[Federal Register: November 7, 2003 (Volume 68, Number 216)]
[Rules and Regulations]               
[Page 63195-63395]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07no03-11]                         
 

[[Page 63195]]

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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 410 and 414



Medicare Program; Revisions to Payment Policies Under the Physician Fee 
Schedule for Calendar Year 2004; Final Rule


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410 and 414

[CMS-1476-FC]
RIN 0938-AL96

 
Medicare Program; Revisions to Payment Policies Under the 
Physician Fee Schedule for Calendar Year 2004

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule will refine the resource-based practice 
expense relative value units (RVUs) and make other changes to Medicare 
Part B payment policy. The policy changes concern: Medicare Economic 
Index, practice expense for professional component services, definition 
of diabetes for diabetes self-management training, supplemental survey 
data for practice expense, geographic practice cost indices, and 
several coding issues. In addition, this rule updates the codes subject 
to the physician self-referral prohibition. We also make revisions to 
the sustainable growth rate and the anesthesia conversion factor.
    These changes will ensure that our payment systems are updated to 
reflect changes in medical practice and the relative value of services.
    We are also finalizing the calendar year (CY) 2003 interim RVUs and 
are issuing interim RVUs for new and revised procedure codes for CY 
2004.
    As required by the statute, we are announcing that the physician 
fee schedule update for CY 2004 is -4.5 percent, the initial estimate 
of the sustainable growth rate for CY 2004 is 7.4 percent, and the 
conversion factor for CY 2004 is $35.1339.
    We published a proposed rule (68 FR 50428) in the Federal Register 
on Part B drug payment reform on August 20, 2003. This proposed rule 
would also make changes to Medicare payment for furnishing or 
administering certain drugs and biologicals. We have not finalized 
these proposals to take into account that the Congress is considering 
legislation that would address these issues. We will continue to 
monitor legislative activity that would reform the Medicare Part B drug 
payment system. If legislation is not enacted soon on this issue, we 
remain committed to completing the regulatory process.

DATES: Effective date: These regulations are effective on January 1, 
2004.
    Comment date: We will consider comments on the physician self-
referral designated health services additions and deletions identified 
in Tables 8 and 9, and the interim work RVUs for selected procedure 
codes identified in Addendum C if we receive them at the appropriate 
address, as provided in the addresses section, no later than 5 p.m. on 
January 6, 2004.

ADDRESSES: In commenting, please refer to file code CMS-1476-FC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. Mail written comments (one original and 
two copies) to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-1476-FC, P.O. Box 8013, Baltimore, MD 
21244-8013.
    Please allow sufficient time for us to receive mailed comments on 
time in the event of delivery delays.
    If you prefer, you may deliver (by hand or courier) your written 
comments (one original and two copies) to one of the following 
addresses:
Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or Room C5-14-03, 7500 Security Boulevard, 
Baltimore, MD 21244-8013.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available if you wish to retain proof of filing by stamping in and 
retaining an extra copy of the comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and could be considered late.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    Pam West (410) 786-2302 (for issues related to practice expense.)
    Jim Menas (410) 786-4507 (for issues related to anesthesia.)
    Rick Ensor (410) 786-5617 (for issues related to Geographic Cost 
Price Index (GPCI).)
    Mary Stojak (410) 786-6939 (for issues related to the definition of 
diabetes for diabetes self-management training (DSMT).)
    Shannon Martin (410) 786-7939 (for issues related to rebasing of 
the Medicare Economic Index (MEI).)
    Craig Dobyski, (410) 786-4584 (for issues related to telehealth).
    Joanne Sinsheimer, (410) 786-4620 (for issues related to updates to 
the list of certain services subject to the physician self-referral 
prohibitions).
    Diane Milstead (410) 786-3355, Latesha Walker (410) 786-1101, or 
Gaysha Brooks (410) 786-3355 (for all other issues.)

SUPPLEMENTARY INFORMATION: 
    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money order payable to 
the Superintendent of Documents, or enclose your Visa or Master Card 
number and expiration date. Credit card orders can also be placed by 
calling the order desk at (202) 512-1800 or by faxing to (202) 512-
2250. The cost for each copy is $10. As an alternative, you can view 
and photocopy the Federal Register document at most libraries 
designated as Federal Depository Libraries and at many other public and 
academic libraries throughout the country that receive the Federal 
Register.
    This Federal Register document is also available from the Federal 
Register online database through GPO access, a service of the U.S. 
Government Printing Office. The Web site address is http://www.access.gpo.gov/nara/index.html
.

Accessing Physician Fee Schedule Web Site and Pricing Information

    Information on the physician fee schedule and pricing files can be 
found on our homepage. You can access this data by typing the 
following: http://cms.hhs.gov/physicians/pfs or you can access this 
data by using the following directions:
    1. Go to the CMS homepage (http://www.cms.hhs.gov).
    2. Place your cursor over the word ``Professionals'' in the blue 
area near the top of the page. Select ``Physicians'' from the drop-down 
menu.
    3. Scroll down and under ``Payment/Billing'' select ``Physician Fee 
Schedule'.
    The Physician Fee Schedule pricing information is contained in two 
public use files.
    (1) National Physician Fee Schedule Relative Value File--This file 
contains all CPT/HCPCS (excluding codes beginning with B, E, L, K, and 
O), their short descriptions and a status indicator, which denotes 
whether or not the service is priced under the physician fee schedule. 
The file also contains the components used in the calculation of the 
annual pricing amount (that is., the RVUs, GPCIs, and

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conversion factor), anesthesia conversion factors, and the payment 
policy indicators used to price the claims with surgical modifiers. 
This file does not contain the calculated pricing amounts.
    (2) Physician Fee Schedule Payment Amount File National/Carrier--
This file contains the CPT code and the Medicare price for all services 
priced under the Physician Fee Schedule. These data can be downloaded 
for (a) the entire country, or (b) for a selected carrier (in most 
cases carriers correlate with states). There is no option of requesting 
data for selected HCPCS codes. The zip file, which is downloaded, 
contains a file named PF04pc.doc, which explains the data contained in 
each column. This file also contains a description of pricing 
localities used in the Physician Fee Schedule. Due to the size of the 
national file (as well as many of the carrier-specific files), these 
data are provided in a comma-delimited format, which can be used to 
populate database applications. Generally speaking, these data are too 
large for Excel, however if a carrier specific file has 3 or fewer 
localities, Excel can be used.
    Another file that providers may find useful is the Zipcode to 
Carrier Locality File. This file will map ZIP Codes to CMS carriers and 
localities and map Zip Codes to their State and determine whether the 
ZIP Code has a rural designation as determined by CMS. You can access 
this file by typing the following: http://cms.hhs.gov/providers/pufdownload/default.asp#alphanu
 or you can access this data by using 
the following directions:
    1. Go to the CMS homepage (http://www.cms.hhs.gov).
    2. Place your cursor over the word ``Professionals'' in the blue 
area near the top of the page. Select ``Physicians'' from the drop-down 
menu.
    3. Scroll down and under ``Payment/Billing'' select ``Medicare 
Payment Systems.''
    4. Scroll down and under Coding Files select ``Zipcode to Carrier 
Locality File.''

Table of Contents

I. Background
    A. Legislative History
    B. Published Changes to the Fee Schedule
II. Specific Provisions for Calendar Year 2004
    A. Resource-Based Practice Expense Relative Value Units
    1. Resource-Based Practice Expense Legislation
    2. Current Methodology
    3. Practice Expense Proposals for Calendar Year 2004
    B. Geographic Practice Cost Indices (GPCIs)
    C. Coding Issues
III. Other Issues
    A. Definition of Diabetes for Diabetes Self-Management Training 
(DSMT)
    B. Outpatient Therapy Services Performed ``Incident To'' 
Physicians Services
    C. Status of Anesthesia Work and 5-Year Review
    D. Payment Policies for Anesthesia Services
    E. Technical Correction
    F. Publication Issues
IV. Refinement of Relative Value Units for Calendar Year 2004 and 
Response to Public Comments on Interim Relative Value Units for 2003
V. Update to the Codes for Physician Self-Referral Prohibition
VI. Physician Fee Schedule Update for Calendar Year 2004
VII. Allowed Expenditures for Physicians' Services and the 
Sustainable Growth Rate
VIII. Anesthesia and Physician Fee Schedule Conversion Factors for 
CY 2004
IX. Telehealth Originating Site Facility Fee Payment Amount Update
X. Provisions of the Final Rule
XI. Collection of Information Requirements
XII. Response to Comments
XIII. Regulatory Impact Analysis
Addendum A--Explanation and Use of Addendum B
Addendum B--2004 Relative Value Units and Related Information Used 
in Determining Medicare Payments for 2004 Addendum C--Codes with 
Interim RVUs
Addendum D--2004 Geographic Practice Cost Indices by Medicare 
Carrier and Locality
Addendum E--2005 Geographic Practice Cost Indices by Medicare 
Carrier and Locality
Addendum F--Updated List of CPT/HCPCS Codes Used to Describe Certain 
Designated Health Services Under the Physician Self-Referral 
Provision

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

AMA American Medical Association
APC Ambulatory Payment Classification
BBA Balanced Budget Act of 1997
BBRA Balanced Budget Refinement Act of 1999
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 
Act of 2000
CF Conversion factor
CFR Code of Federal Regulations
CMS Centers for Medicare & Medicaid Services
CNS Clinical Nurse Specialist
CPT [Physicians'] Current Procedural Terminology [4th Edition, 2002, 
copyrighted by the American Medical Association]
CPEP Clinical Practice Expert Panel
CRNA Certified Registered Nurse Anesthetist
DHHS Department of Health and Human Services
E/M Evaluation and management
ESRD End-Stage Renal Disease
GAF Geographic adjustment factor
GPCI Geographic practice cost index
HCPCS Healthcare Common Procedure Coding System
HHA Home health agency
IDTFs Independent Diagnostic Testing Facilities
MCM Medicare Carrier Manual
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MGMA Medical Group Management Association
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
OMB Office of Management and Budget
PC Professional component
PEAC Practice Expense Advisory Committee
PPO Preferred Provider Organization
PPS Prospective payment system
PRA Paperwork Reduction Act of 1995
RUC [AMA's Specialty Society] Relative [Value] Update Committee
RVU Relative value unit
SGR Sustainable growth rate
SMS [AMA's] Socioeconomic Monitoring System
SNF Skilled Nursing Facility
TC Technical component

I. Background

A. Legislative History

    Since January 1, 1992, Medicare has paid for physicians' services 
under section 1848 of the Social Security Act (the Act), ``Payment for 
Physicians'' Services.'' This section provides for three major 
elements: (1) A fee schedule for the payment of physicians' services; 
(2) limits on the amounts that nonparticipating physicians can charge 
beneficiaries; and (3) a sustainable growth rate (SGR) for the rates of 
increase in Medicare expenditures for physicians' services. The Act 
requires that payments under the fee schedule be based on national 
uniform relative value units (RVUs) that are based on the resources 
used in furnishing a service. Section 1848(c) of the Act requires that 
national RVUs be established for physician work, practice expense, and 
malpractice expense. Section 1848(c)(2)(B)(ii)(II) of the Act provides 
that adjustments in RVUs may not cause total physician fee schedule 
payments to differ by more than $20 million from what they would have 
been had the adjustments not been made. If adjustments to RVUs cause 
expenditures to change by more than

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$20 million, we must make adjustments to ensure that they do not 
increase or decrease by more than $20 million.

B. Published Changes to the Fee Schedule

    In the July 2000 proposed rule, (65 FR 44177), we listed all of the 
final rules published through November 1999. In the August 2001 
proposed rule (66 FR 40372) we discussed the November 2000 final rule 
relating to the updates to the RVUs and revisions to payment policies 
under the physician fee schedule.
    In the November 2001 final rule with comment period (66 FR 55246), 
we made revisions to resource-based practice expense RVUs; services and 
supplies incident to a physician's professional service; anesthesia 
base unit variations; recognition of Physicians' Current Procedural 
Terminology (CPT) tracking codes; and nurse practitioners, physician 
assistants, and clinical nurse specialists performing screening 
sigmoidoscopies. We also addressed comments received on the June 8, 
2001 proposed notice (66 FR 31028) for the 5-year review of work RVUs 
and finalized these work RVUs. In addition, we acknowledged comments 
received in response to a discussion of modifier-62, which is used to 
report the work of co-surgeons. The November 2001 final rule also 
updated the list of services that are subject to the physician self-
referral prohibitions in order to reflect CPT and Healthcare Common 
Procedure Coding System (HCPCS) code changes that were effective 
January 1, 2002. All these revisions ensure that our payment systems 
are updated to reflect changes in medical practice and the relative 
value of services. This final rule also conformed our regulations to 
reflect statutory provisions of Medicare, Medicaid, and State Child 
Health Insurance Program (SCHIP) Benefits Improvement and Protection 
Act of 2000 (Pub. L. 106-554) (BIPA) concerning: the mammography 
screening benefit; biennial screening pelvic examinations for certain 
beneficiaries; expanded coverage for screening colonoscopies to all 
beneficiaries; annual glaucoma screenings for high-risk beneficiaries; 
coverage for medical nutrition therapy services for certain 
beneficiaries; expanded payment for telehealth services; payment for 
certain Indian Health Service for some services under the physician fee 
schedule; and revision of the payment for certain physician pathology 
services.
    In the December 31, 2002 final rule with comment period (67 FR 
79966), we refined resource-based practice expense RVUs and made other 
changes to Medicare Part B policy. These included: The pricing of the 
technical component for positron emission tomography (PET) scans, 
Medicare qualifications for clinical nurse specialists, a process to 
add or delete services to the definition of telehealth, the definition 
for ZZZ global periods, global period for surface radiation, and 
application of endoscopic reduction rules for certain codes. In 
addition, this rule: Updated the codes subject to physician self-
referral prohibitions, expanded the definition of a screening fecal-
occult blood test, and modified our regulations to expand coverage for 
additional colorectal cancer screening tests through our national 
coverage determination process. We also made revisions to the SGR, the 
anesthesia conversion factor (CF), and the work values for some 
gastroenterologic services. We finalized the calendar year (CY) 2002 
interim RVUs and assigned interim RVUs for new and revised procedure 
codes for CY 2003, clarified the enrollment of therapists in private 
practice and the policy regarding services and supplies incident to a 
physician's professional services, and made technical changes to the 
definition of outpatient rehabilitation services.
    This final rule also revised the regulations at Sec.  485.618 to 
allow registered nurses (RNs) to provide emergency care in certain 
critical access hospitals (CAHs) in frontier areas (an area with fewer 
than six residents per square mile) or remote locations (locations 
designated in a State's rural health plan that we have approved).
    As required by statute this final rule also announced that the 
physician fee schedule update for CY 2003 was -4.4 percent, the initial 
estimate of the SGR for CY 2003 was 7.6 percent, and the CF for CY 2003 
was $34.5920, effective March 1, 2003. However, on February 28, 2003 
(68 FR 9567), after enactment of the Consolidated Appropriations 
Resolution of 2003 (Pub. L. 108-7), we published a final rule that 
revised the estimates used to establish the SGRs for fiscal years 1998 
and 1999 and announced a 1.6 percent increase in the CY 2003 physician 
fee schedule CF for March 1 to December 31, 2003. The CF from March 1 
to December 31, 2003 is $36.7856 and the anesthesia CF for this period 
is $17.05. All other provisions of the December 31, 2002 final rule 
were unchanged by the rule published February 28, 2003.

C. Components of the Fee Schedule Payment Amounts

    Under the formula set forth in section 1848(b)(1) of the Act, the 
payment amount for each service paid under the physician fee schedule 
is the product of three factors--(1) a nationally uniform relative 
value for the service; (2) a geographic adjustment factor (GAF) for 
each physician fee schedule area; and (3) a nationally uniform 
conversion factor (CF) for the service. The CF converts the relative 
values into payment amounts.
    For each physician fee schedule service, there are three relative 
values--(1) an RVU for physician work; (2) an RVU for practice expense; 
and (3) an RVU for malpractice expense. For each of these components of 
the fee schedule, there is a geographic practice cost index (GPCI) for 
each fee schedule area. The GPCIs reflect the relative costs of 
practice expenses, malpractice insurance, and physician work in an area 
compared to the national average for each component.
    The general formula for calculating the Medicare fee schedule 
amount for a given service in a given fee schedule area can be 
expressed as:

Payment = [(RVU work x GPCI work) + (RVU practice expense x GPCI 
practice expense) + (RVU malpractice x GPCI malpractice)] x CF

    The CF for CY 2004 appears in section IX. The RVUs for CY 2004 are 
in Addendum B. The GPCIs for CY 2004 can be found in Addendum D.
    Section 1848(e) of the Act requires us to develop GAFs for all 
physician fee schedule areas. The total GAF for a fee schedule area is 
equal to a weighted average of the individual GPCIs for each of the 
three components of the service. In accordance with the statute, 
however, the GAF for the physician's work reflects one-quarter of the 
relative cost of physician's work compared to the national average.

D. Development of the Relative Value System

1. Work Relative Value Units (RVUs)
    Approximately 7,500 codes represent services included in the 
physician fee schedule. The work RVUs established for the 
implementation of the fee schedule in January 1992 were developed with 
extensive input from the physician community. A research team at the 
Harvard School of Public Health developed the original work RVUs for 
most codes in a cooperative agreement with us. In constructing the 
vignettes for the original RVUs, Harvard worked with expert panels of 
physicians and obtained input from physicians from numerous 
specialties.
    The RVUs for radiology services were based on the American College 
of Radiology (ACR) relative value scale,

[[Page 63199]]

which we integrated into the overall physician fee schedule. The RVUs 
for anesthesia services were based on RVUs from a uniform relative 
value guide. We established a separate CF for anesthesia services, and 
we continue to recognize time as a factor in determining payment for 
these services. As a result, there is a separate payment system for 
anesthesia services.
2. Practice Expense and Malpractice Expense Relative Value Units
    Section 1848(c)(2)(C) of the Act required that the practice expense 
and malpractice expense RVUS equal the product of the base allowed 
charges and the practice expense and malpractice percentages for the 
service. Base allowed charges are defined as the national average 
allowed charges for the service furnished during 1991, as estimated 
using the most recent data available. For most services, we used 1989 
charge data aged to reflect the 1991 payment rules, since those were 
the most recent data available for the 1992 fee schedule.
    Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 
103-432), enacted on October 31, 1994, required us to develop a 
methodology for a resource-based system for determining practice 
expense RVUs for each physician service. As amended by the BBA, section 
1848(c) required the new payment methodology to be phased in over 4 
years, effective for services furnished in 1999, with resource-based 
practice expense RVUs becoming fully effective in 2002. The BBA also 
required us to implement resource-based malpractice RVUs for services 
furnished beginning in 2000.

II. Specific Provisions for Calendar Year 2004

    In response to the publication of the August 15, 2003 proposed 
rule, (68 FR 49030), and the December 2002 interim final rule, (67 FR 
79966), we received approximately 2,433 comments. We received comments 
from individual physicians, health care workers, and professional 
associations and societies. The majority of comments addressed the 
physician fee schedule proposals related to the dialysis G codes, 
``incident to'' therapy services, and the geographic practice cost 
indices locality payment discussion issue.
    The proposed rule discussed policies that affected the RVUs on 
which payment for certain services would be based. Certain changes 
implemented through this final rule are subject to the $20 million 
limitation on annual adjustments contained in section 
1848(c)(2)(B)(ii)(II) of the Act.
    After reviewing the comments and determining the policies we would 
implement, we have estimated the costs and savings of these policies 
and added those costs and savings to the estimated costs associated 
with any other changes in RVUs for 2004. We discuss in detail the 
effects of these changes in the Regulatory Impact Analysis in section 
XIII.
    For the convenience of the reader, the headings for the policy 
issues correspond to the headings used in the August 15, 2003 proposed 
rule. More detailed background information for each issue can be found 
in the December 2002 interim final rule with comment period and the 
August 2003 proposed rule.

A. Resource-Based Practice Expense Relative Value Units

1. Resource-Based Practice Expense Legislation
    Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 
103-432), enacted on October 31, 1994, required us to develop a 
methodology for a resource-based system for determining practice 
expense RVUs for each physician's service beginning in 1998. In 
developing the methodology, we were to consider the staff, equipment, 
and supplies used in providing medical and surgical services in various 
settings. The legislation specifically required that, in implementing 
the new system of practice expense RVUs, we apply the same budget-
neutrality provisions that we apply to other adjustments under the 
physician fee schedule.
    Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 
105-33), enacted on August 5, 1997, amended section 1848(c)(2)(B)(ii) 
of the Act and delayed the effective date of the resource-based 
practice expense RVU system until January 1, 1999. In addition, section 
4505(b) of the BBA provided for a 4-year transition period from charge-
based practice expense RVUs to resource-based RVUs.
    Further legislation affecting resource-based practice expense RVUs 
was included in the Medicare, Medicaid and State Child Health Insurance 
Program (SCHIP) Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 
106-113) enacted on November 29, 1999. Section 212 of the BBRA amended 
section 1848(c)(2)(B)(ii) of the Act by directing us to establish a 
process under which we accept and use, to the maximum extent 
practicable and consistent with sound data practices, data collected or 
developed by entities and organizations. These data would supplement 
the data we normally collect in determining the practice expense 
component of the physician fee schedule for payments in CY 2001 and CY 
2002. (In the 1999 final rule (64 FR 59380), we extended, for an 
additional 2 years, the period during which we would accept 
supplementary data.)
2. Current Methodology for Computing the Practice Expense Relative 
Value Unit System
    Effective with services furnished on or after January 1, 1999, we 
established a new methodology for computing resource-based practice 
expense RVUs that used the two significant sources of actual practice 
expense data we have available--the Clinical Practice Expert Panel 
(CPEP) data and the American Medical Association's (AMA) Socioeconomic 
Monitoring System (SMS) data. The methodology was based on an 
assumption that current aggregate specialty practice costs are a 
reasonable way to establish initial estimates of relative resource 
costs for physicians' services across specialties. The methodology 
allocated these aggregate specialty practice costs to specific 
procedures and, thus, can be seen as a ``top-down'' approach.

a. Major Steps

    A brief discussion of the major steps involved in the determination 
of the practice expense RVUs follows. (Please see the November 1, 2001 
final rule (66 FR 55249) for a more detailed explanation of the top-
down methodology.)
    [sbull] Step 1--Determine the specialty specific practice expense 
per hour of physician direct patient care. We used the AMA's SMS survey 
of actual aggregate cost data by specialty to determine the practice 
expenses per hour for each specialty. We calculated the practice 
expenses per hour for the specialty by dividing the aggregate practice 
expenses for the specialty by the total number of hours spent in 
patient care activities.
    [sbull] Step 2--Create a specialty specific practice expense pool 
of practice expense costs for treating Medicare patients. To calculate 
the total number of hours spent treating Medicare patients for each 
specialty, we used the physician time assigned to each procedure code 
and the Medicare utilization data. We then calculated the specialty 
specific practice expense pools by multiplying the specialty practice 
expenses per hour by the total physician hours.
    [sbull] Step 3--Allocate the specialty specific practice expense 
pool to the specific services performed by each specialty. For each 
specialty, we

[[Page 63200]]

divided the practice expense pool into two groups based on whether 
direct or indirect costs were involved and used a different allocation 
basis for each group.
    (i) Direct costs--For direct costs (which include clinical labor, 
medical supplies, and medical equipment), we used the procedure 
specific CPEP data on the staff time, supplies, and equipment as the 
allocation basis.
    (ii) Indirect costs--To allocate the cost pools for indirect costs, 
including administrative labor, office expenses, and all other 
expenses, we used the total direct costs combined with the physician 
fee schedule work RVUs. We converted the work RVUs to dollars using the 
Medicare CF (expressed in 1995 dollars for consistency with the SMS 
survey years).
    [sbull] Step 4--For procedures performed by more than one 
specialty, the final procedure code allocation was a weighted average 
of allocations for the specialties that perform the procedure, with the 
weights being the frequency with which each specialty performs the 
procedure on Medicare patients.

b. Other Methodological Issues

(i) Nonphysician Work Pool
    For services with physician work RVUs equal to zero (including the 
technical components of radiology services and other diagnostic tests), 
we created a separate practice expense pool using the average clinical 
staff time from the CPEP data and the ``all physicians'' practice 
expense per hour.
    We then used the adjusted 1998 practice expense RVUs to allocate 
this pool to each service. We have removed services from the 
nonphysician work pool if the requesting specialty predominates 
utilization of the service. Also, for all radiology services that are 
assigned physician work RVUs, we used the adjusted 1998 practice 
expense RVUs for radiology services as an interim measure to allocate 
the direct practice expense cost pool for radiology specialties to the 
most appropriate SMS specialty.
(ii) Crosswalks for Specialties Without Practice Expense Survey Data
    Since many specialties identified in our claims data did not 
correspond exactly to the specialties included in the SMS survey data, 
it was necessary to crosswalk these specialties to the most appropriate 
SMS specialty.
(iii) Physical Therapy Services
    Because we believe that most physical therapy services furnished in 
physicians' offices are performed by physical therapists, we 
crosswalked all utilization for therapy services in the CPT 97000 
series to the physical and occupational therapy practice expense pool.
3. Practice Expense Proposals for Calendar Year 2004
a. Nonphysician Workpool
    The nonphysician work pool is a special methodology that we used to 
determine practice expense RVUs for many services that do not have 
physician work RVUs. While the nonphysician work pool is of benefit to 
many of the services that were originally included, we have allowed 
specialties to request that their services be removed from the pool. 
Because the nonphysician work pool includes a variety of services 
performed by many different specialties, we use the ``all physician'' 
average practice expense per hour in place of a specialty-specific 
practice expense per hour.
    As discussed in the August 15, 2003 proposed rule, we are 
continuing to study the alternatives that are available and any 
modifications to the nonphysician workpool would be published in 
proposed rulemaking.
    Comment: Several specialty societies expressed support for the 
ongoing study of this complex issue and appreciate that any 
modifications to the nonphysician workpool would be published as 
proposed rulemaking for review and comment prior to implementation. A 
biopharmaceutical company commented that we should move forward to 
develop a new methodology that better recognizes actual resource 
consumption so that we can develop a preferable alternative.
    Response: We are appreciative of the support and will continue to 
study this issue.

b. Supplemental Practice Expense Survey Data

i. Survey Criteria and Submission Dates

    As required by the BBRA, we established criteria to evaluate data 
collected by organizations to supplement the data normally used in 
determining the practice expense component of the physician fee 
schedule. We have required supplementary survey data to be submitted by 
August 1 to be considered for computing practice expense RVUs for the 
following year. We proposed to change the required submission date to 
March 1, which would allow us to publish our decisions regarding survey 
data in the proposed rule and provide an opportunity for public comment 
on survey results. We also proposed to extend for an additional 2 years 
the period for accepting survey data that meets the criteria set forth 
in the November 2000 final rule (as modified in the December 31, 2002 
final rule). The deadline for submission of the supplemental data to be 
considered in CY 2005 and CY 2006 would be March 1, 2004 and March 1, 
2005, respectively.
    Comment: Specialty societies expressed appreciation for our 
proposal to extend the deadline for submission of surveys. Commenters 
also approved of our proposal to change the due date for submission of 
supplemental practice expense survey data to March 1, so that the 
implications of the use of the survey data could be discussed in the 
proposed rule.
    Response: We will implement the change in the submission dates for 
supplementary surveys as proposed. The deadline for submission of the 
supplemental data to be considered in CY 2005 and CY 2006 would be 
March 1, 2004 and March 1, 2005, respectively. We will revise Sec.  
414.22(b)(6)(ii) to reflect this change.

ii. Submission of Supplemental Surveys

    The College of American Pathologists (CAP) submitted supplemental 
survey data for independent laboratories for consideration for CY 2004. 
Our contractor, The Lewin Group, evaluated the data and has recommended 
acceptance.
    Comment: Based on our proposal to revise the date for submission of 
supplemental survey data, CAP requested that we delay incorporation of 
this survey data until next year's proposed rule. CAP also expressed an 
interest in being able to evaluate the combined effects of the use of 
the new survey data along with the technical change for pathology 
services before the changes are implemented. Therefore, CAP requested 
that we also extend the moratorium on calculating the technical 
component as the difference between the global and professional 
component practice expense RVUs by one additional year, as discussed in 
the August 15, 2003 proposed rule. This request for a delay in 
incorporating the new survey data, as well as extending the moratorium 
was supported by the AMA and several specialty societies.
    Response: We agree with the comments that suggest extending by one 
year the moratorium on calculating the technical component practice 
expense RVU as the difference between the global and professional 
component RVUs for pathology services. We also agree with comments 
suggesting that we not incorporate the CAP survey into the practice 
expense methodology until next year. We will evaluate the CAP

[[Page 63201]]

survey in next year's proposed rule at the same time we show the effect 
of the above described change for pathology services.

c. Practice Expense for a professional component service

    While we typically assign all staff, equipment and supply costs for 
services with professional and technical components (PC and TC) to the 
technical portion of the service, in the proposed rule we discussed 
limited instances where it is appropriate to assign direct inputs to a 
PC service. We proposed to modify the practice expense methodology to 
allow direct inputs to be added to PC services when these inputs are 
clearly associated with the professional service, including when the 
PEAC makes such recommendations. Specifically we proposed to add the 
PEAC recommended staff times to the PC of the following cardiac 
services: CPT codes 93508, 93510, 93511, 93514, 93524, 93526, 93527, 
93528, 93529, 93530, 93531, 93532, 93533 and 93624.
    Comment: The RUC, the AMA, the American College of Physicians and 
societies representing cardiologists, cardiac rhythm specialists, 
interventional radiologists, nuclear medicine, chest physicians, 
radiation oncologists, radiologists, endocrinologists and 
dermatologists expressed support for this change in methodology. 
Commenters were also in agreement with the specific CPT codes mentioned 
in the proposed rule, but requested that direct inputs also be added to 
the PC of CPT codes 93619, 93620 and 93642, which were reviewed at the 
January PEAC meeting. The RUC comment indicated that additional codes 
might be identified at future PEAC/RUC meetings.
    Response: We will finalize the proposed assignment of direct 
practice expense to the proposed 14 cardiac services and will add the 
PEAC recommended inputs to the PC of CPT codes 93619, 93620 and 93642, 
as requested by the commenters.

d. Utilization Data

    We use Medicare utilization data in the development of specialty-
specific practice expense RVUs that are then weight averaged to 
determine a single practice expense RVU per code. Prior to 2003, we 
used the most recent complete year of utilization data to determine the 
practice expense RVUs. In the December 31, 2002 final rule (67 FR 
79982), we adopted a policy of using the 1997 through 2000 Medicare 
utilization in the practice expense methodology. For new codes created 
since 2000, there are no Medicare utilization data. In the August 15, 
2003 rule we proposed to follow a similar practice to the one described 
above and use specialty-specific Medicare utilization data for codes 
created after 2000 at the first opportunity they become available to 
us. Since we will not have any utilization data at the time we first 
establish practice expense RVUs for a new code, we proposed that we 
continue, whenever possible, to make an assumption about the specialty 
that will likely provide the service or to use the ``all physician'' 
average when we do not have sufficient information to assign any given 
specialty.
    Comment: The specialty societies representing internal medicine, 
rheumatology and pulmonary medicine supported our proposal to use 1997 
through 2000 Medicare utilization data for all codes that were in 
existence at that time and to use specialty-specific Medicare 
utilization data for codes created after 2000 when utilization data 
first become available, using the ``all physician'' average when we do 
not have sufficient information to assign a given specialty. These 
commenters, as well as several others, suggested that the RUC and the 
specialty societies could provide information on the specialties that 
will likely perform a new service to minimize the potential changes to 
the practice expense RVUs that will occur when we substitute actual for 
estimated utilization. However, a specialty society representing 
gastroenterology expressed concern that we are moving forward with 
plans to shift the basis of our methodology for compiling data to a 
five-year basis. The commenter urged us to not make changes until 
extensive impact comparisons are conducted that can be evaluated by 
physician community.
    Response: We will implement our proposal to use specialty-specific 
Medicare utilization data for codes created after 2000 at the first 
opportunity they become available to us. We will also continue, 
whenever possible, to make an assumption about the specialty that will 
likely provide the service or to use the ``all physician'' average when 
we do not have sufficient information to assign any given specialty. 
Information about the specialty we assign to a code that has no 
utilization data can be found in the utilization data files we make 
available on the CMS web site following final rule publication. With 
respect to the comment about shifting to a 5-year basis of utilization 
data for the practice expense methodology, we are making no change in 
policy for codes that existed in the 1997 to 2000 period. We are using 
only the later year utilization data for codes that have been created 
since that time. Any information from the RUC that could assist us in 
this process would be welcomed.
    Comment: A specialty society representing colon and rectal surgeons 
agreed with our general utilization methodology, but disagreed that 
averaged 1997-2000 utilization data should be used for all codes that 
were not in existence for the entire period. The commenter argued that 
the frequency for these codes might be artificially low because the 
coding was new and that this may impact the relativity between new and 
old codes in the same family with similar inputs. The society suggested 
that any code that did not exist during the entire 1997-2000 period 
default to 2002 or most recent data.
    Response: As we have explained, the Medicare utilization is 
important to the practice expense methodology because it determines 
which specialty scaling factors will be applied to the estimated 
practice expense input values in determining the practice expense RVUs 
for each service. The proportion of the volume billed by each specialty 
is more important to determining the practice expense RVU for a given 
service than the total volume. If the code is low in volume but the 
proportion of the code's volume billed by each specialty is generally 
consistent over time, there will be little or no difference in a code's 
practice expense RVUs, whether we use its initial year of utilization 
or a later year to determine its value.
    Comment: Commenters representing dermatology as well as a 
pharmaceutical company expressed concern regarding the decrease in 
payment for photodynamic therapy, CPT code 95657. The commenters noted 
our discussion in the proposed rule indicating that this reduction in 
the practice expense RVUs is occurring because of updates to the 
Medicare utilization data used in the practice expense methodology. As 
a result of the updated utilization data, the practice expense 
methodology now uses the dermatology scaling factor (0.54) for supplies 
instead of the all physician average (1.29), and this change leads to 
the reduction in payment for the code. The commenters urged us to 
reconsider the proposal and at least to reinstate physicians' ability 
to bill separately in 2004 for the light-activating agent under the 
appropriate J code and also to remove the drug from the practice 
expense portion of the procedure.
    Response: One of the functions of the utilization data in our 
practice expense methodology is to assign all procedures to the 
specialty-specific cost pools of the

[[Page 63202]]

specialty or specialties performing them. Each cost pool has its own 
scaling factor. This scaling factor is used to scale the aggregate CPEP 
procedure-level costs for a specialty to the aggregate costs for the 
same specialty as determined by the SMS practice expense data. As we 
indicated in the proposed rule, we do not have utilization data upon 
which to determine the practice expense RVUs for a new code at the time 
it is created. As a default, we have assigned many new codes the ``all 
physician'' scaling factor until we have the data to move these codes 
into the appropriate specialty cost pools. Because it allows us to 
apply the appropriate specialty scaling factor, the use of the updated 
utilization data in the practice expense methodology can lead to 
increases or decreases in the value of a code, even though its practice 
expenses remain unchanged. In this case, the supplies scaling factor 
for dermatology is lower than that for ``all physicians,'' leading to a 
decrease in practice expense RVUs when the dermatology scaling factor 
was applied to the CPEP data of the photodynamic therapy service.
    We believe the initial practice RVUs for photodynamic therapy were 
too high, because the later information on Medicare utilization 
indicates that we should have used the dermatology scaling factor which 
would have produced a lower practice expense value. As we indicate 
above, we are working to minimize changes that will occur in the 
practice expense RVUs for a service by making an initial assumption 
about which specialty will likely bill us for a service. However, we 
believe our policy for new codes should be consistent with how we 
determine the practice expense RVUs for existing codes, even if updates 
to the Medicare utilization data lead to increases or decreases in the 
practice expense RVUs.
    Though we believe that it is appropriate to use the updated 
utilization that results in a reduction in payment for CPT code 96567, 
we will pay separately for the light activating agent beginning January 
1, 2004. However, we are also further considering whether Medicare 
should pay separately for certain topical drugs in certain 
circumstances. Any change in policy would be discussed in future 
rulemaking.
    Comment: Specialty societies representing radiation oncology, as 
well as individual commenters, expressed concern about the decrease in 
payment for the intensity modulated radiation therapy (IMRT) treatment 
service, CPT code 77418. The commenters stated that this was due to a 
``quirk'' in the utilization data relating to new codes and requested 
that this code be priced by the non-physician work pool methodology.
    Response: We will calculate the practice expense RVUs for the IMRT 
treatment service, CPT code 77418, using the nonphysician workpool 
methodology. This will be consistent with the way we currently 
calculate the practice expense for all other radiation therapy services 
with no physician work RVUs.
    Comment: The specialty society representing radiation oncology also 
noted that there was a reduction in the practice expense RVUs for the 
intensity modulated radiation therapy planning procedure, CPT code 
77301. A remote cardiac monitoring service questioned why the use of 
new utilization data could decrease the value of a code such as HCPCS 
code G0249 for the provision of test material and equipment for home 
INR monitoring.
    Response: Both CPT code 77301 and HCPCS code G0249 were new codes 
for which we did not have utilization data and which were initially 
assigned the ``all physician'' scaling factor. As described above, now 
that we have the utilization data, the services have been placed in the 
specialty-specific cost pools based on how the service is billed to 
Medicare, which have lower scaling factors than the ``all physician.'' 
This shift has led to the reduced practice expense RVUs for CPT code 
77301. If we had placed this code in the radiation oncology cost pool 
to begin with, it would have had the reduced practice expense payments 
for the past two years as well. HCPCS code G0249 will actually have 
increased practice expense RVUs in 2004 due to the effect of the 
repricing of supplies.
    Comment: We received one comment that questioned how updated 
utilization data could have such a huge and direct effect on specific 
codes. The commenter requested clarification from us on the workings of 
the utilization data within the practice expense methodology so that 
the public will understand how utilization data will affect new 
technologies in the future.
    Response: As explained above, one of the functions of the 
utilization data in our practice expense methodology is to assign all 
procedures to the specialty-specific cost pools of the specialty or 
specialties performing them. If we do not know the specialty, we have 
used ``all physician'' scaling factors. The ``all physician'' scaling 
factors could be higher or lower than the specialty-specific scaling 
factor and produce different RVUs for the code. For instance, CPT code 
77301-26 is a PC service that has no direct cost inputs. Thus, its 
practice expense RVUs are affected only by the indirect cost scaling 
factor. To develop the 2003 practice expense RVUs for this code, we 
adjusted indirect costs allocated to this code by the ``all physician'' 
indirect cost scaling factor of 0.57. However, for 2004, we have 
Medicare utilization data from 2002 for this procedure code. Radiation 
oncologists and radiologists respectively billed Medicare for 67 
percent and 30 percent of the total volume of services provided to 
Medicare patients in 2002. The weighted average scaling factor for all 
the specialties that bill Medicare for this procedure code is 0.48. 
Since we are adjusting indirect costs by 0.48 instead of 0.57, the 
final practice expense value is lower.

e. Practice Expense Advisory Committee (PEAC)

    The PEAC, a subcommittee of the RUC, has, since 1999, been 
providing us with recommendations for refining the direct practice 
expense inputs (clinical staff, supplies, and equipment) for existing 
CPT codes.

1. Recommendations on CPEP Inputs for 2003

    In the December 31, 2002 proposed rule, we responded to the PEAC 
recommendations for the refinement to the CPEP direct practice expense 
inputs for over 1200 codes, including refinements to codes from almost 
every major specialty. In addition, the recommendations included 
standardized times for office-based clinical staff for services 
provided during a patient's hospitalization and for discharge day 
management services, as well as pre-service clinical staff times for 
323 neurosurgery procedures. We reviewed and accepted all of the 
recommendations. We received the following comments on these revisions.
    Comment: We received comments from specialty societies representing 
dermatology, dermatolgic surgery and Mohs surgery expressing concern 
regarding the decrease in practice expense RVUs for skin biopsy 
procedures, CPT codes 11100 and 11101 and the destruction of benign or 
premalignant lesion services, CPT codes 17000 and 17003. The commenters 
questioned whether the reductions reflect errors in the validated 
practice expense inputs used in the practice expense calculations.
    Response: We have checked the practice expense inputs and found 
that these match the clinical staff, supply and equipment inputs as 
recommended by the RUC. The reduction in practice expense RVUs was 
caused by the

[[Page 63203]]

refinement of these inputs, which, in turn, was based on the 
presentation made to the PEAC by the dermatology specialty society. We 
will, therefore, not make any further revisions to the practice expense 
inputs for these services in this final rule.

2. Recommendations on CPEP Inputs for 2004

    In the August 15, 2003 proposed rule we included the PEAC 
recommendations from meetings held in September of 2002 and January 
2003 as well as recommendations on the refinements to the clinical 
staff time for all 90-day global services. In addition, the PEAC 
convened a workgroup to make recommendations on the refinement of all 
the 116 remaining evaluation and management codes. We reviewed the 
submitted PEAC recommendations and proposed to accept them.
    Comment: The American Osteopathic Association expressed 
appreciation that we supported the recommended changes for the 
osteopathic manipulative treatment codes and commended us for accepting 
the PEAC recommendations for the clinical staff times for 90-day global 
codes. The American College of Obstetricians and Gynecologists stated 
that our acceptance of the PEAC recommendations is an example of 
exceptional cooperation and collaboration in meeting the healthcare 
needs of Americans served by the Medicare program. The American Academy 
of Dermatology applauded our acceptance of the year's PEAC 
recommendations. The AMA and the American College of Radiology stated 
that they appreciate our recognition of the significant resources 
specialty societies have devoted to the practice expense refinement 
process and is thankful that our practice expense staff avail 
themselves of specialty society input. The American College of Surgeons 
also supported our acceptance of the PEAC recommendations, including 
the decision to permit exceptions to the standard pre-service times for 
some surgical procedures. The College other specialty societies also 
expressed appreciation for our commitment to the refinement process.
    Response: We, in turn, are appreciative of these positive comments. 
We believe that it is only because of the cooperative working 
relationship between the specialty societies, the AMA and CMS that 
there has been such a high level of success in tackling practice 
expense refinement.
    Comment: The American College of Physicians as well as other 
specialty societies representing surgeons, otolaryngologists, 
podiatrists, geriatric psychiatrists, obstetricians and gynecologists, 
cataract and refractive surgeons, neurosurgeons, dermatologists, 
rheumatologists, radiologists and radiation oncologists supported our 
inclusion of the PEAC recommendations in the proposed rule because this 
would better enable specialty societies to address their impact and 
make comments prior to publication of the final rule.
    However, specialty societies representing chest physicians and 
thoracic physicians disagreed with our decision to change our previous 
practice of including the PEAC recommendations in the final, rather 
than the proposed rule, because this meant that the recommendations 
from the March PEAC meeting were not included for this year. The 
society argued that changing this long-standing policy without 
announcing it in the Federal Register is inappropriate. The comment 
also contended that the specialty societies agreed to the inputs at the 
PEAC meeting; therefore, negative comments would not be forthcoming.
    Response: We discussed this issue at the January PEAC meeting and 
indicated that we were considering including the PEAC recommendations 
in the proposed rule and that the March recommendations would most 
likely not be included. We made this decision because, now that the 
PEAC is refining such a large number of codes, the revisions to the 
inputs were not only changing the practice expense RVUs of the refined 
codes, but also the values of services that were not refined. 
Therefore, we believed it was prudent that revisions be subject to 
comment before the revisions were implemented.
    Comment: The specialty society representing podiatry identified 
some discrepancies between the PEAC recommendations and the inputs in 
the CPEP database for CPT codes 10060, 11000, 11055, 11056, 11057 and 
11752 and requested that these be corrected.
    Response: We have made the corrections as requested.
    Comment: The American Society of Transplant Surgeons (ASTS) 
commented that it is not appropriate to apply either the PEAC-approved 
standard clinical staff times or RN/LPN/MTA staff blend for 90-day 
global procedures to the transplant recipient or living donor services. 
ASTS stated that it had been unaware that the PEAC was applying the 
standard to all 90-day services unless a case was made to the PEAC that 
the times should be increased. ASTS argued that there are substantial 
atypical staff times required for transplant recipients due, in large 
part, to the intensive education required for the transplant patient. 
The commenter noted that the three new CPT codes for living donor 
hepatectomies, CPT codes 47140-47142, were given increased pre-service 
clinical staff time by the RUC and have an RN as the staff type. ASTS 
requested that the current clinical staff times be retained and that an 
RN be assigned rather than the blended staff type to the following 
transplant services: CPT codes 32851, 32852, 32853, 32854, 33935, 
33945, 47135, 47136, 48554, 48556, 50320, 50360, 50365, 50380, 50547.
    Response: It does seem reasonable that at least some of these 
services would have increased pre-times as do the living donor 
hepatectomies recently reviewed by the RUC. Therefore, we will restore 
the original CPEP clinical staff pre-times and use the RN staff type 
for the above services on an interim basis for the coming year. We 
anticipate that the society will bring all of these codes to the PEAC 
for review for either the January or March meeting to ensure that the 
times for the codes receive the same scrutiny as did the new transplant 
codes. It should be noted that a few of the codes have lower original 
CPEP pre-time than the PEAC standard of 60 minutes; for those codes we 
did not change the PEAC standard time. We also are not revising the 
post-procedure clinical staff times for these codes, because the 
current times are in line with the post-service times assigned to the 
new living donor hepatectomy codes recently reviewed by the RUC.
    Comment: A commenter noted that high dose rate (HDR) brachytherapy 
CPT codes 77781, 77782, 77783 and 77784 were not listed in Addendum C 
of the proposed rule. Since these codes were approved by the PEAC and 
forwarded to CMS, ACR questioned why these codes were not listed.
    Response: The CPEP data base files had been revised to reflect the 
PEAC recommendations for these codes. It was an oversight that they 
were not included in Addendum C.
    Comment: The American College of Surgeons listed several possible 
errors in the CPEP database:
    CPT code 11450--missing 1 minute of staff time
    CPT codes 10080, 10081, 11770, 12032, 12035, 12046, 12047, 21550, 
21920, 37609, 38300, 45300-45327, and 46600-46615--missing correct 
number of gloves.
    CPT codes 45900, 45905, 45910, 47382, 49320, 49321, 49322, 49422, 
49429--supplies listed incorrectly--have nonfacility inputs when PEAC 
recommended none in office setting.

[[Page 63204]]

    Response: We thank the College for checking the database so 
carefully. We have made the suggested corrections, with the following 
notes: For CPT codes 10080, 10081 and 11770, the PEAC recommendation 
listed 5 gloves, not 6. For CPT codes 45300-45327 and 46600-46615, we 
adjusted the quantity of unsterile gloves to reflect that there are 2 
pair in the minimum visit supply package; in addition, CPT codes 45321 
and 45327 were not priced in the nonfacility setting.
    Comment: The American Society of Colon and Rectal Surgeons noted a 
few errors in the CPEP supply database. The supply inputs had not been 
changed to match the accepted new recommendations for CPT codes 45900, 
45905, 45910, 47382, 49320, 49321, 49322, 49422 and 49429.
    Response: We have made the corrections to the supply database and 
thank the specialty for bringing this to our attention.
    Comment: The American Speech-Language-Hearing Association (ASHA) 
questioned the proposed 28 percent reduction in the practice expense 
for CPT code 92507, Treatment of speech, language, voice, 
communication, auditory processing and/or aural rehabilitation status. 
The reduction is attributable to a decrease in clinical staff time. 
ASHA contended that the PEAC recommendation was based on a vignette for 
a child receiving such therapy, but that the time involved with a 
typical adult patient receiving this treatment is much longer. ASHA 
stated that a more reasonable time for clinical staff for this service 
is 69 minutes compared to the proposed 46 minutes.
    Response: We understand that the scenario for performing this 
service for a child might be very different than for an adult because 
an adult can participate in a more protracted therapy session. Because 
it is not clear to us at this time what would be the typical scenario, 
we will, on an interim basis, average the clinical staff time needed 
during a speech therapy session for a child with that suggested by ASHA 
for an adult. We will, therefore, assign 58 minutes of clinical staff 
time to this service, with the expectation that ASHA will present CPT 
code 92507 for further discussion and review at the PEAC.
    Comment: We received several comments in response to our acceptance 
of PEAC recommendations for evaluation and management (E/M) codes that 
reduced payment rates for six nursing home services (CPT codes 99301-
99303 and 99311-99313) and two home visit codes (CPT codes 99348 and 
99350). This payment reduction is primarily due to a decrease in the 
clinical staff time assigned to these services.
    The American Academy of Family Physicians (AAFP) supported our 
acceptance of the PEAC recommendations for the E/M nursing facility 
services. The commenter noted that current practice expenses are higher 
for services provided in the non-SNF nursing facility than those 
provided in the SNF facility. The commenter contended that the direct 
practice expense inputs should not vary based on the type of nursing 
facility setting and supported the elimination of the current 
differential in the practice expense RVUs between the SNF and non-SNF 
facility setting.
    However, the American Medical Directors Association (AMDA) 
representing long term care physicians, the American Geriatrics Society 
(AGS) and a health care management company, Health Essentials, all 
disagreed with our decision to accept the E/M nursing facility PEAC 
recommendations and asked us to reconsider our decision to implement 
them in 2004. The request to delay implementation was echoed by the 
American Academy of Home Care Physicians and AGS relating to the two E/
M home visit codes.
    The home care physicians argued that the PEAC recommendations for 
the two home visit codes are flawed because these codes have not yet 
been surveyed by the specialty performing this service. The commenters 
also contended that their views were not represented when the PEAC 
considered the refinements of the E/M home visit codes. Similarly, the 
AMDA noted that the PEAC workgroup responsible for formulating the 
recommendations for the nursing facility codes did not include long 
term care physicians. The AMA also commented on this issue and 
expressed concern that the PEAC recommendations did not include the 
views of all the relevant medical specialties and requested that we 
delay implementation of these E/M code recommendations to allow 
impacted medical specialties an opportunity to present new information 
to the PEAC.
    In addition, the AMDA expressed concern regarding the current work 
RVUs for nursing home visit services.
    Response: At the time the PEAC recommendations were forwarded to 
CMS, we agreed with the views expressed by the AFPP as to the 
reasonableness of the practice expense recommendations for the E/M 
codes for the nursing facility and home visits. However, we are also of 
the opinion that the relevant medical specialties should be given the 
opportunity to have their views considered by the PEAC. Consequently, 
we will not go forward with these E/M recommendations in 2004. This 
will allow time for the PEAC to reconsider the eight E/M codes with 
input from representatives from the nursing home and home visit 
specialties. We will use current CPEP practice expense inputs to price 
these codes for 2004.
    With regard to the concern expressed about the work RVUs for the 
nursing home visits, in the 2004 final rule we will solicit 
recommendations on codes to be reviewed during the next 5-year review 
of work and we suggest that the society recommend review of these 
codes.
    Comment: A specialty society representing gastroenterologists 
commented that the increased clinical staff pre-time added to certain 
colorectal procedures needs to be applied equally to 
gastroenterologists who provide those services.
    Response: We have a single payment for each procedure regardless of 
the specialty performing the service. Therefore, gastroenterologists 
will be paid the same as colorectal surgeons when performing those 
services for which we allowed increased pre-service clinical staff 
time.
    Comment: The American College of Radiology submitted several 
corrections to the CPEP database for those instances where the database 
differed from the PEAC recommendations that we accepted. The College 
stated its appreciation for the opportunity to review the practice 
expense data file for completeness and accuracy and applauded our 
efforts to ensure that the database captures correct and complete 
practice expense data.
    Response: We thank the College for the time and effort expended in 
checking this detailed data. We have made revisions to 19 codes: We 
changed the quantity of sodium chloride injection for CPT codes 78306, 
78315, 78460, 78461, 78464, and 78465; adjusted the quantity of films 
for CPT code 76812; added missing supplies to CPT codes 77408, 77409, 
77411, 77412, 77414, 77416, 76830 and 77290; removed equipment that had 
been deleted from CPT codes 78478 and 78480; and corrected a 
typographical error in the pre-service clinical staff time for CPT 
codes 73218 and 75555.

g. Repricing of Clinical Practice Expense Inputs--Supplies

    We use the practice expense inputs (the clinical staff, supplies, 
and equipment assigned to each procedure) to allocate the specialty-
specific practice expense cost pools to the procedures

[[Page 63205]]

performed by each specialty. The costs of the original inputs assigned 
by the Clinical Practice Expert Panels (CPEP) were determined by our 
contractor, Abt Associates, based primarily on 1994 and 1995 pricing 
data from supply catalogs. In addition, for many items on the equipment 
and supply list, the associated costs were based on the recommendations 
of a CPEP panel member, rather than on actual catalog prices. 
Subsequent to the CPEP panels, equipment and supply items have also 
been added to the CPEP data, with the costs of the inputs provided by 
the relevant specialty society.
    We contracted with a consultant to assist in obtaining current 
pricing information and also to recommend revisions to improve the 
uniformity and consistency of the CPEP supply database. On the basis of 
these recommendations, in the August 15, 2003 proposed rule, we 
proposed updates to the cost information for supplies in the database. 
In addition, we proposed the following database revisions:

--Assignment of supply categories.

    We proposed that supplies be assigned to one of 14 categories.

--Consolidation/standardization of item descriptions.

    We proposed combining items which appeared to be duplicative and 
modifiying descriptions using a key first word when possible for easier 
identification of items. For example, ``mayo stand cover'' and ``drape, 
sterile Mayo'' have both been changed to ``drape, sterile, for Mayo 
stand.''

--Standardization of unit descriptions.

    The current CPEP database contains over 72 unit descriptions 
associated with supplies (for example, item, gram, and cup). To provide 
consistency and ensure that inputs in the database accurately reflect 
the quantity of an item used, we proposed to standardize the unit 
description of items. We also proposed to specifically identify items 
intended for single use through the use of ``uou'' (unit of use) 
following the unit. These changes were reflected in Addendum D of the 
proposed rule.
    There were also items that had not been identified or for which 
pricing information was not found that were included in Table 1 in the 
August 15 proposed rule. Items that we proposed to delete from the 
database were also identified in this table. We requested that 
commenters, particularly the relevant specialty groups, provide us with 
the needed pricing information with appropriate documentation. We also 
stated if we did not obtain verified pricing information for an item, 
it would be eliminated from the database.
    Comment: The RUC expressed appreciation for the enormity of the 
repricing project and stated that the proposed approach was well 
organized and comprehensive. The American Association of Orthopedic 
Surgeons also agreed that the assignment of supply categories would be 
helpful in future refinement activities. The American College of 
Physicians, the American College of Surgeons, and the American 
Urological Association expressed support for our proposal to create a 
numbering system and to standardize the descriptions of supply items to 
increase accuracy of use. The American Academy of Dermatology also 
supported this standardization of proposed ``unit of use'' as long as 
its application does not assume that ``one size fits all'' as some 
supplies may go from milliliter to liter in usage. The American Society 
of Cataract and Refractive Surgery and the Outpatient Ophthalmic 
Surgery Society thanked us for the repricing proposal because this will 
ensure that we are using the more accurate and up-to-date supply costs, 
thus reimbursing physicians more fairly. The American College of 
Radiology recognized the need to update supply and pricing information 
in the practice expense database and commended us for committing to 
this extensive project. The American College of Surgeons also agreed 
that the update of prices for supplies will improve the accuracy of the 
direct practice expense data. The Society of Nuclear Medicine commended 
us for committing to this extensive project. The American Urological 
Association also appreciated this effort and acknowledged it as a huge 
undertaking.
    Response: We appreciate the positive feedback and would like to 
thank all the staff of the specialty societies who worked with our 
contractor to obtain the most representative prices for all of the 
supplies in the CPEP input database.
    Comment: A specialty society representing podiatrists agreed with 
removal of hallux implant and the broach kit from the list of supplies 
to be included under practice expense as both are separately billable 
and the broach kit is also reusable. The commenter did not agree with 
removal of the sterile ankle tourniquet since this is packaged as a 
single use item. The comment included pricing information at $42.87 
each (with documentation) for this supply.
    Response: We will delete the hallux implant and the broach kit from 
the CPEP supply data. We will retain the ankle tourniquet using the 
pricing information supplied by the society.
    Comment: Several commenters expressed concern about the reduction 
in nonfacility practice expense for the interstitial laser coagulation 
of the prostate procedure, CPT code 52647. A manufacturer of endo-
surgery equipment stated that the main reason for this decrease was the 
decrease in the price assigned to the laser fiber used in this 
procedure. We had proposed a price of $290 for this item, but the 
commenter submitted documentation that indicated that the laser fiber 
should be priced at $850 for CPT code 52647. In addition, the commenter 
noted that we had proposed in Table 1 to delete the laser fiber because 
it was reusable; however, this was incorrect as the laser fiber used in 
this procedure could not be reused and should not be deleted from our 
supply list.
    Response: When the laser fiber was repriced, we believed the item 
included in the supply list for CPT code 52647 was the same as a 
``laser tip,'' which was priced at $290. We thank the commenters for 
clarifying the issue. We agree that the laser fiber used in this 
procedure is a disposable supply that we will retain in our CPEP supply 
data at the $850 price documented by the commenter.
    Comment: Commenters representing cardiac arrhythmia specialists and 
a remote cardiac monitoring system recommend that we not delete the 
transtelephonic monitor as a supply even though we are correct that the 
patient and physician re-use this supply during the course of the 
pacemaker's life. The specialty society commenter requested that the 
expense of this supply, which costs $190, should be spread out over 
approximately 5 years.
    Response: The transtelephonic monitor as described would be 
considered a piece of equipment, rather than a reusable supply. 
However, unless the equipment costs over $500, we consider it as an 
indirect cost and it is not included as a direct input. Therefore, we 
will delete the item from our list of direct practice expense inputs as 
proposed.
    Comment: A specialty society representing chest physicians agreed 
that the oximetry sensory probe, CPAP nasal pillow and flow sensor are 
reusable and should be deleted from the list of CPEP supply inputs. The 
society also agreed that albuterol is separately billable and should 
also be deleted. Another commenter, representing sleep medicine, agreed 
that the nasal pillow should be deleted. However, the commenter 
representing chest physicians and a commenter representing thoracic 
physicians disagreed with the proposal to delete

[[Page 63206]]

methacholine chloride because there is no ``J'' code to use when 
billing, thus forcing physicians to used an unlisted service code. The 
commenters also contended that the aerochamber should not be deleted 
because, although reusable, it has a life of only about six months and 
should be costed out accordingly. In addition, the commenters disagreed 
that the inhaler is separately billable because a multi-use canister is 
utilized for this test; therefore, the amount used from the canister 
for each test should be included in the practice expense.
    Response: We will delete the oximetry sensory probe, CPAP nasal 
pillow and flow sensor and albuterol from the list of CPEP supply 
inputs. We will also delete the aerochamber, because an item that is 
reusable over a six-month period cannot be classified as a disposable 
supply. The commenter is correct that there is not a HCPCS ``J'' code 
for methacholine chloride. Therefore, we will keep this in the supply 
database as requested so that physicians can avoid the burden of 
submitting paper claims. We also will keep the inhalant in the database 
using the quantity of 1 gram per procedure at $0.788.
    Comment: Specialty societies representing radiologists and 
interventional radiologists disagreed with the classification of the 
Arrow mechanical thrombectomy device as reusable. The commenter 
contended that this device is single-use because the difficulty in 
cleaning the intra-luminary surface areas could lead to a risk of 
contamination if the device is reused. Moreover, reprocessing the 
thrombectomy device may result in fatigue-related failure.
    The societies also disagreed with our contention that a Seldinger 
needle is reusable; rather a Seldinger needle is single-use and should 
not be removed as a supply item. It is the commenter's understanding 
that hospitals are not in the practice of resterilizing Seldinger 
needles.
    While generally favoring reorganization of CMS' supply listing for 
ease of use and not directly opposed to supply categories, one of the 
commenters was concerned over the potential loss of granularity of cost 
data associated with the use of supply categories and would oppose the 
averaging of costs for the supply categories unless it is appropriate 
to average from a cost and clinical standpoint. A similar comment was 
sent by the radiology specialty society.
    Response: We will retain the thrombectomy device and the Seldinger 
needle as disposable supplies in our CPEP input database. With regard 
to the classification of supplies, the commenter misunderstands the 
purpose of assigning a classification to each supply. This will not be 
used for pricing purposes in any way. Rather, the classifications can 
be useful as a way to sort the long list of supplies in the database to 
make it easier to find a particular item.
    Comment: The contractor responsible for helping us with the 
repricing of supplies informed us that a supply assigned to the 
endometrial ablation procedure, CPT code 58353, was listed as a 
catheter tray when it should be described as a thermal ablation balloon 
catheter at a price of $727. In addition, our contractor supplied us 
with prices for several new supply and equipment items mainly for 
otolaryngology, that were not priced in the proposed rule but were 
included in the PEAC recommendations.
    Response: We will make the appropriate changes in the CPEP supply 
and equipment databases.
    Comment: Commenters representing pediatricians, pulmonary 
physicians and family physicians pointed out that the new price we had 
assigned to the safety syringe and needle did not cover the actual cost 
of purchasing the entire needle stick device that is required by the 
Occupational Safety and Health Administration.
    Response: Our repricing contractor researched this issue for us and 
agreed that the price we were proposing was too low for the appropriate 
item. Based on documentation for a 10 ml Syringe with SafetyGlide 
Needle, the safety syringe and needle will be priced at $.435 each, 
instead of the $.28 that was proposed.
    Comment: A surgical society commenter pointed out that we listed an 
achalasia balloon in Table 1 in the proposed rule and indicated that it 
was a supply used with CPT codes 45905 and 45910. The commenter stated 
that both of these codes were refined in January and that they were not 
priced in the office setting; therefore the balloon should no longer be 
listed as a supply used with these services.
    Response: Our CPEP database currently has these codes priced only 
in the facility setting. However, these services had previously been 
priced in the office and Table 1 was apparently developed before the 
last of the PEAC recommendations were entered. The achalasia balloon no 
longer appears on the CPEP supply database.
    Comment: We received comments from the American College of 
Physicians and another medical society representing allergy and 
immunology with concerns about reductions in reimbursement for the five 
venom immunology CPT Codes (95145-95149). The commenters believe the 
reductions are due, in part, to the use of incorrect supply costs for 
venom extracts that we priced at $5.18 per ml. The commenters provided 
documentation of current prices of five different venoms from two of 
the largest manufacturers of venom extracts. They proposed a price-
averaging methodology utilizing the small and large quantities of 
venoms that are available from the two suppliers. A price of $12.22 per 
milliliter of venom antigen results from using this methodology, and 
the commenters suggest that this price be used in valuing four of the 
five CPT Codes for venom immunology, with the exception of CPT Code 
95147. When a patient requires three stinging insect venoms, as for CPT 
95147, the commenters believe the 3-Vespid mix is typically used. 
Again, the commenters suggested the same price-averaging method noted 
above using cost information from the two vendors, which results in a 
price of $23.49 per ml. This 3-vespid mix price could also be used to 
value CPT Codes 95148 (four venoms) and 96149 (five venoms) with the 
single venom, priced at $12.22, added once to CPT code 97148 and twice 
to CPT Code 97149.
    Response: We were pleased to receive the comments, as well as the 
requested documentation, on the price for various venom extracts, 
because the venom pricing information was not included in the PEAC 
recommendations forwarded after the September 2002 meeting for these 
CPT Codes. This lack of data necessitated the use of a generic stinging 
insect venom price of $5.18 per ml. We accept the pricing information 
supplied by these specialty societies, although we do not agree with 
their proposed averaging of prices from both the small (5ml and 6ml) 
and larger (10ml and 12ml) quantities of venoms. We believe it is more 
appropriate to average the venom prices using the larger (10ml and 
12ml) quantities because of the volume that is used in an accepted 
venom immunotherapy program, which consists of a build up period of 
about four months followed by monthly maintenance therapy. The 
following prices result from this approach: $10.70 per ml of venom and 
$21.26 for the 3-Vespid Mix. Venom pricing for the five CPT codes would 
be as follows: CPT Code 95145 (one venom) at $10.70, CPT Code 95146 
(two venoms) at $21.40, 95147 (three venoms using 3-vespid mix), would 
be $21.26; CPT Code 97148 (four venoms), $21.26 + $10.70 = $31.96; and 
the venom antigen price for

[[Page 63207]]

CPT Code 97149 (five venoms) would be $42.66 ($21.26 + $10.70 + 
$10.70).
    Comment: JCAAI also supplied pricing information for the multi-tine 
device that was requested in Table 1 of our proposed rule. As was 
suggested above, the commenters again proposed we average costs for 
high and low volume purchases, excluding bulk pricing, to obtain the 
price for each test.
    Response: We appreciate the pricing information forwarded by JCAAI 
and selected a purchase quantity that is in the middle of the suggested 
range. For percutaneous allergy testing, CPT code 95004. This purchase 
quantity represents testing 200 typical patients, each receiving 40 
tests. We have added this Multi-tine per test price, $0.233,to the CPEP 
database for CPT codes 95004 and 95010.
    Comment: The American Speech-Language-Hearing Association (ASHA) 
provided pricing information for the following items accompanied by the 
requested documentation: Aphasia assessment treatment forms--$2.84 (for 
a diagnostic aphasia examination form and aphasia diagnostic profile), 
communication books/treatment notebook--$1.50 and eartip insert--$0.65 
each or $0.39 each (two sources). The American Academy of 
Otolaryngology--Head and Neck Surgery (AAO-HNS) submitted a price for 
the eartip insert of $0.23 each and suggested that the communication 
books/treatment notebook be deleted. The (AAO-HNS)also submitted a 
price for cottonoids at $0.875 each and for the phenol applicator kit 
at $15.95 each.
    Response: We will use the submitted price for the aphasia forms and 
will price the eartip insert at $0.423, which is the average of the 
three prices submitted. The notebook, which is assigned to the speech-
language therapy code, would be used over a course of treatment, and is 
not a disposable supply that is used or priced for a single service. 
Therefore, we will delete this item from our CPEP supply data. For the 
phenol applicator kit, we will use the price of $15.152 per kit that 
represents an average price for a 6-kit and a 24-kit quantity purchase. 
Because these kits contain the phenol that is used in the procedures, 
phenol has been deleted as a separate supply from the 11 CPT codes that 
are assigned the kit. AAO-HNS used a 10-pack quantity to assign a price 
to each cottonoid, but we are using a 200-pack quantity that reflects 
the high usage of this item. Therefore, we are using $0.773 as the 
price for each cottonoid.
    Comment: Specialty societies representing radiation oncology and 
radiology disagreed that the fiducial screws used with the intensity 
modulated radiation therapy procedure should be deleted from the CPEP 
input supply list. The society argued that the screws are typically 
used for this procedure and that they are not separately billable.
    Response: We will retain the fiducial screws in the list of 
supplies assigned to the intensity modulated radiation therapy 
procedure.
    Comment: The American Society of Colon and Rectal Surgeons offered 
description changes for two services, CPT codes 46917 and 46924. The 
society recommended that the descriptor for the laser tip for both 
codes be changed to ``laser tip, bare (single use)'' at $150. The 
commenter also requested that an ablation laser generator at $59,890 be 
added to both codes and the existing laser, diode laser, and laser 
generator be deleted.
    Response: A note from our contractor who is working on our 
repricing effort verified the above changes and we have revised our 
supply and equipment databases to reflect them.
    Comment: The American Association of Orthopaedic Surgeons agreed 
with the proposed supply deletions listed in Table 1 of the proposed 
rule that are used in orthopaedic surgery. In addition, the association 
agreed with the concept of standardization of unit descriptions. 
However, the comment contends that the term ``unit of use (uou)'' is 
unclear and that we should consider alternative terms and abbreviations 
that would be more intuitive.
    Response: The supply items in Table 1 that were listed for 
orthopaedic surgery are broach kit, hallux implant, sterile hand table 
drape, sterile cuff tourniquet, cephalosporin and sterile ankle 
tourniquet. As stated above, we will be deleting the broach kit and 
hallux implant and will also delete the hand table drape, cuff 
tourniquet and cephalosporin. As also noted above, we will retain the 
sterile ankle tourniquet in the supply database because the comment 
from the podiatry society argued that this item was not typically 
reused.
    With regard to the comment on the use of ``unit of use,'' we 
selected the ``unit of use'' (uou) term to indicate any item that is 
packaged for single use, even if the item is not completely used up. 
This most often occurs with items that are packaged sterile. For 
example, ``bacitracin (0.9gm uou)'' refers to one 0.9gm foil package. 
The quantity entered would be 1 and not a smaller amount such as 0.3. 
Once this foil package is broken, it is considered ``used up'' and 
therefore the unit of use is 0.9gm. Specifically, any item with a 
``unit of use'' designation is meant to be indicated in whole number 
``unit of use'' quantities, not partials (e.g., entered as 1, 2, 3, 
etc, and not 0.5, 1.5, etc.).
    Comment: A commenter representing sleep medicine stated that our 
proposed price of $25 is significantly below prices for standard CPAP 
masks used in the polysomnography service, CPT code 95811. The 
commenter submitted prices from two manufacturers that average to $88.
    Response: It appears that the commenter has submitted prices for a 
reusable CPAP mask that would not be included in our CPEP data as a 
disposable supply. Therefore, we will price the disposable mask at 
$25.135, as proposed.
    Comment: We received a comment from the American Physical Therapy 
Association (APTA) that contended there is a rank order anomaly caused 
by the increased price for the electrode used for CPT code 97033, 
iontophoresis. APTA noted that the price of a ``pair'' of electrodes 
was $16 in 2001 but has increased to $23.98 under our current supply 
repricing initiative. APTA has asked that we review the proposed cost 
of this item as a means to moderate the rank order anomaly.
    Response: We appreciate the comments offered by APTA and have 
reviewed the cost of the supplies assigned to the iontophoresis 
service. We determined that the electrodes for this service are 
packaged and priced as ``kits'' that contain the complete set of 
electrodes needed to provide one iontophoresis treatment. Therefore, 
only one electrode ``kit'' is needed for this code, as opposed to the 
two electrode ``pairs'' currently in our supply database. Consequently, 
we have changed the supply list for iontophoresis in our database to 
reflect that there is one kit, not two electrodes, at the proposed 
price of $11.99. We believe that this should correct the rank order 
anomaly.
    The following table, ``Table 1 Items Needing Specialty Input,'' 
lists those items on which we had requested specialty input, comments 
we received and the actions we are taking.

[[Page 63208]]



                                                         Table 1.--Items Needing Specialty Input
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           2003 PE                           Prior status of
    2003 PE supply description         2003 PE unit         price     Primary specialties      supply item       Commenter response    CMS action taken
--------------------------------------------------------------------------------------------------------------------------------------------------------
Acetylcholine 10%................  1 gram..............        $0.40  Nurse practitioner,  See Note C. Need     None...............  See Note D.
                                                                       neurology.           patient-use item,
                                                                                            not R&D item.
Aerochamber......................  1 item..............  ...........  Cardiology,          Item may be          Agree--reusable.     Disagree--Deleted.
                                                                       internal medicine.   deleted. May not     Requests item be
                                                                                            be typical and may   retained.
                                                                                            be separately
                                                                                            billable.
Albuterol........................  1 ampule............  ...........  Family practice,     See Note B.........  Agree--separately    Deleted
                                                                       internal medicine.                        billable.
Anthralin ointment...............  1 g.................         2.75  Dermatology........  See Note C.........  None...............  See Note D.
Aphasia assessment--forms average  1 item..............         0.95  Psychiatry,          See Note C.........  Pricing information  Retained at
                                                                       neurology.                                submitted at $2.84.  submitted price.
Balloon, achalasia...............  1 item..............       255.00  General surgery,     See Note C. (Codes   NA in non-facility.  Deleted.
                                                                       colon and rectal     utilizing this
                                                                       surgery.             item being
                                                                                            reviewed by CPT).
Blood dress package..............  1 item..............  ...........  Neurosurgery.......  Item may be          None...............  Deleted.
                                                                                            deleted. Gowning
                                                                                            items listed
                                                                                            separately.
Broach kit.......................  1 item..............  ...........  Podiatry,            See Note A.........  Agree--separately    Deleted.
                                                                       orthopaedic                               billable and
                                                                       surgery.                                  reusable.
Cable for EMG needle electrode...  1 item..............         1.20  Neurology, PM&R....  See Note A.........  None...............  Deleted.
Centimeter ruler.................  1 each..............         2.39  Radiation oncology,  See Note A.........  None...............  Deleted.
                                                                       dermatology.
Cephalosporin....................  1 gm................  ...........  Podiatry,            See Note B.........  Agree--separately    Deleted
                                                                       orthopedic surgery.                       billable.
Chordae Villae sampling kit......  1 item..............  ...........  Obstetrics,          Item may be          None...............  Deleted.
                                                                       gynecology.          deleted.
                                                                                            Duplicated item
                                                                                            with catheter-
                                                                                            stylet kit.
Collagen kit.....................  1 each..............      1383.00  Urology............  Need kit contents.   NA in non-facility.  Deleted.
                                                                                            Collagen sold as
                                                                                            individual
                                                                                            syringe. No
                                                                                            commercial kit
                                                                                            available.
Communication book/Treatment       1 each..............  ...........  Otolaryngology,      See Note C.........  Audiology priced at  Deleted--reusable.
 notebooks.                                                            audiology.                                $1.50 or $3.50.
                                                                                                                 ENT proposed to
                                                                                                                 delete.
Cottonoids.......................  1 item..............  ...........  Otolaryngology.....  See Note C.........  Submitted price of   Retained at $0.73.
                                                                                                                 $0.875.
CPAP nasal pillow................  1 each..............  ...........  Pulmonary medicine.  Item may be          Agree--not typical.  Deleted.
                                                                                            deleted.
                                                                                            Disposable CPAP
                                                                                            face mask also
                                                                                            included in code
                                                                                            95811. Nasal
                                                                                            pillows used with
                                                                                            reusable mask.
Cysto-catheter kit...............  1 item..............         9.04  Urology, general     Need kit contents    None...............  Deleted.
                                                                       practice.            and source/pricing
                                                                                            information.
Detection kit....................  1 slide.............         8.50  Pathology,           See Note C.........  None...............  See Note D.
                                                                       neurology.
Developmental testing--forms       1 item..............         2.64  Clinical             See Note C.          Submitted price of   Retained at
 average.                                                              psychologist,        (Original item       $0.40 for 96110      submitted prices.
                                                                       multiple other       price estimated by   and $2.44 for
                                                                       specialties.         CPEP member.).       96111.
Eartip insert with sound tube....  1 item..............  ...........  Otolaryngology,      See Note C.........  Pricing information  Retained at $0.423.
                                                                       audiology.                                submitted by two
                                                                                                                 specialties.
EEG electrode, gold DIN..........  1 item..............         0.07  Neurology..........  See Note A.........  None...............  See Note E.
Electrode, ring..................  1 item..............       475.00  Obstetrics,          See Note A.........  None...............  Deleted.
                                                                       gynecology,
                                                                       urology.

[[Page 63209]]


Electrodes, pickup, black tin,     1 item..............         0.42  Podiatry, neurology  See Note A.........  None...............  See Note E.
 9mm.
Electrodes, pickup, red tin, 9mm.  1 item..............         0.42  Podiatry, neurology  See Note A.........  None...............  See Note E.
Fiducial screws, set of 4........  1 set...............       558.00  Radiation oncology.  Item may be          Disagree--not        Agree--Retained.
                                                                                            deleted. May not     separately
                                                                                            be typical and may   billable.
                                                                                            be separately        Specialty requests
                                                                                            billable. (Screws    item be retained.
                                                                                            used for IMRT head
                                                                                            fixation device,
                                                                                            but typical
                                                                                            patient vignette
                                                                                            is prostate
                                                                                            cancer.).
Film, fluoroscopic...............  1 sheet.............         3.51  Diagnostic           See Note C.........  None...............  See Note D.
                                                                       radiology,
                                                                       anesthesia.
Flow sensors.....................  1 item..............         1.51  Pulmonary medicine,  See Note A.........  Agree--reusable....  Deleted.
                                                                       internal medicine.
Gold-palladium target............  1 item..............         0.59  Pathology..........  See Note A.........  None...............  Deleted.
Hallux implant...................  1 item..............  ...........  Podiatry,            See Note B.........  Agree--separately    Deleted.
                                                                       orthopaedic                               billable.
                                                                       surgery.
Headcover for MRI................  1 item..............         0.05  Diagnostic           See Note C.........  None...............  See Note D.
                                                                       radiology.
Inhalant.........................  1 ml................         0.75  Cardiology,          Item may be deleted  Use is typical.....  Retained at $0.788.
                                                                       internal medicine.   (May not be
                                                                                            ``typical'' for
                                                                                            service.).
Laryngeal mirror.................  1 item..............  ...........  Diagnostic           See Note A.........  None...............  Deleted.
                                                                       radiology,
                                                                       otolaryngology.
Laser fiber......................  1 item..............       595.00  Urology............  See Note A.........  Disagree--not        Agree--retained at
                                                                                                                 reusable.            submitted price.
                                                                                                                 Submitted price of
                                                                                                                 $850.
Laser fiber cleaving tool........  1 item..............       200.00  Urology............  See Note A.........  None...............  Deleted.
Methylcholine chloride...........  1 dose..............        48.50  Pulmonary medicine,  See Note B.........  Disagree--not        Agree--Retained at
                                                                       internal medicine.                        separately           $39.95.
                                                                                                                 billable. Requests
                                                                                                                 item be retained.
Mounting tray....................  1 each..............        40.00  Radiation oncology,  See Note A.........  None...............  Deleted.
                                                                       diagnostic
                                                                       radiology.
Multi-tine device................  1 item..............  ...........  Allergy/immunology.  See Note C.........  Submitted pricing    Retained at $0.23.
                                                                                                                 information.
Needle, 4 inch...................  1 item..............  ...........  Obstetrics,          See Note C.........  None...............  Deleted.
                                                                       gynecology.
Needle, 4-6 inch.................  1 item..............  ...........  Obstetrics,          See Note C.........  None...............  Deleted.
                                                                       gynecology.
Needle, seldinger................  1 item..............        72.90  Diagnostic           See Note A.........  Disagree--not        Agree--Retained.
                                                                       radiology,                                reusable.
                                                                       multiple other
                                                                       specialties.
Neurobehavioral status--forms      1 item..............         5.77  Clinical             See Note C.          None...............  See Note D.
 average.                                                              psychologist,        (Original item
                                                                       multiple other       price estimated by
                                                                       specialites.         CPEP member.).
Oximetry sensor probe............  1 item..............        15.00  Multiple             See Note A.........  Agree--resuable....  Deleted.
                                                                       specialties.
Penile clamp.....................  1 item..............        40.70  Urology............  See Note A.........  None...............  Deleted.
Phenol applicator kit............  1 unit..............  ...........  Otolaryngology.....  See Note C.........  Pricing information  Retained at
                                                                                                                 submitted.           $15.152.
Primary antibodies...............  1 slide.............         3.52  Pathology,           See Note C.........  None...............  See Note D.
                                                                       neurology.
Psych testing--forms average.....  1 item..............         2.30  Clinical             See Note C.........  None...............  See Note D.
                                                                       psychologist.
Receive coil.....................  ....................  ...........  Diagnostic           See Note A.........  None...............  Deleted.
                                                                       radiology.
Ruler............................  1 each..............         2.67  Radiation oncology,  See Note A.........  None...............  Deleted.
                                                                       diagnostic
                                                                       radiology.
Scissors and clamp, disposable...  1 each..............         0.62  Radiation oncology,  Need clamp           None...............  See Note D.
                                                                       diagnostic           description and
                                                                       radiology.           source/pricing.

[[Page 63210]]


Sealant spray....................  ....................  ...........  Radiation oncology,  See Note C.........  None...............  See Note D.
                                                                       diagnostic.
Silverman needle.................  1 item..............        66.35  Urology............  See Note A.........  None...............  Deleted.
Skin prep, one step..............  1 item..............        26.00  Cardiology.........  Need inches used     None...............  See Note D.
                                                                                            per procedure
                                                                                            (196in per roll).
Smoke evacuation cartridge.......  1 item..............       146.50  Obstetrics,          See Note A.........  None...............  Deleted.
                                                                       gynecology.
Sterile, hand table drape (24x43)  ....................  ...........  Orthopaedic          Item Deleted.        Agree..............  Deleted.
                                                                       surgery, hand        Integral part of
                                                                       surgery.             hand/upper
                                                                                            extremity drape
                                                                                            supply item.
Sterilizing tray.................  1 each..............        64.00  Radiation oncology,  See Note A.........  None...............  Deleted.
                                                                       diagnostic
                                                                       radiology.
Steroid..........................  1 cc................         1.29  Urology............  See Note B.........  None...............  Deleted.
Sweat cells, 4 in a set..........  1 set...............       260.00  Neurology..........  See Note A.........  None...............  Deleted.
Thrombectomy device..............  1 item..............       600.00  Diagnostic           Additional           Disagree--device is  Agree--Retained.
                                                                       radiology.           information          not reusable.
                                                                                            required. Device
                                                                                            is reusable. Need
                                                                                            to identify
                                                                                            specific PTD
                                                                                            single-use
                                                                                            accessories (e.g.
                                                                                            sheath rotator
                                                                                            drive basket).
Tourniquet, ankle, sterile.......  1 item..............  ...........  Podiatry,            See Note A.........  Disagree--packaged   Agree--retained at
                                                                       orthopaedic                               for single use.      submitted price.
                                                                       surgery.                                  Price submitted at
                                                                                                                 $42.87.
Tourniquet, cuff sterile.........  ....................  ...........  Orthopaedic          See Note A.........  Agree..............  Deleted.
                                                                       surgery, hand
                                                                       surgery.
Traction straps..................  1 item..............        60.00  Radiation oncology,  See Note A.........  None...............  Deleted.
                                                                       diagnostic
                                                                       radiology.
Transtelephonic monitor..........  ....................        10.56  Cardiology.........  See Note A.........  Agree--resuable,     Disagree--Deleted.
                                                                                                                 but requests item
                                                                                                                 be retained.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* CPT codes/descriptions only are copyright 2003 American Medical Assn. All Rights Reserved. Applicable FARS/DFARS apply.
Notes:
A. Item deleted. Reusable
B. Item deleted. Separately Billable
C. Additional information required.
D. Issue is pending. Still under review.
E. Issue is pending. Reuse discussion needed.

h. Miscellaneous Practice Expense Issues

Hyperbaric Oxygen Services
    We proposed to assign, on an interim basis, the following practice 
expense inputs to CPT code 99183, Physician attendance and supervision 
of hyperbaric oxygen therapy, per session, when performed in the office 
setting:
    Staff: Respiratory Therapist for 135 minutes (for a 2 hour 
treatment); Supplies: Minimum Visit Supply Package, 180 liters of 
oxygen, 187 cubic feet of air; Equipment: Hyperbaric chamber.
    Comment: A freestanding hyperbaric oxygen center expressed 
appreciation that we priced this procedure in the non-facility setting. 
The commenter also requested that we add certain staff time and some 
supplies to the practice expense inputs assigned to this service.
    The additional supplies requested include disinfectant for cleaning 
the hyperbaric chamber after each patient, two otoscope covers to check 
patients' ears pre and post treatment, and a denture cup and urinal. An 
additional 24 minutes of clinical staff time (using the standard staff 
blend) was also requested for preparing the room, greeting and gowning 
the patient, patient education, taking vital signs before and after 
treatment, positioning the patient and cleaning the room.
    Response: We believe that the request for the above additional 
practice expense inputs is reasonable. Currently, we have assigned 
clinical staff time only for assisting during the procedure itself; 
additional time was calculated using the times used by the PEAC for the 
tasks listed. Therefore, we are adding these inputs to those already 
assigned to the hyperbaric oxygen service. We have also requesting that 
the PEAC review these inputs at a future meeting and the RUC has stated 
that the PEAC will be reviewing this CPT code at the January or March 
2004 meeting.
    Comment: A commenter from another freestanding hyperbaric center 
expressed concern that the proposed physician fee schedule payment for 
CPT 99183 is approximately 25 percent of the payment in the hospital 
setting. The commenter lists additional costs that

[[Page 63211]]

should be considered such as special cleaners and solvents for cleaning 
the chamber, the costs of adherence to quality standards and costs for 
laundering patients' clothing, sheets and blankets. The commenter also 
stated that the hyperbaric chamber costs more than the $125,000 we have 
assigned the item.
    Response: As mentioned above, we have added disinfectant solution 
for cleaning the chamber. We will be proposing the repricing of all 
equipment in our CPEP database next year, which should ensure that the 
price for the hyperbaric chamber reflects the typical cost. The cost of 
laundering and much of the quality assurance costs are considered 
indirect and are not reflected in our direct cost database. However, if 
the PEAC does refine this code as planned, we will review any 
recommendation submitted.

Maxillofacial Prosthetics PE/hour

    We proposed to eliminate the special practice expense pool for 
maxillofacial prosthetic services and to use otolaryngology as the 
crosswalk for oral surgeons and maxillofacial surgeons as a more 
appropriate approximation of the specialties' practice expense per 
hour.
    Comment: The American Association of Oral and Maxillofacial 
Surgeons expressed appreciation for our work on this issue over the 
past three years and heartily concurred with the decision to crosswalk 
maxillofacial prosthetics to otolaryngology. The American Academy of 
Otolaryngology-Head and Neck Surgery also supported our proposed 
crosswalk.
    Response: We will implement the crosswalk of maxillofacial 
prosthetics to otolaryngology as proposed.

Holter Monitoring Codes

    We proposed revising the practice expense inputs for holter 
monitoring codes to remove items that were not needed to perform the 
services. Specifically, we proposed deleting the ECG electrodes and 
laser paper, as well as the electric bed, computer and holter monitor 
from CPT codes 93225 and 93231 and deleting the razor, nonsterile 
gloves, alcohol swab and tape, as well as the electric bed and exam 
table from CPT codes 93226 and 93232.
    Comment: A commenter representing an independent diagnostic testing 
facility and another representing cardiologists expressed support for 
the proposed revisions to the holter monitor codes.
    We also received a comment from the RUC stating that the direct 
practice expense inputs for these above holter monitoring services will 
be reviewed by the PEAC at the January 2004 meeting.
    Response: We will make the proposed changes to the holter 
monitoring codes on an interim basis and will be glad to review the 
recommendations from the PEAC when we receive them next year.

Other Practice Expense Issues

    Comment: We have received requests from several commenters that we 
value certain procedures currently priced only in the facility setting 
in the non-facility setting as well. A manufacturer commented that 
there is a need to price the hysteroscopic endometrial ablation 
procedure, CPT code 58563, in the office to ensure Medicare patient 
access to this alternative to hysterectomy in the least intrusive and 
least costly setting. Several individual gynecologists have expressed 
concern about the absence of a nonfacility rate for this service 
because the facility payment does not cover the costs of performing 
this procedure in the office.
    A manufacturer of endoscopic and surgical supplies and equipment 
expressed concern that several urology services which had previously 
been priced in the non-facility setting, are no longer priced in that 
setting. The commenter contended that the procedures can be performed 
safely in the office and that patients will be forced to go to a 
hospital or ambulatory surgical center for these procedures if the 
office payment does not reflect the direct costs incurred by the 
physician. The services in question are three cystourethroscopy 
procedures, CPT codes 52224, 52275, 52276, and two destruction of 
penile lesion procedures, CPT codes 54057 and 54065.
    A consultant representing non-hospital based providers of LDL 
apheresis, CPT code 36516, requested that we price this procedure in 
the nonfacility setting and provided some cost data for this code. The 
commenter stated that this procedure is commonly provided outside of 
hospitals. A medical technology company requested that we price the 
percutaneous implantation of neurostimulator electrodes procedure, CPT 
code 64561, in the nonfacility setting. This service had previously 
been priced in the office.
    Response: We are aware that technological advances make it now 
possible for more procedures to be safely performed in a physician's 
office. However, CPT code 58563 has recently been reviewed by the PEAC, 
and neither the gynecology specialty society nor the PEAC recommended 
pricing this code in the office setting. Likewise, the urology 
procedures and the neurostimulator service were reviewed this year by 
the PEAC and the apheresis services last year by the RUC, and the PEAC 
and the RUC recommended that these services not be priced in the office 
setting based on the presentation made by the specialty societies. We 
would not rule out working further with the commenters on these 
requests, but we believe that it would not be appropriate to take such 
an action in this final rule. We will be willing to discuss this issue 
further to determine whether any action should be proposed in the 
future.
    Comment: The RUC comment identified the following anomalies in the 
CPEP database for the clinical staff time for a few codes with 000 day 
global periods:
B. (1) Percutaneous Abscess Drainage Codes
    In 1997, CPT created new codes to differentiate between open and 
percutaneous abscess drainage. Unlike their open procedure 
counterparts, all of the percutaneous codes were assigned a global 
period of 000 days with no follow-up visits assigned. However, CMS 
crosswalked the direct inputs from the open codes, which have a 
different global period, to the percutaneous codes, including the time 
assigned for post-procedure office visits. The percutaneous abscess 
drainage codes identified are CPT codes 32201, 44901, 47011, 48511, 
49021, 49041, 49061, 50021, 58823. The comment stated that each of 
these codes is currently priced in the facility setting only. Because 
these procedures are predominately performed in the inpatient setting, 
the comment further recommended that we assign zero direct practice 
expense inputs for these codes.
(2) Closure of Eyelid by Suture
    The commenter also pointed out that CPT code 67875, Closure of 
eyelid by suture, has an assigned global period of 000 and includes no 
post-procedure visits in the work relative value. However, the original 
CPEP process appears to have assigned the code clinical staff time, 
supplies, and equipment related to a follow up visit.
    Response: We agree with the RUC that these 0-day global codes 
should not have any direct costs assigned for post-procedure follow up 
visits. Therefore, we are deleting from the database all the inputs 
related to such visits.
    Comment: Several commenters have expressed concern with the 
unexplained reduction in nonfacility practice expense RVUs for HCPCS 
code G0166, External counterpulsation.
    Response: We have examined the practice expense data files and have

[[Page 63212]]

discovered an error in the database. This has now been corrected.
    Comment: A specialty society representing dermatology commented 
that the practice expense RVUS for laser treatment of psoriasis 
procedures, CPT codes 96920-96922, appear overvalued.
    Response: The practice expense has increased for these codes 
because we did not have a price for the laser tip used in these 
procedures until this year. The laser tip is now priced at $240. We 
have made adjustments to ensure the practice expense RVUs reflect the 
correct pricing of supplies as well as the specialty performing the 
service.
    Comment: One specialty society that represents gastroenterologists 
commented that we cut the payment rate for the colonoscopy procedure, 
CPT 45385, by 10 percent in the nonfacility setting without explanation 
or justification.
    Response: The decrease in payment for this code is due to the 
decreased practice expense inputs now assigned to the service. The PEAC 
submitted recommendations for the direct practice expense inputs for 
this service that were based on a presentation made by two other 
gastroenterological specialty societies, and we have accepted these 
recommendations because we believe them to be reasonable. The code was 
included on Addendum C, ``Codes for Which We Received PEAC 
Recommendation on Practice Expense Direct Cost Inputs,'' in the 
proposed rule.
    Comment: Several commenters representing pediatricians, family 
physicians and chest physicians stated their concern with the proposed 
decrease in the practice expense RVUs for immunization services, CPT 
codes 90471 and 90472, which were removed from the non-physician work 
pool and priced under the top-down methodology starting in 2003.
    Response: We will return the two immunization services to the 
nonphysician work pool. As discussed above, we are increasing the price 
assigned to the needle stick prevention device that is in the supply 
list for the immunization codes. However, the practice expense RVUs for 
these codes would still be less than the current values. As discussed 
above, the price for the needle stick prevention device is still 
fluctuating as new manufacturers enter the market. In addition, it is 
still not clear exactly which device is optimal for the protection of 
medical staff. Therefore, until these issues are settled, we will price 
these immunization services in the nonphysician work pool. This will 
prevent any sharp decrease in payment for these codes, as well as for 
payments for the HCPCS G-codes for administration of influenza, 
hepatitis and pneumococcal vaccines, which are crosswalked to the 
payment for CPT code 90471.
    Comment: We received a comment from Venable, a diathermy 
manufacturer, who voiced concerns about previous decreases in both the 
work and the practice expense RVUs for the diathermy procedure, CPT 
code 97024. According to the commenter, the PEAC recommendations we 
accepted for 2002 included a substantial reduction in clinical labor 
time, the elimination of supplies, and the undervaluing of the 
diathermy equipment, including the assignment of inadequate time for 
equipment use. Citing our current CPEP price of $3,120 as too low, the 
commenter noted the cost of the diathermy machines they manufacture 
range from $19,000 to $30,000 and noted the actual time of a typical 
treatment is 20 minutes, and not 15, as currently listed. A previous 
comment from the electrophysiology specialty section of the American 
Physical Therapy Associati