicative of osteoporosis,
other procedures using alternative appropriate level of supervision of a osteopenia, or vertebral fracture.
technologies of commensurate accuracy physician (as set forth in § 410.32(b)). (3) An individual receiving (or
and cost, as specified by the Secretary (iii) It is reasonable and necessary for expecting to receive) glucocorticoid
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through a national coverage diagnosing and treating the condition of (steroid) therapy equivalent to an
determination process) provided for the a beneficiary who meets the conditions average of 5.0 mg of prednisone, or
early detection of abdominal aortic described in paragraph (d) of this greater, per day for more than 3 months.
aneurysms. section. (4) An individual with primary
(2) Includes a physician’s (2) Medicare covers a medically hyperparathyroidism.
interpretation of the results of the necessary bone mass measurement for (5) An individual being monitored to
procedure. an individual defined under paragraph assess the response to or efficacy of an

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49080 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

FDA-approved osteoporosis drug (g) Application certification is furnishing a consultation or treating


therapy. standards. The IDTF must certify in its a beneficiary for a specific medical
(e) Denial as not reasonable and enrollment application that it meets the problem and who uses the results in the
necessary. If CMS determines that a following standards: management of the beneficiary’s specific
bone mass measurement does not meet (1) Operate its business in compliance medical problem. Nonphysician
the conditions for coverage in with all applicable Federal and State practictioners may order tests as set
paragraphs (b) or (d) of this section, or licensure and regulatory requirements. forth in § 410.32(a)(3).
the standards on frequency of coverage (2) Provide complete and accurate (8) Answer beneficiaries’ questions
in paragraph (c) of this section, it is information on their enrollment and respond to their complaints.
excluded from Medicare coverage as not application. Any change in enrollment Documentation of those contacts must
‘‘reasonable’’ and ‘‘necessary’’ under information must be reported to the be maintained at the physical site.
section 1862(a)(1)(A) of the Act and designated fee-for-service contractor on (9) Openly post these standards for
§ 411.15(k) of this chapter. the Medicare enrollment application review by patients and the public.
(f) Use of the National Coverage within 30 calendar days of the change. (10) Disclose to the government any
Determination Process. For the purposes (3) Maintain a physical facility on an person having ownership, financial, or
of paragraphs (b)(2) and (b)(3) of this appropriate site. For the purposes of this control interest or any other legal
section, CMS may determine through standard, a post office box or interest in the supplier.
the National Coverage Determination commercial mail box is not considered (11) Have its testing equipment
process that additional bone mass a physical facility. The physical facility calibrated per equipment instructions
measurement systems are reasonable must contain space for equipment and in compliance with applicable
and necessary under section 1862(a)(1) appropriate to the services designated national standards.
of the Act for monitoring and on the enrollment application, facilities (12) Have technical staff on duty with
confirming baseline bone mass for hand washing, adequate patient the appropriate credentials to perform
measurements. privacy accommodations, and the tests. The IDTF must be able to produce
storage of both business records and the applicable Federal or State licenses
* * * * * current medical records.
9. Section 410.33 is amended by— or certifications of the individuals
(4) Have all applicable testing
A. Revising paragraph (b)(1). performing these services.
equipment available at the physical site
B. Revising paragraph (e). excluding portable equipment. A catalog (13) Have proper medical record
C. Adding paragraphs (g), (h), and (i). of portable equipment, including storage and be able to retrieve medical
The revision and additions read as equipment serial numbers, must be records upon request from CMS or its
follows: maintained at the physical site. In fee-for-service contractor within 2
addition, portable equipment must be business days.
§ 410.33 Independent diagnostic testing (14) Permit CMS, including its agents,
facility. available for inspection within two
business days of a CMS inspection or its designated fee-for-service
* * * * * * contractors, to conduct unannounced,
(b) Supervising physician. (1) Each request. The IDTF must maintain a
current inventory of the equipment, on-site inspections to confirm the
supervising physician must be limited IDTF’s compliance with these
to providing supervision to no more including serial and registration
numbers, provide this information to standards. The IDTF must be accessible
than three (3) IDTF sites. The IDTF during regular business hours to CMS
supervising physician is responsible for the designated fee-for-service contractor
upon request, and notify the contractor and beneficiaries and must maintain a
the overall operation and administration visible sign posting the normal business
of the IDTFs, including the employment of any changes in equipment within 90
days. hours of the IDTF.
of personnel who are competent to (h) Failure to meet standards. If an
(5) Maintain a primary business
perform test procedures, record and IDTF fails to meet one or more of the
phone under the name of the designated
report test results promptly, accurately standards in paragraph (g) of this
business. The business phone must be
and proficiently, and for assuring section at the time of enrollment, its
located at the designated site of the
compliance with the applicable enrollment will be denied. CMS will
business. The telephone number or toll
regulations. revoke a supplier’s billing privileges if
free numbers must be available in a
* * * * * local directory and through directory and IDTF is found not to meet the
(e) Multi-State entities. (1) An IDTF assistance. standards in paragraph (g) or (b)(1) of
that operates across State boundaries (6) Have a comprehensive liability this section.
must— insurance policy of at least $300,000 or (i) Definition. For purposes of this
(i) Maintain documentation that its 20 percent of its average annual section, the following definition applies:
supervising physicians and technicians Medicare billings, whichever amount is Point of actual delivery of service. The
are licensed and certified in each of the greater, that covers both the place of point of the actual delivery of service
States in which it operates; and business and all customers and means the Place of Service on the claim
(ii) Operate in compliance with all employees of the IDTF. The policy must form. When an IDTF performs a
applicable Federal, State, and local be carried by a non-relative owned diagnostic test at the beneficiary’s
licensure and regulatory requirements company and list the serial numbers of residence, the beneficiary’s residence is
with regard to the health and safety of any and all equipment used by the the Place of Service.
patients. IDTF.
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(2) The point of the actual delivery of (7) Agree not to directly solicit Subpart I—Payment of SMI Benefits
services is the Place of Service on the patients through any means including, 10. Section 410.160 is amended by
claim form. When an IDTF performs a but not limited to, a prohibition on adding paragraphs (b)(7) and (b)(8) to
diagnostic test at the beneficiary’s telephone, computer, or in-person read as follows:
residence, the beneficiary’s residence is contacts. The IDTF must accept only
the Place of Service. those patients referred for diagnostic § 410.160 Part B annual deductible.
* * * * * testing by an attending physician, who * * * * *

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Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules 49081

(b) * * * A. Revising the definition same restrictions on compensation that


(7) Beginning January 1, 2007, ‘‘Centralized building’’. apply to members of the group practice
colorectal cancer screening tests as B. Revising the definition ‘‘Physician under § 411.352(g) (or the contract must
described in § 410.37. in the group practice’’. fit in the personal services exception in
(8) Beginning January 1, 2007, The revisions read as follows: § 411.357(d)), and the independent
ultrasound screening for abdominal § 411.351 Definitions.
contractor’s arrangement with the group
aortic aneurysms described in § 410.19. practice and must comply with the
* * * * * reassignment rules at § 424.80(d)(3) of
* * * * * Centralized building means all or part
this chapter or section 30.2.9.1 of the
of a building, including, for purposes of
PART 411—EXCLUSIONS FROM CMS Internet-only manual, publication
this subpart only, a mobile vehicle, van,
MEDICARE AND LIMITATIONS ON 100–04, Claims Processing Manual,
or trailer that is owned or leased on a
MEDICARE PAYMENT chapter 1 on general billing
full-time basis (that is, 24 hours per day,
requirements (as amended or replaced
11. The authority citation for part 411 7 days per week, for a term of not less
than 6 months) by a group practice and from time to time). Referrals from an
is amended to read as follows:
that is used exclusively by the group independent contractor who is a
Authority: Secs. 1102, 1860D–1 through physician in the group practice are
1860D–42, 1871, and 1877 of the Social practice. Space in a building or a mobile
vehicle, van, or trailer that is shared by subject to the prohibition on referrals in
Security Act (42 U.S.C. 1302, 1395w–101 § 411.353(a), and the group practice is
through 1395w–152, 1395hh, and 1395nn). more than one group practice, by a
group practice and one or more solo subject to the limitation on billing for
Subpart A—General Exclusions and practitioners, or by a group practice and those referrals in § 411.353(b).
Exclusion of Particular Services another provider or supplier (for * * * * *
example, a diagnostic imaging facility)
12. Section 411.15 is amended by— is not a centralized building for PART 414—PAYMENT FOR PART B
A. Revising paragraph (a)(1). purposes of this subpart. This definition MEDICAL AND OTHER HEALTH
B. Adding a new paragraph (k)(12). does not preclude a group practice from SERVICES
C. Revising paragraph (o).
providing services to other providers or 14. The authority citation for part 414
The revisions and addition read as
suppliers (for example, purchased continues to read as follows:
follows:
diagnostic tests) in the group practice’s
Authority: Secs. 1102, 1871, and 1881(b)(1)
§ 411.15 Particular services excluded from centralized building. A group practice of the Social Security Act (42 U.S.C. 1302,
coverage. may have more than one centralized 1395hh, and 1395rr(b)(1).
* * * * * building. A centralized building does
not include space that is owned or 15. A new subpart F is added as
(a) * * * follows:
(1) Examinations performed for a leased by a group practice if that space
purpose other than treatment or is less than 350 square feet. This Subpart F—Payment for New Clinical
diagnosis of a specific illness, limitation does not apply to space Diagnostic Laboratory Tests
symptoms, complaint, or injury, except owned or rented in a building where no
for screening mammography, colorectal more than three group practices own or Sec.
lease space in the ‘‘same building’’ (as 414.400 Basis and scope.
cancer screening tests, screening pelvic
defined in this section) and share the 414.402 Definitions.
exams, prostate cancer screening tests, 414.404 [Reserved]
glaucoma screening exams, initial same ‘‘physician in the group practice’’
414.406 Procedures for public consultation
preventive physical examinations, or (as defined in this section). A for payment for a new clinical diagnostic
ultrasound screening for abdominal centralized building does not include laboratory test.
aortic aneurysms that meet the criteria space owned or leased by a group 414.408 Payment for a new clinical
specified in paragraphs (k)(6) through practice if equipment needed to perform diagnostic laboratory test.
(k)(12) of this section. substantially all (at least 90 percent) of 414.410 Clinical Diagnostic Laboratory Date
the designated health services furnished of Service for Specimens
* * * * * in that space in any given calendar year
(k) * * * is not permanently located in that space. Subpart F—Payment for New Clinical
(12) In the case of ultrasound That is, equipment needed to perform Diagnostic Laboratory Tests
screening for abdominal aortic more than 10 percent of the designated
aneurysms, with the goal of early § 414.400 Basis and scope.
health services furnished in that space
detection of abdominal aortic This subpart implements provisions
in a calendar year cannot be temporarily
aneurysms, subject to the conditions of 1833(h)(8) of the Act procedures for
moved into that space from another
and limitation specified in § 410.19 of determining the basis for, and amount
space in the ‘‘same building’’ or from
this chapter. of, payment for a new clinical
outside the ‘‘same building’’ (as defined
* * * * * diagnostic laboratory test with respect to
in this section).
(o) Experimental or investigational which a new or substantially revised
* * * * * Healthcare Common Procedure Coding
devices, except for certain devices— Physician in the group practice means
(1) Categorized by the FDA as a System code is assigned on or after
a member of the group practice, as well January 1, 2005.
Category A or B device defined in as an independent contractor physician
§ 405.201(b) of this chapter; and during the time the independent § 414.402 Definitions.
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(2) Furnished in accordance with the contractor is furnishing patient care For purposes of this subpart—
CMS clinical research policy. services (as defined in this section) for Substantially Revised Healthcare
Subpart J—Financial Relationships the group practice under a contractual Common Procedure Coding System
Between Physicians and Entities arrangement with the group practice to Code means a code for which there has
Furnishing Designated Health Services provide services to the group practice’s been a substantive change to the
patients in the group practice’s definition of the test or procedure to
13. Section 411.351 is amended by— facilities. The contract must contain the which the code applies (such as a new

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49082 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

analyte or a new methodology for (a) Crosswalking. Crosswalking is (iv) The test is reasonable and
measuring an existing analyte specific used if it is determined that a new test medically necessary.
test). is comparable to an existing test,
multiple existing test codes, or a portion Subpart J—Submission of
§ 414.404 [Reserved] of an existing test code. Manufacturer’s Average Sales Price
§ 414.406 Procedures for public (1) CMS assigns to the new test code, Data
consultation for payment for a new clinical the local fee schedule amounts and
16. Section 414.802 is amended by
diagnostic laboratory test. national limitation amount of the
adding the definition of ‘‘Bona fide
For a new clinical diagnostic existing test.
(2) Payment for the new test code is service fees’’ in alphabetical order to
laboratory test that is assigned a new or read as follows:
made at the lesser of the local fee
substantially revised code on or after
schedule amount or the national § 414.802 Definitions.
January 1, 2005, CMS determines the
limitation amount.
payment after the performance of the * * * * *
(b) Gapfilling. Gapfilling is used when
following: no comparable existing test is available. Bona fide service fees means fees paid
(a) CMS makes available to the public (1) Carrier-specific amounts are by a manufacturer to an entity, that
(through an Internet Web site and other established for the new test code for the represent fair market value for a bona
appropriate mechanisms) a list that first year using the following sources of fide, itemized service actually
includes codes for which establishment information to determine gapfill performed on behalf of the manufacturer
of a payment amount is being amounts, if available: that the manufacturer would otherwise
considered for the next calendar year. (i) Charges for the test and routine perform (or contract for) in the absence
(b) CMS publishes a Federal Register discounts to charges; of the service arrangement, and that are
notice of a meeting to receive public (ii) Resources required to perform the not passed on in whole or in part to a
comments and recommendations (and test; client or customer of an entity, whether
data on which recommendations are (iii) Payment amounts determined by or not the entity takes title to the drug.
based) on the appropriate basis, as other payers; and * * * * *
specified in § 414.408, for establishing (iv) Charges, payment amounts, and 17. Section 414.804 is amended by
payment amounts for the list of codes resources required for other tests that revising paragraphs (a)(1), (a)(2), (a)(3),
made available to the public. may be comparable or otherwise and (a)(4).
(c) Not fewer than 30 days after relevant. The revisions read as follows:
publication of the notice in the Federal (2) In the second year, the test code
Register, CMS convenes a meeting that is paid at the national limitation § 414.804 Basis of Payment.
includes representatives of CMS amount, which is the median of the (a) * * *
officials involved in determining carrier-specific amounts. (1) The manufacturer’s average sales
payment amounts, to receive public price for a quarter for a drug represented
§ 414.410 Clinical Diagnostic Laboratory
comments and recommendations (and Date of Service for Specimens.
by a particular 11-digit National Drug
data on which the recommendations are Code must be calculated as the
The date of service for a laboratory manufacturer’s sales to all purchasers in
based). test is as follows:
(d) Taking into account the comments the United States for that particular 11-
(a) Except as provided under
and recommendations (and digit National Drug Code (after
paragraph (b) of this section, the date of
accompanying data) received at the excluding sales as specified in
service of the test shall be the date the
public meeting, CMS develops and paragraph (a)(4) of this section and then
specimen was collected.
makes available to the public (through (b)(1) If a specimen is collected over deducting price concessions as specified
an Internet Web site and other a period that spans two calendar days, in paragraphs (a)(2) and (a)(3) of this
appropriate mechanisms)— then the date of service shall be the date section) divided by the total number of
(1) A list of proposed determinations the collection ended. units sold by the manufacturer in that
with respect to the appropriate basis for (2) If a specimen was stored for more quarter (after excluding units associated
establishing a payment amount for each than 30 calendar days before testing with sales as specified in paragraph
code, with an explanation of the reasons (otherwise known as ‘‘an archived (a)(4) of this section).
for each determination, the data on specimen’’), the date of service of the (2) Price concessions. (i) In calculating
which the determinations are based, and test shall be the date the specimen was the manufacturer’s average sales price, a
a request for public written comments obtained from storage. manufacturer must deduct price
within a specified time period on the (3) If a specimen was stored for less concessions. Price concessions include
proposed determination; and than or equal to 30 calendar days from the following types of transactions and
(2) A list of final determinations of the the date it was collected, the date of items:
payment amounts for tests, with the service of the test must be the date the (A) Volume discounts.
rationale for each determination, the specimen was obtained from storage if— (B) Prompt pay discounts.
data on which the determinations are (i) The test is ordered by the patient’s (C) Cash discounts.
based, and responses to comments and physician at least 14 days following the (D) Free goods that are contingent on
suggestions from the public. date of the patient’s discharge from the any purchase requirement.
hospital. (E) Chargebacks and rebates (other
§ 414.408 Payment for a new clinical (ii) The test could not reasonably have than rebates under the Medicaid
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diagnostic laboratory test. been ordered while the patient was program).
For a new clinical diagnostic hospitalized. (ii) For the purposes of paragraph
laboratory test that is assigned a new or (iii) The procedure performed while (a)(2)(i), bona fide services fees are not
substantially revised code on or after the beneficiary is a patient of the considered price concessions.
January 1, 2005, CMS determines the hospital is for purposes other than (3) To the extent that data on price
payment amount based on either of the collection of the specimen needed for concessions, as described in paragraph
following: the test. (a)(2) of this section, are available on a

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Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules 49083

lagged basis, the manufacturer must $600,000. The lagged price concessions quarter being submitted. The product
estimate this amount in accordance with percentage for this period equals that results from the multiplication of
the methodology described in this 200,000/600,000 = .33333. The total in the rolling average percentage estimate
paragraph. dollars for the sales subject to the of lagged exempted sales and the sales
(i)(A) For each National Drug Code average sales price reporting for the quarter determines the estimated
with at least 12 months of sales requirement for the quarter being lagged exempted sales in units to
(including products for which the reported, after accounting for non- subtract from the denominator of the
manufacturer has redesignated the lagged price concessions, equals average sales price calculation.
National Drug Code for the specific $50,000 for 10,000 units sold. The Manufacturers must make a
product and package size and has 12 manufacturer’s average sales price corresponding adjustment to the
months of sales across the prior and calculation for this National Drug Code numerator of the average sales price
current National Drug Codes), after for this quarter is: $50,000 ¥ (0.33333 calculation to ensure that the total in
adjusting for exempted sales, the × 50,000) = $33,334 (net total sales dollars for the reporting quarter does not
manufacturer calculates a percentage amount); $33,334/10,000 = $3.33 include revenue related to lagged
equal to the sum of the price (average sales price). exempted sales removed from the
concessions for the most recent 12- (4) Exempted sales. (i) In calculating denominator using the estimation
month period available associated with the manufacturer’s average sales price, a methodology.
sales subject to the average sales price manufacturer must exclude sales that
(B) For National Drug Codes with less
reporting requirement divided by the are exempt from the Medicaid best price
than 12 months of sales, the calculation
total in dollars for the sales subject to calculation under sections
described in paragraph (4)(iii)(A) of this
the average sales price reporting 1927(c)(1)(C)(i) and 1927(c)(1)(C)(ii)(III)
section is calculated based on the sales
requirement for the same 12-month of the Act as limited by section
and exempted sales (lagged and non-
period. 1927(c)(1)(D) of the Act.
(B) For each National Drug Code with (ii) In determining nominal sales lagged) for the period equaling the total
less than 12 months of sales, the exempted under section number of months of sales.
calculation described in paragraph (i)(A) 1927(c)(1)(C)(ii)(III) of the Act, the (C) Manufacturers must exclude
of this section is performed for the time manufacturer calculates the average lagged exempted sales (as calculated
period equaling the total number of manufacturer price as defined in section using the ratio methodology in
months of sales. 1927(k) of the Act and then identifies paragraph (a)(4)(iii)(A) of this section)
(ii) The manufacturer multiplies the sales that are eligible to be considered from their estimates of lagged price
applicable percentage described in a nominal sale under section concessions described in paragraph
paragraph (a)(3)(i)(A) or (a)(3)(i)(B) of 1927(c)(1)(D) of the Act and are at less (a)(3) of this section.
this section by the total in dollars for the than 10 percent of the average * * * * *
sales subject to the average sales price manufacturer price. To identify nominal
reporting requirement (after adjusting sales, the manufacturer must use the Subpart K—Payment for Drugs and
for exempted sales) for the quarter being average manufacturer price for the Biologicals Under Part B
submitted. (The manufacturer must calendar quarter that is the same
carry a sufficient number of decimal calendar quarter as the average sales 18. Section 414.904 is amended by
places in the calculation of the price price reporting period. revising paragraphs (d)(2)(iii) and (d)(3)
concessions percentage in order to (iii) For exempted sales under section to read as follows:
round accurately the net total sales 1927(c)(1)(C)(i) of the Act known on a
§ 414.904 Average sales price as the basis
amount for the quarter to the nearest lagged basis because of chargebacks or
for payment.
whole dollar.) The result of this rebates, manufacturers must estimate
multiplication is then subtracted from such lagged exempted sales using the * * * * *
the total in dollars for the sales subject ratio methodology specified in this (d) * * *
to the average sales price reporting paragraph to exclude lagged exempted (2) * * *
requirement (after adjusting for sales before accounting for price (iii) Effective for drugs and biologicals
exempted sales) for the quarter being concessions as specified in paragraphs furnished in CY 2006 and subsequent
submitted. (a)(2) and (a)(3) of this section.
calendar years, the payment for such
(iii) The manufacturer uses the result (A) For each National Drug Code with
drugs and biologicals furnished in
of the calculation described in at least 12 months of sales (including
products for which the manufacturer connection with renal dialysis services
paragraph (a)(3)(ii) of this section as the
has redesignated the Nation Drug Code and separately billed by freestanding
numerator and the number of units sold
and has 12 months of sales across the and hospital-based renal dialysis
in the quarter (after adjusting for
prior and current National Drug Codes), facilities not paid on a cost basis is 106
exempted sales) as the denominator to
the manufacturer calculates a percent of the average sales price.
calculate the manufacturer’s average
sales price for the National Drug Code percentage using the sum of lagged (3) Widely available market price and
for the quarter being submitted. exempted sales (in units) for the most average manufacturer price. If the
(iv) Example. After adjusting for recent 12 month period available as the Inspector General finds that the average
exempted sales, the total lagged price numerator and the sales (the number of sales price exceeds the widely available
concessions (discounts, rebates, etc.) units after non-lagged exempted sales market price or the average
over the most recent 12-month period have been subtracted from total sales) manufacturer price by 5 percent or more
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available associated with sales for for the same 12 month period as the in CY 2007, the payment limit in the
National Drug Code 12345–6789–01 denominator. The result is a rolling quarter following the transmittal of this
subject to the ASP reporting average percentage estimate of lagged information to the Secretary is the lesser
requirement equal $200,000, and the exempted sales that is applied to the of the widely available market price or
total in dollars for the sales subject to sales (the number of units after non- 103 percent of the average manufacturer
the average sales price reporting lagged exempted sales have been price.
requirement for the same period equals subtracted from total sales) for the * * * * *

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49084 Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules

PART 415—SERVICES FURNISHED BY is not sufficient to order a series of physician or other supplier that
PHYSICIANS IN PROVIDERS, blood glucose tests. performed the test and indicate the
SUPERVISING PHYSICIANS IN * * * * * supplier’s net charge for the test. If the
TEACHING SETTINGS, AND physician or medical group billing for
RESIDENTS IN CERTAIN SETTINGS Subpart F—Limitations on Assignment the test fails to provide this information,
and Reassignment of Claims CMS will not make any payment to the
19. The authority citation for part 415 physician or medical group billing for
continues to read as follows: 23. Section 424.80 is amended by— the test and the billing physician or
A. Revising the heading of paragraph medical group can not bill the
Authority: Secs. 1102 and 1871 of the (d).
Social Security Act (42 U.S.C. 1302 and beneficiary.
1395hh).
B. Revising paragraph (d)(2) (iii) In order to bill for the technical
C. Adding a new paragraph (d)(3). component of the service, the physician
Subpart C—Part B Carrier Payments The revisions and addition read as or medical group must directly perform
for Physician Services to Beneficiaries follows: the professional component of the
in Providers § 424.80 Prohibition of reassignment of service.
claims by suppliers. (Catalog of Federal Domestic Assistance
20. Section 415.130 is amended by
* * * * * Program No. 93.774, Medicare—
revising paragraph (d) to read as Supplementary Medical Insurance Program)
follows: (d) Reassignment to an entity under
an employer-employee relationship or Dated: June 29, 2006.
§ 415.130 Conditions for payment: under a contractual arrangement: Mark B. McClellan,
Physician pathology services. Conditions and limitations. (1) * * * Administrator, Centers for Medicare &
* * * * * (2) Access to records. The supplier Medicaid Services.
(d) Physician pathology services who furnishes the service has
Approved: August 3, 2006.
furnished by an independent laboratory. unrestricted access to claims submitted
by an entity for services provided by Michael O. Leavitt,
The technical component of physician
that supplier. This paragraph applies Secretary.
pathology services furnished by an
independent laboratory to a hospital irrespective of whether the supplier is Note: These addenda will not appear in the
inpatient or outpatient on or before an employee or whether the service is Code of Federal Regulations.
December 31, 2006 may be paid to the provided under a contractual
laboratory by the carrier under the arrangement. If an entity refuses to Addendum A: Explanation and Use of
physician fee schedule if the Medicare provide, upon request, the billing Addenda B
beneficiary is a patient of a covered information to the supplier performing The addenda on the following pages
hospital as defined in paragraph (a)(1) of the service, the entity’s right to receive provide various data pertaining to the
this section. For services furnished after reassigned benefits may be revoked Medicare fee schedule for physicians’
December 31, 2006, an independent under § 424.82(c)(3). services furnished in 2007. Addendum
laboratory may not bill the carrier for (3) Contractual arrangements for B contains the RVUs for work, non-
physician pathology services furnished provision of diagnostic test services. If a facility PE, facility PE, and malpractice
to a hospital inpatient or outpatient. physician or medical group bills for the expense, and other information for all
* * * * * technical component of a diagnostic test services included in the PFS.
covered under section 1861(s)(3) of the In previous years, we have listed
PART 424—CONDITIONS FOR Act and paid for under part 414 of this many services in Addendum B that are
MEDICARE PAYMENT chapter (other than clinical diagnostic not paid under the PFS. To avoid
laboratory tests paid under section publishing as many pages of codes for
21. The authority citation for part 424 1833(a)(2)(D) of the Act, which are these services, we are not including
continues to read as follows: subject to the special rules set forth in clinical laboratory codes or the
Authority: Secs. 1102 and 1871 of the section 1833(h)(5)(A) of the Act), alphanumeric codes (Healthcare
Social Security Act (42 U.S.C. 1302 and following a reassignment involving a Common Procedure Coding System
1395hh). contractual arrangement with the (HCPCS) codes not included in CPT) not
physician or other supplier who paid under the PFS in Addendum B.
Subpart B—Certification and Plan of performed the technical component,
Treatment Requirements each of the following conditions must Addendum B—2007 Relative Value
be met: Units and Related Information Used in
22. Section 424.24 is amended by— (i) The payment to the billing Determining Medicare Payments for
A. Redesignating paragraph (f) as physician, or medical group, less the 2007
paragraph (g). applicable deductibles and coinsurance, This addendum contains the
B. Adding a new paragraph (f). may not exceed the lowest of the following information for each CPT
The addition reads as follows: following amounts: code and alphanumeric HCPCS code,
(A) The physician or other supplier’s except for: alphanumeric codes
§ 424.24 Requirements for medical and net charge to the billing physician or beginning with B (enteral and parenteral
other health services furnished by medical group. therapy), E (durable medical
providers under Medicare Part B. (B) The billing physician’s or medical equipment), K (temporary stcodes for
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* * * * * group’s actual charge. nonphysicians’ services or items), or L


(f) Blood glucose monitoring in skilled (C) The fee schedule amount for the (orthotics); and codes for
nursing facilities. For each blood service that would be allowed if the anesthesiology. Please also note the
glucose test furnished to a resident of a physician or other supplier billed following:
skilled nursing facility, the physician directly. • An ‘‘NA’’ in the ‘‘Non-facility PE
must certify that the test is medically (ii) The physician or medical group RVUs’’ column of Addendum B means
necessary. A physician’s standing order billing for the test must identify the that CMS has not developed a PE RVU

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Federal Register / Vol. 71, No. 162 / Tuesday, August 22, 2006 / Proposed Rules 49085

in the non-facility setting for the service hospital nurse regarding care of a other services payable under the PFS
because it is typically performed in the patient). billed on the same date by the same
hospital (for example, an open heart C = Carriers price the code. Carriers provider. If any other services payable
surgery is generally performed in the will establish RVUs and payment under the PFS are billed on the same
hospital setting and not a physician’s amounts for these services, generally on date by the same provider, these
office). If there is an ‘‘NA’’ in the non- an individual case basis following services are bundled into the service(s)
facility PE RVU column, and the review of documentation, such as an for which payment is made.
contractor determines that this service operative report. X = Statutory exclusion. These codes
can be performed in the non-facility D* = Deleted/discontinued code. represent an item or service that is not