Federal Register: October 31, 1997 (Volume 62, Number 211)]
[Rules and Regulations]
[Page 59047-59097]
From the Federal Register Online via GPO Access


[[Page 59047]]

_______________________________________________________________________

Part III

Department of Health and Human Services

_______________________________________________________________________

Health Care Financing Administration

_______________________________________________________________________

42 CFR Part 400, et al.

Medicare: Physician Fee Schedule for Calendar Year 1998; Payment
Policies and Relative Value Unit Adjustments and Clinical Psychologist
Fee Schedule; Final Rule

Medicare: Physician Fee Schedule Conversion Factor for Calendar Year
1998; Sustainable Growth Rate for Fiscal Year 1998; Notice

Medicare: Physician Fee Schedule for Calendar Year 1998; Payment
Policies and Relative Value Unit Adjustments; Practice Expense Relative
Value Units Adjustments; Proposed Rule

[[Page 59048]]

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 400, 405, 410, 411, and 414

[BPD-884-FC]
RIN 0938-AH94


Medicare Program; Revisions to Payment Policies and Adjustments
to the Relative Value Units Under the Physician Fee Schedule, Other
Part B Payment Policies, and Establishment of the Clinical Psychologist
Fee Schedule for Calendar Year 1998

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule with comment period.

-----------------------------------------------------------------------

SUMMARY: This final rule makes several policy changes affecting
Medicare Part B payment. The changes relate to physician services,
including geographic practice cost index changes, clinical psychologist
services, physician supervision of diagnostic tests, establishment of
independent diagnostic testing facilities, the methodology used to
develop reasonable compensation equivalent limits, payment to
participating and nonparticipating suppliers, global surgical services,
caloric vestibular testing, and clinical consultations.
    This rule also implements provisions in the Balanced Budget Act of
1997 relating to practice expense relative value units, screening
mammography, colorectal cancer screening, screening pelvic
examinations, and EKG transportation. In addition, we are finalizing
the 1997 interim work relative value units and are issuing interim work
relative value units for new and revised codes for 1998.

DATES: Effective Date: This rule is effective January 1, 1998. This
rule is a major rule as defined in Title 5, United States Code, section
804(2). Pursuant to 5 U.S.C. section 801(a)(1)(A), we are submitting a
report to the Congress on this rule on October 30, 1997.
    Comment Date: We will accept comments on interim RVUs for selected
procedure codes identified in Addendum C. Comments will be considered
if we receive them at the appropriate address, as provided below, no
later than 5 p.m. on December 30, 1997.

ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: BPD-884-FC, P.O. Box 26688,
Baltimore, MD 21207-0488.
    If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code BPD-884-FC. Comments received timely will be available for
public inspection as they are received, beginning approximately 3 weeks
after publication of the document, in Room 309-G of the Department's
offices at 200 Independence Avenue, SW., Washington, DC, on Monday
through Friday of each week from 8:30 a.m. to 5 p.m. (phone: (202) 690-
7890).
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FOR FURTHER INFORMATION CONTACT: For staff in the Center for Health
Plans and Providers, Plan and Provider Purchasing Policy Group,
Division of Practitioner and Ambulatory Care:

Jim Menas, (410) 786-4507 (for issues related to practice expense
relative value units).
Regina Walker-Wren, (410) 786-9160 (for issues related to the clinical
psychologist fee schedule).
William Morse, (410) 786-4520 (for issues related to the supervision of
diagnostic tests and independent diagnostic testing facilities).
Ward Pleines, Center for Health Plans and Providers, Chronic Care
Purchasing Policy Group, Division of Cost Reporting, (410) 786-4528,
(for issues related to the reasonable compensation equivalent limit
update factor).
Anita Heygster, Center for Health Plans and Providers, Plan and
Provider Purchasing Policy Group, Division of Integrated Delivery
Systems, (410) 786-4486 (for issues related to participating and
nonparticipating suppliers).
Bill Larson, Office of Clinical Standards and Quality, Coverage and
Analysis Group, (410) 786-4639 (for issues related to screening
mammography, screening pelvic examinations, and screening colorectal
cancer examinations).
Stanley Weintraub, Center for Health Plans and Providers, Plan and
Provider Purchasing Policy Group, Division of Practitioner and
Ambulatory Care, (410) 786-4498 (for all other issues).

SUPPLEMENTARY INFORMATION: In this final rule, we provide background on
the statutory authority for and development of the physician fee
schedule. We also explain in detail the process by which certain
interim work relative value units (RVUs) are reviewed and, in some
cases, revised.
    Section 1848(c)(2)(B) of the Social Security Act (the Act) provides
that adjustments in RVUs resulting from an annual review of those RVUs
may not

[[Page 59049]]

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. Thus, the statute allows a $20 million tolerance for increasing
or reducing total expenditures under the physician fee schedule. We
have determined that net increases because of changes to the physician
fee schedule would have added to projected expenditures in calendar
year 1998 by approximately $300 million. Therefore, we are making the
budget neutrality adjustment required by changes in payment policy and
Physicians' Current Procedural Terminology (CPT) through the conversion
factor (CF). A CF is a national value that converts RVUs into payment
amounts. Effective January 1, 1998, there will be one CF, as specified
by the Balanced Budget Act of 1997 (BBA 1997) (Public Law 105-33),
enacted on August 5, 1997. (Anesthesia has a separate CF but is paid
using a different formula.) The CF is updated annually.
    We have made the adjustment to achieve budget neutrality as we were
best able to estimate. As a result, the total projected expenditures
from the revised fee schedule are estimated to be the same as they
would have been had we not changed the RVUs for any individual codes or
added new codes to the fee schedule.
    Addenda to this rule provide the following information:

Addendum A--Explanation and Use of Addenda B Through G.
Addendum B--1998 Relative Value Units and Related Information Used in
Determining Medicare Payments for 1998.
Addendum C--Codes with Interim Relative Value Units.
Addendum D--1999 Geographic Practice Cost Indices by Medicare Carrier
and Locality.
Addendum E--1998 Geographic Practice Cost Indices by Medicare Carrier
and Locality.
Addendum F--1999 Versus 1997 Geographic Adjustment Factor (GAF) by 1998
Fee Schedule Area.
Addendum G--Counties Included in 1998 Localities (Alphabetically by
State and Locality Name Within State).

    The RVUs and revisions to payment policies in this final rule apply
to physicians' services furnished on or after January 1, 1998.
    To assist readers in referencing sections contained in this
preamble, we are providing the following table of contents. Some of the
issues discussed in this preamble affect the payment policies but do
not require changes to the regulations in the Code of Federal
Regulations. Information on the regulation's impact appears throughout
the preamble and not exclusively in section VIII.

Table of Contents

I. Background
    A. Legislative History
    B. Published Changes to the Fee Schedule
    C. Components of the Fee Schedule Payment Amounts
    D. Summary of the Development of the Relative Value Units
    1. Work Relative Value Units
    2. Practice Expense and Malpractice Expense Relative Value Units
II. Specific Proposals for Calendar Year 1998
    A. Resource-Based Practice Expense Relative Value Units
    1. Phased-In Implementation
    2. Adjustment for Practice Expense Relative Value Units for 1998
    3. Additional Provisions
    B. Geographic Practice Cost Index Changes
    1. Work Geographic Practice Cost Indices
    2. Practice Expense Geographic Practice Cost Indices
    a. Employee Wage Indices
    b. Rent Indices
    c. Medical Equipment, Supplies, and Miscellaneous Expenses
    3. Malpractice Geographic Practice Cost Indices
    C. Fee Schedule for Clinical Psychologist Services
    1. Background
    2. Legislative Changes
    3. Physician Payment Reform
    4. Related Federal Register Document
    5. Policy Pertaining to Clinical Psychologist Services
    6. Rationale and Alternatives Considered
    D. Diagnostic Tests
    1. Ordering of Diagnostic Tests
    2. Supervision of Diagnostic Tests
    3. Independent Diagnostic Testing Facility
    E. Reasonable Compensation Equivalent Limit Update Factor
    1. Background
    2. Change in the Methodology Used to Develop Reasonable
Compensation Equivalent Limits
    F. Payment to Participating and Nonparticipating Suppliers
    G. Increase in Work Relative Value Units for Global Surgical
Services to Account for the 1997 Increases for Work Relative Value
Units in Evaluation and Management Services
    H. Caloric Vestibular Testing
    I. Clinical Consultations
    J. Actual Charges
III. Implementation of the Balanced Budget Act of 1997
    A. Changes in Practice Expense Relative Value Units for 1998
    B. Coverage of Screening Mammography and Related Payment Changes
    C. Colorectal Cancer Screening
    1. Coverage Determination in Screening Barium Enemas
    2. Provisions of the Final Rule
    3. Frequency Limits and Conditions of Coverage
    4. Payment Limits
    5. Screening Colonoscopy in an Ambulatory Surgical Center
    D. Coverage of Screening Pelvic Examination (Including a
Clinical Breast Examination) and Related Payment Changes
    E. Reinstatement of the Payment for Transportation of EKG
Equipment
    F. Waiver of Proposed Rulemaking for Provisions in the Balanced
Budget Act of 1997
IV. Refinement of Relative Value Units for Calendar Year 1998 and
Responses to Public Comments on Interim Relative Value Units for
1997
    A. Summary of Issues Discussed Related to the Adjustment of
Relative Value Units
    B. Process for Establishing Work Relative Value Units for the
1998 Fee Schedule
    1. Work Relative Value Unit Refinements of Interim and Related
Relative Value Units (Includes Table 1--Work Relative Value Unit
Refinements of 1997 Interim and Related Relative Value Units)
    2. Establishment of Interim Work Relative Value Units for New
and Revised Physicians' Current Procedural Terminology Codes and New
HCFA Common Procedure Coding System Codes for 1998
    a. Methodology (Includes Table 2--American Medical Association
Specialty Society Relative Value Update Committee and Health Care
Professionals Advisory Committee Recommendations and HCFA's
Decisions for New and Revised 1998 CPT Codes)
    b. Discussion of Codes for Which the RUC Recommendations Were
Not Accepted
    C. Other Changes to the 1998 Physician Fee Schedule and
Clarification of CPT Definitions
V. Provisions of the Final Rule
VI. Collection of Information Requirements
VII. Waiver of Proposed Rulemaking and Response to Comments
VIII. Regulatory Impact Analysis
    A. Regulatory Flexibility Act
    B. Geographic Practice Cost Index Changes
    C. Fee Schedule for Clinical Psychologist Services
    D. Diagnostic Tests
    E. Reasonable Compensation Equivalent Limit Update Factor
    F. Payment to Participating and Nonparticipating Suppliers
    G. Increase in Work Relative Value Units for Global Surgical
Services to Account for the 1997 Increases for Work Relative Value
Units in Evaluation and Management Services
    H. Caloric Vestibular Testing
    I. Clinical Consultations
    J. Changes in Practice Expense Relative Value Units for 1998
    K. Coverage of Screening Mammography and Related Payment Changes
    L. Colorectal Cancer Screening
    M. Coverage of Screening Pelvic Examination (Including a
Clinical Breast Examination) and Related Payment Changes
    N. Reinstatement of the Payment for Transportation of EKG
Equipment

[[Page 59050]]

    O. Elimination of the Separate Budget-Neutrality Adjuster for
the Work Relative Value Units
    P. Effect of Changes Resulting from Adjustments to the Relative
Value Units
    Q. Net Impact of Relative Value Unit Changes on Medicare
Specialties
    1. Impact Estimation Methodology
    2. Overall Fee Schedule Impact
    3. Specialty Level Effect (Includes Table 3-- Impact on Medicare
Payments by Specialty Due to Changes in Relative Value Units)
    R. Five-Year Impacts of Benefit Changes (Includes Table 4--
Projected Budget Impact of New Benefits)
    S. Rural Hospital Impact Statement
Addendum A--Explanation and Use of Addenda B Through G.
Addendum B--1998 Relative Value Units and Related Information Used
in Determining Medicare Payments for 1998.
Addendum C--Codes with Interim Relative Value Units.
Addendum D--1999 Geographic Practice Cost Indices by Medicare
Carrier and Locality.
Addendum E--1998 Geographic Practice Cost Indices by Medicare
Carrier and Locality.
Addendum F--1999 Versus 1997 Geographic Adjustment Factor (GAF) by
1998 Fee Schedule Area.
Addendum G--Counties Included in 1998 Localities (Alphabetically by
State and Locality Name Within State).

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

AMA--American Medical Association.
BBA--1997 Balanced Budget Act of 1997
CF--Conversion factor.
CFR--Code of Federal Regulations.
CPI--Consumer Price Index.
CPI-U--Consumer Price Index for All Urban Consumers.
CPT--[Physicians'] Current Procedural Terminology [4th Edition,
1997, copyrighted by the American Medical Association].
CT--Computerized axial tomography.
FDA--Food and Drug Administration.
GAF--Geographic adjustment factor.
GPCI--Geographic practice cost index.
HCFA--Health Care Financing Administration.
HCPCS--HCFA Common Procedure Coding System.
HHS--[Department of] Health and Human Services.
HUD--[Department of] Housing and Urban Development.
IDTF--Independent Diagnostic Testing Facility.
IPL--Independent Physiological Laboratory.
MEI--Medicare Economic Index.
MRI--Magnetic resonance imaging.
OBRA--Omnibus Budget Reconciliation Act.
PC--Professional component.
RUC--[AMA's Specialty Society] Relative [Value] Update Committee.
RVU--Relative value unit.
TC--Technical component.

I. Background

A. Legislative History

    Since January 1, 1992, Medicare has paid for physician services
under section 1848 of the Social Security Act (the Act), ``Payment for
Physicians' Services.'' This section contains three major elements: (1)
A fee schedule for the payment of physician services; (2) a method to
control the rates of increase in Medicare expenditures for physicians'
services; and (3) limits on the amounts that nonparticipating
physicians can charge beneficiaries. The Act requires that payments
under the fee schedule be based on national uniform relative value
units (RVUs) based on the resources used in furnishing a service.
Section 1848(c) of the Act requires that national RVUs be established
for physician work, practice expense, and malpractice expense.
    Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments
in RVUs because of changes resulting from a review of those RVUs may
not cause total physician fee schedule payments to differ by more than
$20 million from what they would have been had the adjustments not been
made. As noted above, if this tolerance is exceeded, we must make an
adjustment to the conversion factor (CF) to preserve budget neutrality.
    Section 1848(e)(1)(C) of the Act requires us to review and, if
necessary, adjust the geographic practice cost indices (GPCIs) at least
every 3 years. This section also requires us to phase in the adjustment
over 2 years and implement only one-half of any adjustment if more than
1 year has elapsed since the last GPCI revision. The GPCIs were first
implemented in 1992 and were reviewed and revised in 1995. Thus, we are
required to complete the second GPCI review and implement only one-half
of any adjustment by 1998 and one-half in 1999.
    The Act requires that payments vary among fee schedule areas
according to geographic indices. In general, the fee schedule areas
that existed under the prior reasonable charge system were retained
under the fee schedule. A detailed discussion of fee schedule areas can
be found in the June 5, 1991 proposed rule (56 FR 25832) and in the
November 25, 1991 final rule (56 FR 59514). We are required by section
1848(e)(1)(A) of the Act to develop separate indices to measure
relative cost differences among fee schedule areas compared to the
national average for each of the three fee schedule components. While
requiring that the practice expense GPCIs and malpractice GPCIs reflect
the full relative cost differences, the Act requires that the work
indices reflect only one-quarter of the relative cost differences
compared to the national average.

B. Published Changes to the Fee Schedule

    In the June 18, 1997 proposed rule (62 FR 33159), we listed all of
the final rules published through November 22, 1996 relating to the
updates to the RVUs and revisions to payment policies under the
physician fee schedule. In the June 1997 proposed rule (62 FR 33158),
we discussed several policy options affecting Medicare payment for
physicians' services including resource-based practice expense RVUs,
geographic practice cost index changes, clinical psychologist services,
supervision of diagnostic tests, establishment of independent
diagnostic testing facilities, the methodology used to develop
reasonable compensation equivalent limits, payment to participating and
nonparticipating suppliers, global surgical services, caloric
vestibular testing, clinical consultations, and payments based on
actual charges.
    This final rule affects the regulations set forth at part 400,
which consists of an introduction and definitions; part 405, which
consists of regulations on Federal health insurance for the aged and
disabled; part 410, which consists of regulations pertaining to
supplementary medical insurance benefits (Part B); part 411, which
consists of regulations pertaining to exclusions from Medicare and
limitations on Medicare payment; and part 414, which consists of
regulations pertaining to the payment for Part B medical and other
health services. It also discusses changes to work RVUs affecting
payment of physician services. The information in this final rule
updates information in the June 18, 1997 proposed rule (62 FR 33158).

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 for 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 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

[[Page 59051]]

of these components of the fee schedule there is a 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<INF>work</INF> x <INF>work adjuster</INF> x GPCI<INF>work</INF>
)+(RVU<INF>practice expense</INF> x GPCI<INF>practice expense</INF>)+
(RVU<INF>malpractice</INF> x GPCI<INF>malpractice</INF>) x CF]

    The CF for calendar year 1998 appears in Addendum A. The RVUs for
calendar year 1998 are in Addendum B. The GPCIs for calendar year 1998
are in Addendum E.
    Section 1848(e) of the Act requires the Secretary 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. Thus, the GPCIs reflect the
relative costs of practice expenses, malpractice insurance, and
physician work in an area compared to the national average. In
accordance with the law, 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. Summary of the Development of the Relative Value Units

1. Work Relative Value Units
    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. The original work RVUs
for most codes were developed by a research team at the Harvard School
of Public Health in a cooperative agreement with us. In constructing
the vignettes for the original RVUs, Harvard worked with panels of
expert physicians and obtained input from physicians from numerous
specialties.
    The RVUs for radiology services are based on the American College
of Radiology relative value scale, which we integrated into the overall
physician fee schedule. The RVUs for anesthesia services are based on
RVUs from a uniform relative value guide. We established a separate CF
for anesthesia services while 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.
    Proposed RVUs for services were published in a proposed rule in the
Federal Register on June 5, 1991 (56 FR 25792). We responded to the
comments in the November 25, 1991 final rule. Since many of the RVUs
were published for the first time in the final rule, we considered the
RVUs to be interim during the first year of the fee schedule and gave
the public 120 days to comment on all work RVUs. In response to the
final rule, we received comments on approximately 1,000 services. We
responded to those comments and listed the new RVUs in the November 25,
1992 notice for the 1993 fee schedule for physicians' services. We
considered these RVUs to be final and did not request comments on them.
    The November 25, 1992 notice (57 FR 55914) also discussed the
process used to establish work RVUs for codes that were new or revised
in 1993. The RVUs for these codes, which were listed in Addendum C of
the November 25, 1992 notice, were considered interim in 1993 and open
to comment through January 26, 1993.
    We responded to comments received on RVUs listed in Addendum C of
the November 25, 1992 notice (57 FR 56152) in the December 2, 1993
final rule (58 FR 63647) for the 1994 physician fee schedule. The
December 2, 1993 final rule discussed the process used to establish
RVUs for codes that were new or revised for 1994. The RVUs for these
codes, which are listed in Addendum C of the December 2, 1993 final
rule (58 FR 63842), were considered interim in 1994 and open to comment
through January 31, 1994. We proposed RVUs for some non-Medicare and
carrier-priced codes in our June 24, 1994 proposed rule (59 FR 32760).
Codes listed in Table 1 of the June 1994 proposed rule were open to
comment. These comments, in addition to comments on RVUs published as
interim in the December 2, 1993 final rule were addressed in the
December 8, 1994 final rule (59 FR 63432). In addition, the December 8,
1994 final rule discussed the process used to establish RVUs for codes
that were new or revised for 1995. Interim RVUs for new or revised
procedure codes were open to comment. Comments were also accepted on
all RVUs considered under the 5-year refinement process. The December
8, 1995 final rule (60 FR 63124) addressed comments on RVUs published
as interim in the December 8, 1994 final rule. In addition, the
December 8, 1995 final rule discussed the process used to establish
RVUs for codes that were new or revised for 1996. The November 22, 1996
final rule (61 FR 59490) addressed all comments received in response to
our May 3, 1996 proposed notice (61 FR 19992) on the 5-year review of
work RVUs, finalized the 1996 interim work RVUs, and issued interim
RVUs for new and revised procedure codes for 1997.
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, and amended by the BBA 1997,
requires us to develop a methodology for a resource-based system for
determining practice expense RVUs for each physician service. In
developing the methodology, we considered the staff, equipment, and
supplies used in providing medical and surgical services in various
settings. The legislation required the new payment methodology to be
phased in over 4 years, effective for services furnished in 1999.

II. Specific Proposals for Calendar Year 1998

    In response to the publication of the June 1997 proposed rule, we
received approximately 8,600 comments. We received comments from
individual physicians, health care workers, and professional
associations and societies. The majority of the comments addressed the
proposals related to resource-based practice expense RVUs, supervision
of diagnostic tests, and payments based on actual charges.
    The proposed rule discussed policies that affect the number of RVUs
on which payment for certain services would be based. Certain changes
implemented through this final rule are subject to the $20 million
limitation on annual adjustments contained in section 1848(c)(2)(B) of
the Act.
    After reviewing the comments and determining the policies we will
implement, we have estimated the costs and savings of these policies
and added those costs and savings to the estimated costs associated
with any other changes in RVUs for 1998. We discuss in detail the
effects of these changes in the

[[Page 59052]]

Regulatory Impact Analysis (section VIII).
    For the convenience of the reader, the headings for the policy
issues in section II correspond to the headings used in the June 1997
proposed rule (62 FR 33158). More detailed background information for
each issue can be found in the June 1997 proposed rule.

A. Resource-Based Practice Expense Relative Value Units

    Section 121 of the Social Security Act Amendments of 1994 (Public
Law 103-432), enacted on October 31, 1994, requires us to develop a
methodology for a resource-based system for determining practice
expense RVUs for each physician service. The June 1997 proposed rule
(62 FR 33160), contained the proposed resource-based practice expense
RVUs. We received a substantial number of comments on our proposal,
both favorable and unfavorable.
    Before the close of the comment period on August 18, 1997, the
Balanced Budget Act (BBA) of 1997 (Pub. L. 105-33) was enacted on
August 5, 1997. The BBA 1997 delayed implementation of the resource-
based practice expense system until 1999. The BBA 1997 contained
additional requirements.
1. Phased-in Implementation
    Instead of paying for all services entirely under a resource-based
practice expense system in 1999, the system will be implemented over a
4-year period. The practice expense RVUs for 1999 will be based on the
product of 75 percent of the previous year's practice expense RVUs
(1998) and 25 percent of the resource-based practice expense RVUs. For
the year 2000, the percentages will be 50 percent of the charge-based
practice expense RVUs and 50 percent of the resource-based practice
expense RVUs. For 2001, the percentages will be 25 percent of the
charge-based practice expense RVUs and 75 percent of the resource-based
practice expense RVUs. For subsequent years, the RVUs will be based
totally on resource-based practice expense RVUs.
2. Adjustment for Practice Expense Relative Value Units for 1998
    Section 4505 of the BBA 1997 specifies the manner in which practice
expense RVUs in 1998 are adjusted.
    Section 4505 of the BBA 1997 enacted a provision that would in 1998
redistribute practice expense RVUs in the direction of the resource-
based RVUs that are to be implemented in 1999. The 1998 practice
expense RVUs for certain services are reduced to 110 percent of their
work RVUs for the service, and the monies are used to raise the
practice expense RVUs for office visit procedures. (Section 4505 of the
BBA 1997 also gives us the authority to adjust this percentage if the
aggregate amount of reductions exceeds $390 million. Since the
application of the 110 percent results in reductions of approximately
$330 million, no further adjustment is necessary.) A detailed
discussion of this provisions is discussed in section III,
``Implementation of the Balanced Budget Act of 1997.''
3. Additional Provisions
    Several additional provisions relating to the development of
resource-based practice expense RVUs will be published in the Federal
Register in the spring of 1998. These provisions will be discussed in a
notice of intent to regulate that is being published elsewhere in this
issue of the Federal Register.
    We are not adopting the resource-based practice expense system
proposal published in the June 1997 proposed rule. However, we will
publish a new proposed rule in the spring of 1998 with a new set of
resource-based practice expense RVUs.

B. Geographic Practice Cost Index Changes

    The Act requires that payments vary among fee schedule areas to the
extent that resource costs vary as measured by the GPCIs. As stated
earlier, section 1848(e)(1)(C) of the Act requires us to review and, if
necessary, adjust the GPCIs at least every 3 years. This section of the
Act also requires us to phase in the adjustment over 2 years and
implement only one-half of any adjustment in the first year if more
than 1 year has elapsed since the last GPCI revision. The GPCIs were
first implemented in 1992, and the first review and revision was
implemented in 1995. (A detailed discussion of the development of the
GPCIs and references to obtaining studies on the development of the
GPCIs can be found in the June 1997 proposed rule (62 FR 33172.)
    The 1998 through 2000 GPCIs represent the second GPCI update. The
1999 GPCIs (Addendum D) are the fully revised GPCIs. The 1998 GPCIs
(Addendum E) represent the one-half transition GPCIs. Addendum F shows
the estimated effects on area payments of the fully revised 1999 GPCIs.
The payment effects in 1998 will be about one-half of these amounts.
    The same data sources and methodology used for the 1995 through
1997 GPCIs were used for the 1998 through 2000 GPCIs with a few very
minor modifications. No acceptable additional data sources were found.
1. Work Geographic Practice Cost Indices
    The work GPCIs are based on the decennial census. The 1992 through
1994 work GPCIs were based on 1980 census data, because 1990 census
data were not yet available. The work GPCIs were revised in 1995 with
new data from the 1990 census. New census data will not be available
again until after the 2000 census. We searched for other data that
would enable us to update the work GPCIs between the decennial census.
No acceptable data sources were found.
    Therefore, we are making no changes in the work GPCIs, other than
the generally negligible changes resulting from using 1994, rather than
1992, RVUs in mapping counties to localities for this GPCI update. We
believe it is preferable to make no changes rather than making
inaccurate changes based on unacceptable data. We believe that this is
a particularly reasonable position given the generally small magnitude
of the changes in payments resulting from the changes in the work GPCIs
from the 1980 to the 1990 census data.
2. Practice Expense Geographic Practice Cost Indices
    a. Employee Wage Indices. As with the work GPCIs, the employee wage
portion of the practice expense GPCIs is based on decennial census
data. Like the work GPCIs, the employee wage indices are not being
changed during this GPCI update.
    b. Rent Indices. The office rental indices are again based on HUD
residential rent data. The revised rental indices are based on 1996 HUD
data as opposed to 1994 HUD data used in the 1995 through 1997 GPCIs.
    c. Medical Equipment, Supplies, and Miscellaneous Expenses. As with
the 1992 through 1994 and 1995 through 1997 GPCIs, this component was
given a national value of 1.000, indicating no measurable difference
among areas in costs. (For previously published Federal Register
documents that discuss these issues, see section I.B. of this final
rule, ``Published Changes to the Fee Schedule.'')
3. Malpractice Geographic Practice Cost Indices
    Again, malpractice premium data were collected for a mature
``claims made'' policy with $1 million to $3 million limits of
coverage, with adjustments made for mandatory patient compensation
funds. The proposed malpractice indices were based on 1992

[[Page 59053]]

through 1994 premium data, the latest years available when this study
was being conducted in 1995 through 1996, compared to the 1990 through
1992 data used in the current 1995 through 1997 indices.
    Fee schedule areas are described by carrier and locality number
with a short geographic description such as ``Atlanta.'' We received
numerous inquiries about the geographic areas that comprise our fee
schedule areas. Addendum G lists alphabetically by State and fee
schedule area the counties included in each fee schedule area.
    Comment: The majority of commenters expressed concern about the
continued use of proxy data, especially the HUD residential rent data,
rather than commercial rent data, in the GPCIs. They suggested we
collect actual data on physician earnings and expenses.
    Response: In both the 1995 and this GPCI revision we conducted an
extensive search for alternative data sources as well as for more
recent data. The search led us to conclude that the current GPCI
proxies are still the best available data to measure practice cost
differences among areas. As stated in all previous proposed and final
rules on the GPCIs, the actual earnings of physicians were not used to
adjust geographical differences in fees because these fees are, in
large part, the determinants of the earnings. That is, the use of
actual physician earnings would be ``circular.'' As also discussed in
all previous proposed and final rules on the GPCIs, no acceptable
sources of commercial rent data were found.
    We believe the current GPCI data sources are an accurate reflection
of area practice cost differences. We believe physician earnings will
vary among areas as do the earnings of other highly educated
professionals, and commercial rents will vary among areas as do
residential rents. The employee wage portion of the GPCIs is based on
census data on the actual earnings of the type of employees found in
physicians' offices. The malpractice index is based on actual
malpractice premiums. The current GPCI data sources reflect costs
across the country and are updated on a regular basis. Any data
collection of actual physician costs of sufficient breadth to cover all
counties and be updated on a regular basis would be massive and
extremely costly. We are unconvinced that such an effort would produce
a result so significantly at variance with the present GPCIs as to
justify the resources required to collect the data.
    Comment: Commenters stated that there should be no geographic
payment differences under the physician fee schedule. They believe that
in a national program with the same Medicare Part B premium everywhere,
that equivalent services should have equivalent payment regardless of
geographic area.
    Response: Section 1848(e)(1)(A) of the Act requires that payments
vary among areas as resource costs vary as reflected by the GPCIs.
    Comment: One commenter stated that the GPCIs did not accurately
reflect area cost differences because uniform GPCI component cost share
weights were used. The commenter stated that use of the same cost
shares everywhere fails to recognize that component weights might vary
among areas, specialties, and services depending upon factors such as
case mix, availability of other health care resources, and individual
practice styles.
    Response: We agree that different specialties and individual
practitioners utilize resources differently and may have expenses in
different proportions from the component weights used in the GPCIs as
discussed in the June 1997 proposed rule at 62 FR 33172. The physician
fee schedule was established in 1992 specifically to eliminate the
large unjustifiable payment differences that existed among services,
specialties, and geographic areas by establishing a uniform national
payment system. Payments under the physician fee schedule are based on
uniform national RVUs for a service and a national dollar conversion
factor and can vary only as area resource costs vary as demonstrated by
the GPCIs. The law prohibits any specialty payment differential. The
RVUs for a service represent the typical service. The GPCI component
weights represent the average practice expense component weights across
all physician specialties and are intended to reflect average costs
across all services and specialties in an area and not to reflect
exactly the costs of each individual practitioner. Thus, physician fee
schedule payments are designed by law to reflect the resources involved
with provision of the typical service across all specialties and
physicians in an area. It would not be in keeping with the intent of
the law nor would it be practical or desirable in a national program to
attempt to recognize individual practice patterns.
    Comment: One commenter stated that contrary to the GPCIs, which
show that costs tend to be higher in urban areas, rural physicians may
actually have higher costs than urban or suburban physicians. The
commenter attributed this to such factors as higher shipping costs,
higher equipment maintenance costs, higher continuing education costs,
and less efficient use of medical equipment.
    Response: While we have heard this argument since the inception of
the physician fee schedule, we have no data demonstrating that
physicians in rural areas have higher costs of practice than physicians
in urban or suburban areas. Physician work, rents, employee wages, and
malpractice insurance represent about 86 percent of physician costs as
reflected in the GPCIs. Our data show that wages, both physician wages
as reflected by wages of other highly educated professionals and the
wages of medical and clerical personnel in physicians' offices, and
rents are higher in urban and suburban areas than in rural areas. While
malpractice premiums are the same statewide in many States, in those
States where premiums do vary geographically they are higher in urban
areas. The types of expenses mentioned as higher in rural areas,
continuing education, higher shipping costs, higher equipment
maintenance costs, and less efficient use of equipment, represent only
a very small portion of physician practice costs.
    Comment: One commenter recommended that changes in malpractice
GPCIs reflect actual changes in costs from year to year.
    Response: We interpret this comment to mean that the malpractice
GPCIs should reflect actual changes in malpractice premiums from the
prior year. That is, the 1998 malpractice GPCIs should reflect actual
changes in malpractice premiums from 1997 to 1998, and the malpractice
GPCIs should be changed each year to reflect annual premium changes.
The law requires that we review and revise the GPCIs at least every 3
years. This revision involves substantial data collection and analysis
and must be published in a proposed rule. For example, the last GPCI
revision was in 1995, meaning that the next revision is required in
1998. This requires publication of the proposed changes in the Federal
Register in early 1997 to allow for public comment. To meet this
timeframe, data collection begins in 1995 to allow time for data
analysis and drafting of the proposed rule. Therefore, given the time
frame for the process to utilize updated data, this is the most current
data that could be used. Thus, the revised malpractice GPCIs are based
on 1992 through 1994 malpractice premium data, the most recent data
available at the time the revision process was begun in 1995. As
discussed in the proposed rule, we use a 3-year average rather than the
most recent single year of malpractice data to smooth the annual
volatility of

[[Page 59054]]

malpractice premiums and present a more accurate indication of
malpractice premium trends over time. We do not plan to revise the
GPCIs more frequently than every 3 years as required by law.
    Result of evaluation of comments: The GPCIs proposed on June 18,
1997 will be effective beginning in 1998.

C. Fee Schedule for Clinical Psychologist Services

1. Background
    Until 1997, the fee schedule for clinical psychologist services was
a locality-based fee schedule developed by the individual Medicare
carriers. The Medicare carriers established the locality-based fee
schedule in 1988 after section 4077(b) of the Omnibus Budget
Reconciliation Act of 1987 (OBRA 1987) (Public Law 100-203), enacted on
December 22, 1987, first provided for direct payment for clinical
psychologist services furnished in a community mental health center.
Section 4077(b)(3)(D) of OBRA 1987 amended section 1833(a)(1) of the
Act by providing that payment for clinical psychologist services be
based at 80 percent of the lower of the actual charge or a fee
schedule.
    The Act provides that the Secretary determine the fee schedule. As
a result, we furnished guidance to all Medicare Part B carriers to
establish the initial, that is, baseline, clinical psychologist fee
schedule as follows:
    <bullet> Set the fee schedule for therapeutic services at 80
percent of the adjusted prevailing charge for participating
psychiatrists in a locality; and
    <bullet> Set the fee schedule for diagnostic services at 90 percent
of the adjusted prevailing charge for participating psychologists in a
locality.
    We also advised the Medicare Part B carriers to update the clinical
psychologist fee schedule in subsequent years by the annual change in
the Consumer Price Index for All Urban Consumers (CPI-U). We adopted
the CPI-U to update the clinical psychologist fee schedule because it
was the economic index used for updating most other nonphysician
practitioner charges at that time.
    Since that time, there have been two significant changes to the fee
schedule for clinical psychologist services. First, effective January
1, 1992, we implemented the policy to base payment for psychological
testing services furnished by clinical psychologists on the amounts in
the physician fee schedule. Second, effective January 1, 1997, we
linked the fee schedule for clinical psychologist services to the
physician fee schedule in the same manner as for most other health care
practitioner services. We describe these changes in more detail in the
sections that follow.
2. Legislative Changes
    Although section 4077(b) of OBRA 1987 provided for clinical
psychologist services as separately payable under Medicare Part B under
a fee schedule, direct payment was limited to services furnished in
community mental health centers. Subsequent amendments to the law
expanded the scope of the benefit. These amendments were discussed in a
related Federal Register document described in section II.C.4. below.
3. Physician Payment Reform
    As noted in section I.A., since January 1, 1992, Medicare Part B
has paid for physician services based on a fee schedule. Until 1992,
physician services had been paid on the basis of a reasonable charge
system. This system led to significant payment variations among types
of services, physician specialties, and localities. Section 6102 of
OBRA 1989 added a new section 1848 to the Act, ``Payment for
Physicians'' Services,'' which replaced the reasonable charge system
with a fee schedule that reflected the resources required to perform a
given service. Although this legislation linked the payment methodology
for most practitioner services to the physician fee schedule, it did
not address payment for clinical psychologist services. Nevertheless,
because amounts established under the physician fee schedule for
psychological testing were heavily based on combined charge data for
psychiatrists and psychologists, we wished to ensure that clinical
psychologists would receive 100 percent of the physician fee schedule
amount for those services. Therefore, effective January 1, 1992, fee
schedule amounts for psychological testing services furnished by
clinical psychologists are set at 100 percent of the physician fee
schedule. However, before 1997, no change was made to the clinical
psychologist fee schedule for therapeutic and other diagnostic
services.
4. Related Federal Register Document
    We discussed several aspects of payment for clinical psychologist
services in a proposed rule published in the Federal Register on
December 29, 1993 (Medicare Coverage and Payment for Clinical
Psychologist, Other Psychologist, and Clinical Social Worker Services
(BPD-706-P)) (58 FR 68829). That document addressed issues such as
coinsurance, the outpatient mental health treatment limitation in
section 1833(c) of the Act, and assignment of claims. In the December
1993 proposed rule, we indicated that we would address the calculation
of the clinical psychologist fee schedule amounts set forth under
section 1833(a)(1)(L) of the Act in a separate proposed rule (58 FR
68837). Below, we discuss establishing the fee schedule for clinical
psychologist services as referred to in the December 1993 proposed
rule.
5. Policy Pertaining to Clinical Psychologist Services
    There are two types of services billed directly to Medicare Part B
by clinical psychologists: diagnostic services and therapeutic
services. Medicare direct payment for services furnished by clinical
psychologists became effective July 1, 1988. From 1988 through 1996,
Medicare Part B payment to clinical psychologists for therapeutic
services was subject to a locality-based fee schedule calculated by
each Medicare carrier. In 1988, the Medicare carriers developed the
clinical psychologist fee schedule on the basis of a HCFA analysis of
charging practices of psychologists and psychiatrists. Because no
Medicare charge data for therapeutic services furnished by clinical
psychologists existed at that time, we compared psychologist and
psychiatrist charges from other payor sources as a gap-filling measure
for Medicare pricing purposes. The resulting clinical psychologist fee
schedule amounts for therapeutic services, as shown in section II.C.1.
above, were set at 80 percent of the adjusted prevailing charge for
similar services of Medicare-participating psychiatrists in the
locality. (The ``adjusted prevailing charge'' for physicians means the
locality prevailing charge that is calculated by applying the Medicare
Economic Index (MEI) to the base year prevailing charge. In this way,
Medicare reasonable charges for physician services are increased above
the base year rates only to the extent determined to be justified by
appropriate economic data.)
    Initially, the fee schedule amounts for diagnostic services
furnished by clinical psychologists were set at 90 percent of the
Medicare prevailing charge for independently practicing psychologists
in a locality. In contrast to therapeutic services, Medicare charge
data had existed for diagnostic testing because psychological testing
furnished by independent psychologists under a physician's order had
been covered as ``other diagnostic tests'' under section 1861(s)(3) of
the Act.

[[Page 59055]]

    The amounts established under the physician fee schedule for
diagnostic psychological testing were largely based on blended charge
data for both psychologists and physicians. Furthermore, because
psychologists are the predominant suppliers of psychological testing
services, the physician fee schedule amounts for those services were
based in large part on psychologist charge data. In the November 25,
1991 final rule that established the physician fee schedule, we stated
(56 FR 59507) that diagnostic tests furnished by clinical psychologists
would be paid under the physician fee schedule. Since January 1, 1992,
amounts for diagnostic psychological testing services furnished by
psychologists are equivalent to the amounts established under the
physician fee schedule authorized by section 1848 of the Act.
(Diagnostic psychological testing services are listed in the
Physicians' Current Procedural Terminology (CPT) '97 as CPT codes 96100
through 96117.)
    A variety of health care practitioners under Medicare have payment
levels that are tied, by law, to the physician fee schedule. These
practitioners include nurse practitioners, nurse midwives, and
physician assistants. We believe that it is also appropriate to
establish a clinical psychologist fee schedule that is linked to the
physician fee schedule. The implementation of 24 new billing codes for
psychotherapy services effective January 1, 1997 required us to
establish relative values under the physician fee schedule for each
code. We established the clinical psychologist fee schedule value for
all services at 100 percent of the physician fee schedule amount for
the corresponding service. Consequently, this rule sets forth the fee
schedule for covered clinical psychologist services at 100 percent of
the physician fee schedule amount for the corresponding service. The
rationale for this payment level appears in section II.C.6. below.
Although this payment policy was implemented January 1, 1997, we are
including it in this final rule in order to codify in regulations the
methodology for the clinical psychologist fee schedule.
6. Rationale and Alternatives Considered
    As noted in section II.C.1., we recommended in 1988 that Medicare
carriers set clinical psychologist fee schedule amounts for therapeutic
services at 80 percent of the MEI-adjusted prevailing charge for
psychiatrists. That level had been primarily based on the fee
differential found in a review of psychologist and psychiatrist fees
from 1985 through 1988.
    Effective January 1, 1992, physicians' services are paid under a
resource-based fee schedule rather than a reasonable charge
methodology. The physician fee schedule establishes payment amounts for
all physician services as defined in section 1848(j)(3) of the Act. One
effect of the physician fee schedule is that payment for physician
services is now standardized. We believe that the clinical psychologist
fee schedule amounts for therapeutic services should be tied to the
physician fee schedule.
    As noted earlier, effective for services furnished on or after
January 1, 1992, payment for diagnostic psychological tests furnished
by clinical psychologists is based on the physician fee schedule. The
clinical psychologist fee schedule for therapeutic services, which was
in use until January 1, 1997, was not resource-based but was derived
from the initial linkage between psychologist and psychiatrist
prevailing charges. However, with the implementation of the physician
fee schedule, prevailing charges no longer apply for physician
services. Furthermore, because the prevailing charge was based on
actual charging patterns, it frequently resulted in large differences
in charges from one area to another. With implementation of the
physician fee schedule, the GAF used to adjust the RVUs for physician
services has changed the geographic distribution of fees. The purpose
of the GAF is to recognize only justifiable differences in the cost of
operating a medical practice in different areas.
    Finally, once the clinical psychologist fee schedule is linked
directly to the physician fee schedule, the annual physician update
factor used to update fees for clinical psychologist services will be
the same as the index used to update fees for physicians and other
health care practitioners. The following table illustrates that, for
the years between 1989 through 1991 (during which the prevailing charge
system applied), the CPI-U update factor exceeded the congressionally
imposed limits on the MEI that was used to adjust Medicare prevailing
charges for nonprimary care physician services:

------------------------------------------------------------------------
                                            1989       1990       1991
            Annual increase              (percent)  (percent)  (percent)
------------------------------------------------------------------------
CPI-U..................................       4.0        5.2        4.7
MEI (for other than primary care)......       1.0        2.0        0.0
------------------------------------------------------------------------

    Using a hypothetical prevailing charge of $100 for psychiatrists in
1988, we illustrate the relationship of the clinical psychologist fee
schedule to psychiatrist prevailing charges in 1991 in the following
table:

------------------------------------------------------------------------
                                       1989         1990         1991
------------------------------------------------------------------------
Psychiatrists (1988 prevailing
 charge = $100):
    MEI update factor............         1.01         1.02         1.00
    Updated prevailing charge....      $101.01      $103.02      $103.02
Clinical Psychologists (1988 fee
 = $80):
    CPI-U update factor..........         1.04        1.052        1.047
    Updated fee..................       $83.20       $87.53       $91.64
Psychologist/Psychiatrist (1988 =
 80%)............................        82.4%        85.0%        89.0%
------------------------------------------------------------------------

    By 1991, the combined effect of using the CPI-U to update the
clinical psychologist fee schedule and the MEI to update psychiatrist
prevailing charges resulted in a clinical psychologist fee schedule
that was equivalent to 89 percent of the psychiatrist prevailing
charge. Additionally, implementation of the physician fee schedule
resulted in slight payment decreases for psychiatrist services in 1992.
In 1993 and 1994, moreover, the physician fee schedule amounts for
nonsurgical services other than primary care services were increased by
0.8 percent and 5.3 percent, respectively. By comparison, during the
first 3 years that the physician fee schedule was in effect, clinical
psychologist fee schedule amounts increased by 4.7 percent, 3.1
percent, and 3.0 percent, respectively, for 1992, 1993, and 1994,
because clinical psychologist fee schedule amounts were adjusted by a
different economic index, the Consumer Price Index (CPI). Consequently,
through 1994, clinical psychologist fee schedule increases outpaced
those for physicians furnishing nonsurgical services other than primary
care as well as those for

[[Page 59056]]

other nonphysician practitioners whose payments are tied to the
physician fee schedule.
    The combined effect of all these factors is that the clinical
psychologist fee schedule no longer reflected the original fee
differentials between psychologists and psychiatrists that had been
found in the health care marketplace and factored into the initial
clinical psychologist fee schedule. As a result, the clinical
psychologist fee schedule was marked by disparities with the physician
fee schedule for similar services as well as by wide geographic
variations that reflected historical charging patterns in different
areas.
    We had previously considered setting the clinical psychologist fee
schedule at the level established under the physician fee schedule for
similar services. However, at that time, the CPT descriptors for
individual psychotherapy services (CPT codes 90841 through 90844)
included the term ``* * * [with] continuing medical diagnostic
evaluation, and drug management, when indicated.'' These are medical
aspects of a psychotherapeutic service that are outside the scope of
clinical psychologist licensure. Therefore, we were concerned that it
would be inappropriate to set the clinical psychologist fee schedule
amounts at the same level as the physician fee schedule when clinical
psychologists were unable to perform the full service described in the
codes.
    During 1996, as part of the statutorily mandated 5-year refinement
of the RVUs for the physician fee schedule, the American Medical
Association's (AMA's) Specialty Society Relative Value Scale Update
Committee (RUC) recommended increases for a number of psychotherapy
codes. (The RUC, which is comprised of representatives of various
medical specialty societies, the AMA, the American Osteopathic
Association, and the CPT Editorial Panel, makes recommendations to us
concerning the assignment of RVUs to new and revised CPT codes.) As a
prelude to accepting the RUC recommendations, we examined the coding of
psychiatry services. We concluded that the CPT code descriptors for
individual psychotherapy needed to be changed to define the service
more clearly, recognize the variations in work associated with
different types of psychotherapy as well as the settings in which the
types of psychotherapy are furnished, and assign face-to-face time
values for the service. As a result, effective January 1, 1997, CPT
codes 90842, 90843, 90844, and 90855 for individual psychotherapy are
no longer recognized for Medicare purposes. These codes have been
replaced by 24 alphanumeric codes that include 12 codes for therapy
furnished in the office and other outpatient settings and 12 codes for
therapy furnished in inpatient hospital, partial hospital, or
residential care settings. These two categories were further broken
down into the types of psychotherapy services. A full listing and
discussion of these codes was included in the final rule (Medicare
Program; Revisions to Payment Policies and Five-Year Review of and
Adjustments to the Relative Value Units Under the Physician Fee
Schedule for Calendar Year 1997 (BPD-852-FC)), published November 22,
1996. (See 61 FR 59521 through 59523.)
    One of the effects of the coding system changes for psychiatric
services is that now there are codes for reporting psychotherapy both
with and without medical evaluation and management services. Under
Medicare, clinical psychologists may bill for individual psychotherapy
without medical evaluation and management services. Consequently, when
clinical psychologists bill for individual psychotherapy without
medical evaluation and management, those services are equivalent to
individual psychotherapy without medical evaluation and management
services when furnished by a physician. As a result, we believe that it
is both reasonable and equitable to pay clinical psychologists the same
amount as physicians for equivalent services.
    Alternatively, we considered retaining the previous clinical
psychologist fee schedule for therapeutic services. We also considered
setting the clinical psychologist fee schedule at a level other than
100 percent of the physician fee schedule. However, we rejected these
options because the resulting fee schedule amounts would have
essentially continued to be derived from physician prevailing charges,
which are no longer relevant under the physician fee schedule and would
only serve to perpetuate geographic variations in charges that are a
residual effect of the reasonable charge payment system.
    We received a few comments on the clinical psychologist fee
schedule from five separate major professional associations and
federations at the national and State level.
    Comment: One commenter urged us to develop an equitable payment
methodology for clinical social workers that takes into account the
practitioner's investment in education and training, office expenses,
and malpractice costs instead of a methodology that is based on a
percentage of what is paid to another nonphysician provider. The
commenter noted that payment for clinical social worker services seems
to be the only instance under the Medicare statute when one G48
nonphysician's payment rate is tied to that of another nonphysician
provider.
    Response: The Medicare statute requires that payment be made to
clinical social workers at 80 percent of the lesser of the actual
charge for the services or 75 percent of the amount determined for
payment for clinical psychologist services. Under the circumstances, it
would be inappropriate to develop an alternative payment amount for
clinical social worker services.
    Comment: Several commenters stated that they are pleased that we
have addressed the problem of the clinical psychologist fee schedule
and the inequitable situation that in some areas of the country fees
for psychology services were higher than the fees for the same services
provided by a psychiatrist. Accordingly, these commenters are
supportive of our requirement that psychologists may bill only for
psychotherapy without medical evaluation and management. However, two
of the commenters suggested that we consider our policy of a fee
schedule for psychologists' services set at 100 percent of the
physician fee schedule amount to be an interim policy, pending
completion of ongoing survey work and the RUC's deliberations.
Completion of the RUC's review of the work involved in the new codes
will help inform decision makers about whether the coding changes and
RVUs have adequately captured the resource cost differences between
psychotherapy provided by psychiatrists and that provided by
psychologists.
    Additionally, one of these commenters stated that it is illogical
to permit psychologists to be paid at 100 percent of the physician fee
schedule for comparable services using the same malpractice expense
RVUs assigned to physician codes. Malpractice insurance premiums for
psychologists are as low as 10 percent of the premiums charged to
leading psychiatrists. Even when psychiatrists provide psychotherapy
without evaluation and management, their professional standard of care
exceeds the standard of care applicable to psychologists. Psychologists
do not have the same responsibility as psychiatrists in terms of being
accountable for failure to furnish medications or recognize a non-
psychiatric medical condition when providing psychotherapy without
medical evaluation and management.

[[Page 59057]]

Accordingly, this commenter believes that the malpractice expense and
practice expense associated with the significantly higher standard of
care required of psychiatrists requires that we set payment for
psychologists' services at less than 100 percent of the physician fee
schedule amount.
    Response: The temporary psychotherapy ``G'' HCFA Common Procedure
Coding System (HCPCS) codes (G0071 through G0094) were implemented as
interim codes, and the RUC-recommended RVUs for these services were
also considered as interim. Although these temporary ``G'' codes will
be crosswalked directly to permanent numeric HCPCS codes effective
January 1, 1998, the codes and the assigned RVUs will continue to be
considered interim.
    We believe that, for the most part, we have addressed the situation
when malpractice insurance premiums for psychiatrists are higher than
the cost of malpractice insurance for psychologists by establishing an
entire set of psychotherapy codes that are exclusive to physicians that
psychologists are precluded from billing under the Medicare program. We
established this set of codes because the services that both physicians
and psychologists can furnish are probably not the services that are
contributing to the psychiatrist's higher malpractice costs. The
services that are reserved to physicians alone are those involving
medications and complexities that would contribute to the higher
malpractice costs.
    Comment: One commenter expressed that it has a major concern about
our continued exclusion of psychologists from the use of CPT evaluation
and management codes as well as the ``G'' HCPCS codes that encompass an
evaluation and management component. The commenter believes that we
should remove our longstanding restriction on the use of these codes by
psychologists and, instead, incorporate into our coding system a
realistic reflection of the present day practice of psychology.
    Moreover, the commenter believes that since psychologists play an
important evaluative role, we should seriously reconsider our
longstanding exclusionary policy and permit payment to psychologists
for evaluation and management codes that represent services that
psychologists are already providing under the Medicare program.
    Response: We believe that the CPT diagnostic psychological testing
CPT codes 96100 through 96117 and the CPT psychotherapy codes 90801
through 90899 capture the range of mental health services, including
nonmedical evaluation services, that clinical psychologists are
expected to provide for purposes of the Medicare clinical psychologist
benefit and that clinical psychologists are authorized by law to
furnish. The evaluation and management services included in the codes
that psychologists cannot bill Medicare are services involving medical
evaluation and management. Psychologists are not licensed to perform
these types of services.
    Result of evaluation of comments: We are finalizing our proposal to
maintain the clinical psychologist fee schedule at 100 percent of the
physician fee schedule amount for comparable services. The RVUs for
individual psychotherapy services remain in effect on an interim basis.

D. Diagnostic Tests

1. Ordering of Diagnostic Tests
    In our November 22, 1996 final rule for the 1997 physician fee
schedule (61 FR 59490), we revised Sec. 410.32 (Diagnostic x-ray tests,
diagnostic laboratory tests, and other diagnostic tests: Conditions) to
state that, to be covered, diagnostic tests had to be ordered by the
physician who treats the patient. Section 410.32 contained exceptions
for x-rays used by chiropractors to demonstrate the subluxation of the
spine and for certain nonphysician practitioners operating within the
scope of their statutory benefit and State licenses. We are adding an
additional exception to Sec. 410.32 to indicate that a physician who
meets the qualification requirements for an interpreting physician
under section 354 of the Public Health Service Act as provided in
Sec. 410.34 (Mammography services: Conditions for and limitations on
coverage), paragraph (a)(7), may order a diagnostic mammogram based on
the findings of a screening mammogram even though the physician does
not treat the beneficiary. We believe this is appropriate because the
Food and Drug Administration, rather than HCFA, is responsible for the
conditions under which mammograms are covered. It would also facilitate
additional and necessary diagnostic testing to investigate suspicious
findings at the time the beneficiary is present at the testing site
rather than requiring the beneficiary to return at a later date for
follow-up testing.
    In addition, commenters have asked about the statutory basis for
denial of claims under the ordering rule adopted in the 1996 physician
fee schedule final rule. We have determined that tests are not
demonstrably reasonable and medically necessary unless they are ordered
by the patient's physician who will employ the tests to manage the
patient's care. Thus, we are clarifying in Sec. 410.32(a) that the
denials are based on the exclusion in section 1862(a)(1)(A) of the Act,
and contained in Sec. 411.15(k)(1), that is, the services ``are not
reasonable and necessary for the diagnosis and treatment of illness or
injury or to improve the functioning of a malformed body member.''
Beneficiaries may be protected from liability for claims denied on this
basis by the limitation on liability provision of section 1879 of the
Act.
    All commenters addressing the proposal to permit certain physicians
to order a diagnostic mammogram based on the findings of a screening
mammogram even though the physician does not treat the beneficiary
enthusiastically supported the proposal. We received no comments on the
proposal to clarify that denial of claims by carriers because the tests
were not ordered by a physician who uses the findings in the management
of the beneficiary's care are based on the reasonable and necessary
exclusion in section 1862(a)(1)(A) of the Act and in Sec. 411.15(k)(1).
    Below is a discussion of the public comments we received on our
proposal relating to ordering of diagnostic tests and our responses:
    Comment: Several commenters requested clarification of the
applicability of the diagnostic test ordering provision, adopted in the
final rule of November 22, 1996, to diagnostic procedures performed in
hospital settings: the responses to comments seemed to indicate that,
although the intent of the new policy was primarily directed at
nonhospital testing, the requirement applied in all settings.
    Response: The policy was set forth in Sec. 410.32, which generally
addresses diagnostic tests covered under section 1861(s)(3) of the Act
and payable by Part B carriers rather than fiscal intermediaries.
Regulations other than Sec. 410.32 govern the coverage of diagnostic
tests furnished to hospital patients, which are payable through fiscal
intermediary payment mechanisms. Specifically, the coverage of
diagnostic tests furnished to hospital outpatients is addressed in
Sec. 410.28, and the coverage of diagnostic tests furnished to hospital
inpatients is addressed in Sec. 409.16. Therefore, the test ordering
policy adopted in the final rule of November 22, 1996, effective for
procedures furnished beginning January 1, 1997, does not apply to
diagnostic tests furnished in hospitals.
    Comment: A few commenters expressed concern that manual sections

[[Page 59058]]

implementing the ordering rule have not been issued. One commenter
indicated that interpreting physicians are in the untenable position of
having to choose between performing additional tests they know the
patient needs based on the findings of the initial procedure or
postponing procedures to ensure that they do not violate HCFA rules.
Another indicated that there are times that the referring physician
cannot be reached and delaying a procedure would not be in the best
interests of the patient.
    Response: In adopting the test-ordering proposal, we intended to
establish the general principle that, to be covered under Medicare, a
diagnostic test must be ordered by a physician who will use the
findings in the medical management of the patient. The policy did not
require that the order be in writing or instruct carriers to
investigate claims prior to payment to ensure the existence of such an
order. It was intended for use by carriers in situations in which a
problem has been identified, or is strongly suspected, as a basis for
recovery of payments for tests that did not meet the reasonable and
necessary criteria of section 1862(a)(1)(A) of the Act. In the
situations cited by the commenters, we do not think it would be
unreasonable to ask for the testing physician to receive authorization
from the ordering physician's office (either by phone or FAX) for the
additional tests he or she believes to be necessary. Certainly,
provision could be made for an emergency situation. We are trying to
address situations in which there is a pattern of the testing entity's
adding procedures to those ordered by the patient's personal physician.
    Comment: Commenters representing the interests of entities that
furnish nuclear medicine procedures indicated a continuing problem with
the ordering requirement and stated that nuclear medicine physicians,
by State and Federal regulations, are the only physicians who can
actually order nuclear medicine tests.
    Response: We see no conflict between our proposal and State and
Federal regulations. However, in order to address these concerns more
fully we would need more specific information as to the State and
Federal regulations in question.
    Comment: A national organization representing psychologists
indicated that Sec. 410.32 addresses the ordering and supervision of
diagnostic tests and objected to some of the wording relating to
nonphysician practitioners, such as clinical psychologists. The
commenter pointed out that Sec. 410.32(a)(3) indicates that certain
nonphysician practitioners who furnish services that would be physician
services if furnished by a physician, and who are operating within the
scope of their authority under State law and within the scope of their
Medicare statutory benefit, ``may be treated the same as physicians
treating beneficiaries for the purpose of this section.'' The commenter
suggested that the wording be changed to ``shall be treated the same .
.  .'' because, as written, the wording does not require that these
individuals always be treated as physicians for purposes of this
section.
    Response: The commenter raises an interesting point that we agree
needs further clarification. The purpose of Sec. 410.32(a)(3) is to
ensure that the nonphysician practitioners in question may order tests
for the beneficiaries they are treating. (We are adding the same
wording to the section on independent diagnostic testing facilities
(IDTFs) to clarify that the nonphysician practitioners in question may
order diagnostic testing by IDTFs.) However, we did not intend to
permit these same nonphysician practitioners to supervise diagnostic
testing performed by others. Under the rule we are adopting, all
diagnostic tests payable under the physician fee schedule must be
performed under the supervision of a physician (as defined in section
1861(r) of the Act) with certain exceptions set forth in
Sec. 410.32(b). Therefore, we are modifying the wording of
Sec. 410.32(a)(3) to change the last word from ``section'' to
``paragraph.'' In other words, the nonphysician practitioners are
treated as physicians as far as the ordering of tests for the patients
they are treating is concerned but not for the other subject of
Sec. 410.32, that is, the supervision of the performance of tests.
(However, certain nonphysician practitioners may personally perform
certain diagnostic tests without physician supervision. This subject is
addressed in the discussion of the comments on both the physician
supervision and IDTF proposals.)
    Result of evaluation of comments: We are adopting the proposals
(with the wording clarification indicated above) to (1) permit certain
physicians to order a diagnostic mammogram based on the findings of a
screening mammogram even though the physician does not treat the
beneficiary and (2) clarify that carrier denial of claims because the
tests were not ordered by a physician who uses the findings in the
management of the beneficiary's care are based on the reasonable and
necessary exclusion in section 1862(a)(1)(A) of the Act and in
Sec. 411.15(k)(1).
2. Supervision of Diagnostic Tests
    We are clarifying in Sec. 410.32 the policy on physician
supervision of diagnostic x-ray and other diagnostic tests that are
payable under the physician fee schedule. (Diagnostic procedures may be
split into professional components (PCs) and technical components (TCs)
or be TC-only.) The clarification is applicable to the TCs of
diagnostic procedures covered under section 1861(s)(3) of the Act
(whether billed separately or as part of a ``global'' charge with the
PC) that are furnished in settings in which the Part B carrier pays for
the TCs under the physician fee schedule. The coverage of diagnostic
procedures furnished to hospital patients is addressed in other
regulations and is not affected by this clarification. In addition,
diagnostic laboratory tests as described in paragraph (d) of
Sec. 410.32 are not affected by this clarification. This final rule
represents our judgment that diagnostic procedures are safe and
effective only when they are furnished with appropriate physician
supervision. Therefore, denials of claims for failure to meet the
required level of physician supervision would be based on the exclusion
in section 1862(a)(1)(A) of the Act and in Sec. 411.15(k)(1), that is,
they ``are not reasonable and necessary for the diagnosis and treatment
of illness or injury or to improve the functioning of a malformed body
member.'' This means that the beneficiary may be protected under the
limitation on liability provisions in section 1879 of the Act.
    We believe that the requirements of Sec. 410.32 should be revised
because, except for the reference to ``other diagnostic tests'' in the
heading of Sec. 410.32, x-rays are the only diagnostic tests payable
under the physician fee schedule that are discussed in the current
Sec. 410.32. We are clarifying that some degree of physician
supervision is required for every diagnostic test payable under the
physician fee schedule with a few exceptions.
    Our specific revisions to the regulations are:
    <bullet> The definition and discussion of the term ``general
supervision'' currently appears only in Sec. 410.32(a)(2) (concerning
portable x-ray services). We are clarifying that this level of
supervision is the minimal level required for all diagnostic tests
payable under the physician fee schedule unless specific exception is
made by regulation.
    <bullet> The definition and discussion of the term ``direct
supervision'' is set forth in revised Sec. 410.32(b)(3)(ii), concerning

[[Page 59059]]

diagnostic x-ray and other diagnostic tests. We are clarifying that
this level of supervision is required for some types of diagnostic
procedures that are not x-rays.
    <bullet> We are incorporating into regulations at
Sec. 410.32(b)(3)(iii) the existing policy that there are some
diagnostic procedures that require a physician's presence with the
patient at the time of performance of the procedure for the procedure
to be covered.
    We are setting forth a general rule that diagnostic tests payable
under the physician fee schedule require at least general supervision
(and in some cases either direct or personal supervision, as defined in
this final rule) by a physician (as defined in section 1861(r) of the
Act). Because of the restrictive definitions in section 1861(r), we
believe that nearly all tests will be supervised by doctors of medicine
or osteopathy, or, in the case of procedures related to the eyes and
consistent with State licensure, doctors of optometry. We do not
perceive a significant impact on doctors of dentistry and chiropractic
in this regard since Medicare covers limited services for these
specialties and we believe diagnostic test supervision will not be an
issue for these specialties.
    We are excluding three types of diagnostic tests from the physician
supervision requirements:
    <bullet> Diagnostic mammography procedures, which are regulated by
the Food and Drug Administration.
    <bullet> Diagnostic tests personally furnished by a ``qualified
audiologist'' as defined in section 1861(ll)(3) of the Act. These
include ``audiology services'' as defined in section 1861(ll)(2) of the
Act that are payable by Medicare carriers under the physician fee
schedule. We are excluding these diagnostic tests from the physician
supervision requirement because the Congress has defined these services
without requiring physician supervision of their performance.
    <bullet> Diagnostic psychological testing services personally
performed by a qualified psychologist practicing independently of an
institution, agency, or physician's office as currently defined in
section 2070.2 of the Medicare Carriers Manual (HCFA Pub. 14-3). These
services are distinguished from services of clinical psychologists,
which are covered under section 1861(ii) of the Act, rather than
section 1861(s)(3). We are excluding these tests from the physician
supervision requirement because we do not believe that these services
require physician supervision of their performance.
    We are setting forth the policy that the minimal level of physician
supervision, which is applicable to all diagnostic procedures payable
under the physician fee schedule, with the exceptions cited above, is
general supervision. ``General supervision'' means the procedure is
furnished under the physician's overall direction and control, but
physician presence is not required during the performance of the
procedure. Under general supervision, the training of the nonphysician
personnel who actually perform the diagnostic procedure and the
maintenance of the necessary equipment and supplies are the continuing
responsibility of the physician. Examples of procedures requiring only
general physician supervision include the following:
    <bullet> Plain films (x-rays) involving the extremities, pelvis,
vertebral column, or skull.
    <bullet> Plain films of the chest and abdomen that do not involve
the use of contrast media.
    <bullet> Electrocardiograms except when the code description
specifies physician supervision such as with a cardiovascular stress
test.
    <bullet> Ultrasound diagnostic procedures except when the code
description specifies a physician's service such as the placement of a
probe in the case of transesophageal echocardiography.
    <bullet> Electroencephalograms, polysomnography, and sleep studies.
    We are setting forth the policy that the existing definition of
``direct supervision'' in Sec. 410.32 be applied to types of services
other than diagnostic x-rays. ``Direct supervision'' in the office
setting does not mean that the physician must be present in the room
when the procedure is performed; however, the physician must be present
in the office suite and immediately available to furnish assistance and
direction throughout the performance of the procedure. Examples of
diagnostic procedures requiring both general and direct supervision
include the following:
    <bullet> Magnetic resonance imaging, computerized axial tomography,
and nuclear medicine procedures.
    <bullet> Procedures in which contrast materials are used.
    <bullet> X-rays other than skeletal, abdominal, and chest x-rays
cited in the discussion of ``general supervision.''
    We are defining ``personal supervision'' as follows: ``Personal
supervision'' means a physician must be in attendance in the room
during the performance of the procedure. Examples of procedures
requiring both general and personal supervision include the following:
    <bullet> Cardiovascular stress tests including those furnished with
nuclear medicine and echocardiography procedures.
    <bullet> Cardiac catheterization.
    <bullet> Radiological supervision and interpretation procedures.
    Under the changes made to section 1861(s)(3) of the Act by section
145(b) of Public Law 103-432, the Congress has added diagnostic
mammography as part of the portable x-ray benefit. Therefore, we are
adding diagnostic mammograms (but not screening mammograms) to the list
of services a portable x-ray supplier may furnish in Sec. 410.32(c).
However, the supplier must meet the certification requirements of
section 354 of the Public Health Service Act, as implemented by 21 CFR
part 900, subpart B.
    These supervision requirements are applicable only for diagnostic
tests under section 1861(s)(3) of the Act. Other statutory provisions
such as CLIA, the physician self-referral rules, etc., which contain
supervisory standards for physicians, are not affected by this rule,
and continue to be required, if applicable.
    Several commenters who objected to various aspects of the physician
supervision proposal were obviously addressing procedures performed in
hospitals, and we would like to clarify this situation for them. As
pointed out in the first paragraph of the preamble discussion of this
proposal in the June 18, 1997 proposed rule (62 FR 33179), we proposed
to modify and clarify the policy in Sec. 410.32 on physician
supervision of diagnostic procedures that are covered under section
1861(s)(3) of the Act and payable under the physician fee schedule.
Regulations other than Sec. 410.32 govern the coverage of diagnostic
tests furnished to hospital patients. Specifically, the coverage of
diagnostic tests furnished to hospital outpatients is addressed in
Sec. 410.28, and the coverage of diagnostic tests furnished to hospital
inpatients is addressed in Sec. 409.16. Further, this proposal
addressed the coverage of the technical component (TC) (including TCs
billed with the professional component (PC) of the procedure in a
global bill) and other diagnostic procedures that are not split into PC
or TC components and that do not have RVUs reflecting physician work.
Diagnostic services that have physician work RVUs are not ``other
diagnostic tests'' covered under section 1861(s)(3) of the Act but
physician services and services incident to a physician's services
covered under sections 1861(s)(1) and 1861(s)(2)(A) of the Act. These
services are either personally

[[Page 59060]]

furnished by the physician or furnished as an ``incident to'' service.
In both cases, the policy has been established and is unaffected by
this rule. Either the physician is present because he or she is
personally furnishing the service or, in the case of ``incident to''
services, the physician is in the suite (the same standard as proposed
for direct supervision under the proposal) during the time the
diagnostic service is performed. To summarize, neither the technical
services associated with diagnostic tests furnished in hospitals nor
diagnostic service codes containing physician work RVUs (other than
global billings) are affected by this proposal.
    Comment: Many physician commenters disagreed with our proposal to
place diagnostic ultrasound procedures in the category of tests
requiring general supervision. We received the following comments:
    <bullet> Most ultrasound diagnostic procedures should be placed in
the direct or personal supervision categories. The requirement for
general supervision is not sufficient to achieve the needed degree of
physician input in the final product of the ultrasound examination.
    <bullet> Good ultrasound can only be performed through a working
partnership between the technologist and the supervising physician.
Commenters pointed out that radiologists frequently will examine the
patient in real time to clarify uncertain findings or to further
characterize pathology detected during the technologist's examination.
If the physician does not go back to scan these patients himself,
critical diagnoses would be missed. The common and correct practice of
ultrasound is for a technologist to perform the examination and for a
physician to check the study before the patient leaves the examining
area.
    <bullet> The performance of ultrasound procedures requires more
physician supervision than magnetic resonance imaging (MRIs),
computerized axial tomography (CTs), or nuclear medicine procedures.
    <bullet> One commenter referred to unregulated ultrasound
procedures in the U.S. as a ``cesspool of poor medical practice.''
    <bullet> One commenter suggested that Medicare should prohibit
payments for self-referred sonographic procedures performed by
physicians who purchase this equipment for their offices and find
reasons to use the equipment on their patients even though they are
poorly-trained in the interpretations of the findings.
    <bullet> Several physicians commented that they often performed
these tests personally without a technologist present.
    Response: In developing our proposal on levels of physician
supervision for out-of-hospital diagnostic testing, we placed
ultrasound procedures in the general category on the basis that it was
safe to perform these procedures without the presence, either in the
room or in the suite, of a physician. However, in determining whether
services and procedures are reasonable and necessary, we also consider
whether a service or procedure is effective. Based on the comments we
received on the proposal, primarily from physicians who utilize
ultrasound procedures in diagnosing patients, we have become convinced
that the effectiveness of ultrasound procedures is enhanced when the
performance of these tests is supervised by a physician who is not only
on-site when the procedure is performed, but who also monitors the
performance of the procedure. Therefore, we are modifying our proposal
and are placing ultrasound diagnostic procedures in the direct category
that requires the presence of the physician in the office suite when an
individual procedure is performed.
    Comment: Some commenters objected to our proposal to place CTs,
MRIs, and nuclear medicine procedures in the category of procedures
requiring the direct supervision of a physician. Some commenters
indicated that CTs and MRIs required direct supervision only when
contrast media are used to perform the tests. Commenters suggested that
such a requirement would cause a dramatic reduction in the availability
of these services furnished through mobile entities in rural areas. It
was alleged that the physician supervision requirements contradict
those established by the United States Nuclear Regulatory Commission
for nuclear medicine procedures. Some commenters indicated that some
nuclear medicine procedures required direct supervision, some required
only general supervision, and some required a mid-level of supervision
in which the physician could monitor the performance of the test by
telephone.
    Response: Based on the comments received, we have decided to move
the required level of supervision for computerized axial tomography
procedures (CTs) and magnetic resonance imagery procedures (MRIs)
performed without the introduction of contrast media into the category
of general supervision. We have become convinced that general
supervision by a physician has become the established standard of
practice for CTs and MRIs performed without contrast media. CT and MRI
procedures in which contrast materials are utilized will remain in the
direct category. We are adopting our proposal of direct supervision
with regard to all nuclear medicine procedures. (Also, see comment
below addressing supervision of nuclear cardiology procedures.)
    Comment: Several commenters objected to the assignment of
cardiovascular stress tests, including those furnished with nuclear
medicine and echocardiography procedures, to the category of tests
requiring performance under the personal supervision of a physician.
Their comments included the following:
    <bullet> Cardiovascular stress tests performed by well-trained
physician extenders, such as registered nurses and physician
assistants, using established protocols and under the direct
supervision of a physician have proved to be safe and effective.
    <bullet> The use of exercise physiologists, B.S.N. degree nurses,
or physician assistants was the ``standard of care'' in their hospital.
    <bullet> In the absence of data to suggest that direct supervision
is less safe than personal supervision, only direct supervision should
be required.
    <bullet> The requirement is contrary to the position of the
American College of Physicians, the American College of Cardiology, and
the American Heart Association, set forth in a 1990 task force
statement that endorses the position that ``exercise testing in
selected patients can be safely performed by properly trained nurses,
exercise physiologists, physical therapists, or medical technicians
working directly under the supervision of a physician who should be in
the immediate vicinity and available for emergencies.''
    <bullet> The success of cardiac rehabilitation programs has
demonstrated the success of nonsupervised exercise in the cardiac
patient.
    <bullet> One physician commenter agreed with our placing of stress
tests in the personal supervision category and indicated that personal
physician supervision was absolutely essential for the safety of the
patient and for the test to be of maximal diagnostic utility.
    Response: We do not agree with the general tone of the comments. It
is established policy under Medicare that cardiovascular stress tests
must be performed under the direct supervision of a physician to be
covered. (For example, the interim teaching physician instructions,
issued June 28, 1996,

[[Page 59061]]

placed the procedures in the category of complex and dangerous
procedures requiring the presence of a teaching physician (rather than
a resident) during their performance.) In addition, we do not believe
that the reference to ``exercise'' and cardiac rehabilitation programs
is the same thing as a cardiovascular stress test. With regard to the
1990 task force statement by the three organizations cited above, we
believe that the reference to ``selected patients'' being safely tested
by nonphysicians is a telling one. It is not at all clear to us that
the appropriate level for ``selected patients'' should be the general
standard applicable to all patients, particularly patients in the age
group of most Medicare beneficiaries.
    The circumstances surrounding cardiovascular stress tests are
unusual because, although the issue at hand for Medicare coverage
purposes is the supervision of the performance of the technical
component of the test, this supervision is described by the AMA's CPT
coding system with a specific code (CPT code 93016) for use in billing
for physician supervision of cardiovascular stress tests when the
physician who supervises the performance of the test differs from the
physician who bills for the interpretation and report of the procedure.
This means that the in-person supervision by a physician of this
particular procedure has been determined to be so essential that it was
necessary to establish a separate code for it. This code should be
billed in connection with a stress test that will be interpreted and
used in the diagnosis of the patient. It may not be used to bill for
``supervision'' of exercise in connection with a cardiac rehabilitation
program.
    We firmly believe that there should be a physician in attendance
during the performance of cardiovascular stress tests to provide--
    <bullet> Medical expertise required for the performance of the
test;
    <bullet> Medical treatment for complications and side effects of
the test;
    <bullet> Medical services required as part of the test, for
example, injections or the administration of medications; and
    <bullet> Medical expertise in the interpretation of the test (some
of which may have to be provided while the test is actually being
performed).
    We do not believe that nonphysician personnel, even well-trained
personnel, possess the knowledge and skills to immediately address all
complications that may occur.
    The reference to cardiovascular stress tests performed in hospitals
indicates a misunderstanding of the physician supervision proposal.
This proposal does not apply in hospitals; it only applies in settings
in which the TC of the procedure is payable by the carrier. However,
even in hospitals, if a physician wishes to bill the carrier for the
supervision of the procedure using CPT code 93016 (a physician's
service covered under section 1861(s)(1) of the Act rather than a
diagnostic test covered under 1861(s)(3) of the Act), the physician
must have been present for the performance of the test. It is our view
that the physician's presence to deal with emergencies, as well as the
other activities listed above, is the service that CPT code 93016
describes and the appropriate level of physician supervision for
cardiovascular stress tests.
    Comment: Several commenters indicated that it was inappropriate to
require direct supervision of nuclear cardiology imaging procedures.
Commenters indicated that these procedures can be provided under the
general supervision of a nuclear cardiologist who is close at hand (but
not in the suite during the performance of the procedure) or through
supervision of the procedure through telemedicine. This latter position
was described as a mid-level of physician supervision between general
and direct. One commenter indicated that ready availability (within
minutes) was sufficient to address any procedural, clinical, or
radiation safety concerns that arise. One commenter indicated that the
proposal was not rational and that the requirement for the physician to
be in the office during a nuclear cardiology imaging procedure would
make excessive demands upon a physician's schedule flexibility. The
commenters indicated that no data exist to show that nuclear cardiology
imaging provided with direct supervision was in any way superior to
this imaging provided under general supervision. Some commenters made a
distinction between their comments on the direct level of supervision
standard applicable to nuclear cardiology procedures generally (as well
as all other nuclear medicine procedures) and the personal supervision
standard applicable to nuclear cardiology procedures involving
cardiovascular stress tests. The commenters cited the passage from the
1990 American College of Physicians/American College of Cardiology/
American Heart Association Task Force quoted in the prior discussion on
stress tests to justify their position that some level of physician
supervision between general and direct was all that was required.
Finally, some commenters suggested that the goal of improving quality
while reducing costs to the Medicare program would be better served by
tightening standards for physicians eligible to be paid for the
procedures.
    Response: As stated earlier in these comments, we believe that
direct supervision is the minimum level for all diagnostic tests
involving the use of contrast materials including the radionuclides
used in nuclear medicine procedures. We are not persuaded by the
comments that there is something about nuclear cardiology procedures
that should, instead, require only general physician supervision. With
regard to the statement used to support only general and direct
physician supervision for stress testing, we would point out that the
July 1997 American College of Cardiology/American Heart Association
Guidelines for Exercise Testing in its introduction states:

    For the purpose of this document, exercise testing is a
cardiovascular stress test using treadmill or bicycle exercise and
electrocardiographic and blood pressure monitoring. Pharmacological
stress and the use of imaging modalities (radionuclide imaging,
echocardiography) are beyond the scope of these guidelines.
(Emphasis added.)

This statement leads us to believe that the argument with respect to
stress testing of ``selected patients'' by nonphysicians was being
quoted out of context with respect to nuclear cardiology procedures. We
are not persuaded that our proposal was wrong, and we are adopting the
proposed standards of physician supervision for the procedures. When
the nuclear cardiology procedure in question involves a stress test and
separate nuclear medicine and cardiovascular codes are used, personal
supervision is required for the portion of the procedure involving
stress, and the direct supervision standard applies to the nuclear
portions of the overall procedure.
    Comment: One commenter objected to the term ``other diagnostic
tests'' in the title of Sec. 410.32, questioned why x-rays are listed,
and suggested that the term ``ultrasound'' be specifically cited. The
commenter argued that the level of supervision cannot be appropriately
indicated unless ultrasound is specifically named and the tests
requiring supervision indicated.
    Response: ``X-rays and other diagnostic tests'' is the term used in
section 1861(s)(3) of the Act. We will indicate the appropriate level
of supervision for a code in the data base, as indicated above. With
regard to ultrasound procedures, direct supervision is required.

[[Page 59062]]

    Comment: Several commenters suggested that direct supervision be
defined to include the presence of a physician in a remote office suite
to accommodate teleradiology. The physician would review the
examination remotely, in real time, and arrange for a response team to
handle patient care or contrast media emergencies at the site where the
procedure is performed.
    Response: Medicare currently pays for the interpretation of
diagnostic procedures using images or other data transmitted via
teleradiology. We would have to have more information about the
arrangement the commenters have in mind, but, under the policy we are
adopting, a physician cannot appropriately provide direct or personal
supervision of diagnostic tests through telemedicine.
    Comment: One commenter suggested that, for uroradiology procedures,
the radiologist may not be present for the entire procedure; however,
because of the use of contrast material, the appropriate level of
supervision is direct.
    Response: We have placed some uroradiology procedures in the direct
category and others in the personal category. This is consistent with
our general policy of requiring the presence of the physician during
the imaging portion of any procedure described with a supervision and
interpretation code.
    Comment: One commenter suggested that the definition of ``personal
supervision'' be clarified to provide for situations in which a
radiologist must leave the procedure room for either clinical or safety
reasons. The example was given of a radiologist leaving the procedure
room during filming due to radiation exposure.
    Response: If it is the customary practice for radiologists to leave
the room for a short period of time for safety reasons to avoid
radiation exposure, we would, of course, have no problem with them
continuing to do so. We would expect the supervising physician to be
present for all portions of the procedure that do not present a safety
problem.
    Comment: One commenter asked for clarification of whether the
personal supervision standard applicable to cardiac stress tests should
be required for pulmonary stress tests. The example of ambulating the
patient to obtain oxygen saturation for oxygen recertification was
given.
    Response: We are not exactly sure of the specific procedures about
which the commenter is inquiring. If it is CPT code 94620 (Pulmonary
stress testing, simple or complex), the level is personal. For CPT
codes 94760 through 94762 for noninvasive oximetry, the level is
general.
    Comment: A national organization representing psychologists
questioned our decision not to provide an exception from the physician
supervision requirement for procedures performed by clinical
psychologists in the same way that we did for qualified independent
psychologists (who are not clinical psychologists as defined in
Medicare instructions). They requested that the rules be rewritten to
clarify that both types of psychologists may perform services without
physician supervision.
    Response: Under our proposal, we explained that we were regulating
diagnostic procedures covered under section 1861(s)(3) of the Act and
payable under the physician fee schedule. We provided an exception to
the physician supervision requirement in the case of diagnostic
psychological testing services personally performed by qualified
independent psychologists because these tests are covered under section
1861(s)(3), and there had been longstanding specific national coverage
policy in the Medicare Carriers Manual regarding these billings without
any requirement for physician supervision. We pointed out in the
proposal that diagnostic tests performed by clinical psychologists (the
same range of tests as those that qualified independent psychologists
are permitted to bill) were covered under section 1861(ii) of the Act,
rather than section 1861(s)(3), and we meant to convey the point that
diagnostic tests performed by clinical psychologists were unaffected by
the proposal. That is, clinical psychologists could continue to perform
these tests without physician supervision. We were concerned about the
logical consistency of providing an exception to a requirement in the
regulations for a class of services to which that regulation did not
apply. However, to clarify the policy, we have decided to explicitly
include diagnostic psychological testing personally performed by
clinical psychologists in the exception to the physician supervision
requirement.
    Comment: Several commenters indicated that physical therapists have
performed electromyography procedures consistent with State laws for
years without physician supervision. They pointed out that eliminating
the availability of physical therapist-provided electromyography
services would create a severe hardship for Medicare enrolles in rural
areas.
    Response: We did not intend to limit access to care in rural areas,
and therefore, we have modified our proposal to provide two additional
exceptions to the requirement for physician supervision for diagnostic
procedures in which physical therapists are involved. These exceptions
apply to codes in the range of CPT codes 95860 through 95937. Under one
exception with a physician fee schedule data base indicator of 6, that
is, the procedure must be personally performed by a physician or a
physical therapist who is certified by the American Board of Physical
therapy Specialties as a qualified electrophysiologic clinical
specialist and is permitted to provide the service under State law.
Under the second exception with a data base indicator of 7, the
procedure must be personally performed by a physical therapist who is
certified by the American Board of Physical Therapy Specialties as a
qualified electrophysiologic clinical specialist or performed under the
direct supervision of a physician. We recognize that these categories
were not contained in the proposed rule and specifically invite further
comment on the appropriateness of these two exceptions to the CPT codes
95860 through 95937.
    Comment: Several commenters expressed support for the physician
supervision proposal but pointed out that we should state by CPT code
into which category each procedure falls. One commenter pointed to the
lack of specific information about the category of physician
supervision into which pulmonary and neurology testing procedures
should be placed and suggested that the final rule address these
procedures to promote consistency among carriers.
    Response: We are providing such a listing as a part of this
preamble. It will become a part of the physician fee schedule data base
and may be modified from time to time in the same way other data base
indicators are changed; therefore, there should be consistency among
carriers.
    Result of evaluation of comments: We are adopting our proposal to
assign an appropriate level of physician supervision to every
diagnostic test payable under the physician fee schedule with
exceptions for certain procedures personally performed by qualified
independent psychologists, clinical psychologists, qualified
audiologists, and physical therapists who are certified as qualified
electrophysiologic clinical specialists. With respect to several
groupings of diagnostic codes, we have changed our proposed policy
based on comments from the physician specialties most involved with
particular groups of codes. In some cases, such as CTs and MRIs
performed without the use of contrast materials, we have lowered the

[[Page 59063]]

level of required physician supervision. In others, such as ultrasound
procedures, we have increased the level of required supervision. We are
publishing a listing of diagnostic codes in this preamble with the
level of physician supervision we have determined to be appropriate. In
addition, we are adding a field to the physician fee schedule data base
indicating the appropriate level of supervision. We anticipate that
there will continue to be discussions among HCFA, physician specialty
groups, and others about these levels of supervision, and we expect
that the indicators applicable to individual procedures will be changed
from time to time as is currently the case with other data base
indicators.

Physician Fee Schedule Data Base Indicator

Physician Supervision of Diagnostic Procedures
0=Vacant
1=Procedure must be performed under the general supervision of a
physician
2=Procedure must be performed under the direct supervision of a
physician
3=Procedure must be performed under the personal supervision of a
physician
4=Physician supervision policy does not apply when procedure personally
furnished by a qualified, independent psychologist or a clinical
psychologist; otherwise must be performed under the general supervision
of a physician
5=Physician supervision policy does not apply when procedure personally
furnished by a qualified audiologist; otherwise must be performed under
the general supervision of a physician
6=Procedure must be personally performed by a physician OR a physical
therapist who is certified by the American Board of Physical Therapy
Specialties as a qualified electrophysiologic clinical specialist AND
is permitted to provide the service under State law
7=Procedure must be personally performed by a physical therapist who is
certified by the American Board of Physical Therapy Specialties as a
qualified electrophysiologic clinical specialist AND is permitted to
provide the service under State law OR performed under the direct
supervision of a physician
9=Medicare physician diagnostic supervision policy does not apply
P=Decision pending

                               Level of Physician Supervision of Diagnostic Tests
----------------------------------------------------------------------------------------------------------------
              HCPCS                  Level            HCPCS            Level            HCPCS           Level
----------------------------------------------------------------------------------------------------------------
                                              DIAGNOSTIC RADIOLOGY
----------------------------------------------------------------------------------------------------------------
                                                  HEAD AND NECK
----------------------------------------------------------------------------------------------------------------
70010 & TC......................            3  70015 & TC.........            3  70030 & TC........            1
70100 & TC......................            1  70110 & TC.........            1  70120 & TC........            1
70130 & TC......................            1  70134 & TC.........            1  70140 & TC........            1
70150 & TC......................            1  70160 & TC.........            1  70170 & TC........            3
70190 & TC......................            1  70200 & TC.........            1  70210 & TC........            1
70220 & TC......................            1  70240 & TC.........            1  70250 & TC........            1
70260 & TC......................            1  70300 & TC.........            1  70310 & TC........            1
70320 & TC......................            1  70328 & TC.........            1  70330 & TC........            1
70332 & TC......................            3  70336 & TC.........            1  70350 & TC........            1
70355 & TC......................            1  70360 & TC.........            1  70370 & TC........            3
70371 & TC......................            3  70373 & TC.........            3  70380 & TC........            1
70390 & TC......................            3  70450 & TC.........            1  70460 & TC........            2
70470 & TC......................            2  70480 & TC.........            1  70481 & TC........            2
70482 & TC......................            2  70486 & TC.........            1  70487 & TC........            2
70488 & TC......................            2  70490 & TC.........            1  70491 & TC........            2
70492 & TC......................            2  70540 & TC.........            1  70541 & TC........            2
70551 & TC......................            1  70552 & TC.........            2  70553 & TC........            2
----------------------------------------------------------------------------------------------------------------
                                                      CHEST
----------------------------------------------------------------------------------------------------------------
71010 & TC......................            1  71015 & TC.........            1  71020 & TC........            1
71021 & TC......................            1  71022 & TC.........            1  71023 & TC........            3
71030 & TC......................            1  71034 & TC.........            3  71035 & TC........            1
71036 & TC......................            3  71038 & TC.........            3  71040 & TC........            3
71060 & TC......................            3  71090 & TC.........            3  71100 & TC........            1
71101 & TC......................            1  71110 & TC.........            1  71111 & TC........            1
71120 & TC......................            1  71130 & TC.........            1  71250 & TC........            1
71260 & TC......................            2  71270 & TC.........            2  71550 & TC........            1
71555 & TC......................            9
----------------------------------------------------------------------------------------------------------------
                                                SPINE AND PELVIS
----------------------------------------------------------------------------------------------------------------
72010 & TC......................            1  72020 & TC.........            1  72040 & TC........            1
72050 & TC......................            1  72052 & TC.........            1  72069 & TC........            1
72070 & TC......................            1  72072 & TC.........            1  72074 & TC........            1
72080 & TC......................            1  72090 & TC.........            1  72100 & TC........            1
72110 & TC......................            1  72114 & TC.........            1  72120 & TC........            1
72125 & TC......................            1  72126 & TC.........            2  72127 & TC........            2
72128 & TC......................            1  72129 & TC.........            2  72130 & TC........            2
72131 & TC......................            1  72132 & TC.........            2  72133 & TC........            2
72141 & TC......................            1  72142 & TC.........            2  72146 & TC........            1

[[Page 59064]]


72147 & TC......................            2  72148 & TC.........            1  72149 & TC........            2
72156 & TC......................            2  72157 & TC.........            2  72158 & TC........            2
72159 & TC......................            9  72170 & TC.........            1  72190 & TC........            1
72192 & TC......................            1  72193 & TC.........            2  72194 & TC........            2
72196 & TC......................            1  72198 & TC.........            9  72200 & TC........            1
72202 & TC......................            1  72220 & TC.........            1  72240 & TC........            3
72255 & TC......................            3  72265 & TC.........            3  72270 & TC........            3
72285 & TC......................            3  72295 & TC.........            3
----------------------------------------------------------------------------------------------------------------
                                                UPPER EXTREMITIES
----------------------------------------------------------------------------------------------------------------
73000 & TC......................            1  73010 & TC.........            1  73020 & TC........            1
73030 & TC......................            1  73040 & TC.........            3  73050 & TC........            1
73060 & TC......................            1  73070 & TC.........            1  73080 & TC........            1
73085 & TC......................            3  73090 & TC.........            1  73092 & TC........            1
73100 & TC......................            1  73110 & TC.........            1  73115 & TC........            3
73120 & TC......................            1  73130 & TC.........            1  73140 & TC........            1
73200 & TC......................            1  73201 & TC.........            2  73202 & TC........            2
73220 & TC......................            1  73221 & TC.........            1  73225 & TC........            9
----------------------------------------------------------------------------------------------------------------
                                                LOWER EXTREMITIES
----------------------------------------------------------------------------------------------------------------
73500 & TC......................            1  73510 & TC.........            1  73520 & TC........            1
73525 & TC......................            3  73530 & TC.........            3  73540 & TC........            1
73550 & TC......................            3  73560 & TC.........            1  73562 & TC........            1
73564 & TC......................            1  73565 & TC.........            1  73580 & TC........            3
73590 & TC......................            1  73592 & TC.........            1  73600 & TC........            1
73610 & TC......................            1  73615 & TC.........            3  73620 & TC........            1
73630 & TC......................            1  73650 & TC.........            1  73660 & TC........            1
73700 & TC......................            1  73701 & TC.........            2  73702 & TC........            2
73720 & TC......................            1  73721 & TC.........            1  73725 & TC........            2
----------------------------------------------------------------------------------------------------------------
                                                     ABDOMEN
----------------------------------------------------------------------------------------------------------------
74000 & TC......................            1  74010 & TC.........            1  74020 & TC........            1
74022 & TC......................            1  74150 & TC.........            1  74160 & TC........            2
74170 & TC......................            2  74181 & TC.........            1  74185 & TC........            9
74190 & TC......................            3
----------------------------------------------------------------------------------------------------------------
                                             GASTROINTESTINAL TRACT
----------------------------------------------------------------------------------------------------------------
74210 & TC......................            3  74220 & TC.........            3  74230 & TC........            3
74235 & TC......................            3  74240 & TC.........            3  74241 & TC........            3
74245 & TC......................            3  74246 & TC.........            3  74247 & TC........            3
74249 & TC......................            3  74250 & TC.........            2  74251 & TC........            3
74260 & TC......................            3  74270 & TC.........            3  74280 & TC........            3
74283 & TC......................            3  74290 & TC.........            2  74291 & TC........            2
74300 & TC......................            3  74301 & TC.........            3  74305 & TC........            3
74320 & TC......................            3  74327 & TC.........            3  74328 & TC........            3
74329 & TC......................            3  74330 & TC.........            3  74340 & TC........            3
74350 & TC......................            3  74355 & TC.........            3  74360 & TC........            3
74363 & TC......................            3
----------------------------------------------------------------------------------------------------------------
                                                  URINARY TRACT
----------------------------------------------------------------------------------------------------------------
74400 & TC......................            2  74405 & TC.........            2  74410 & TC........            2
74415 & TC......................            2  74420 & TC.........            3  74425 & TC........            3
74430 & TC......................            3  74440 & TC.........            3  74445 & TC........            3
74450 & TC......................            3  74455 & TC.........            3  74470 & TC........            3
74475 & TC......................            3  74480 & TC.........            3  74485 & TC........            3
----------------------------------------------------------------------------------------------------------------
                                          GYNECOLOGICAL AND OBSTETRICAL
----------------------------------------------------------------------------------------------------------------
74710 & TC......................            1  74740 & TC.........            3  74742 & TC........            3
74775 & TC......................            3
----------------------------------------------------------------------------------------------------------------
                                                      HEART
----------------------------------------------------------------------------------------------------------------
75552 & TC......................            1  75553 & TC.........            2  75554 & TC........            1
75555 & TC......................            1  75556..............            9
----------------------------------------------------------------------------------------------------------------

[[Page 59065]]


                                               AORTA AND ARTERIES
----------------------------------------------------------------------------------------------------------------
75600 & TC......................            3  75605 & TC.........            3  75625 & TC........            3
75630 & TC......................            3  75650 & TC.........            3  75658 & TC........            3
75660 & TC......................            3  75662 & TC.........            3  75665 & TC........            3
75671 & TC......................            3  75676 & TC.........            3  75680 & TC........            3
75685 & TC......................            3  75705 & TC.........            3  75710 & TC........            3
75716 & TC......................            3  75722 & TC.........            3  75724 & TC........            3
75726 & TC......................            3  75731 & TC.........            3  75733 & TC........            3
75736 & TC......................            3  75741 & TC.........            3  75743 & TC........            3
75746 & TC......................            3  75756 & TC.........            3  75774 & TC........            3
75790 & TC......................            3
----------------------------------------------------------------------------------------------------------------
                                              VEINS AND LYMPHATICS
----------------------------------------------------------------------------------------------------------------
75801 & TC......................            3  75803 & TC.........            3  75805 & TC........            3
75807 & TC......................            3  75809 & TC.........            3  75810 & TC........            3
75820 & TC......................            3  75822 & TC.........            3  75825 & TC........            3
75827 & TC......................            3  75831 & TC.........            3  75833 & TC........            3
75840 & TC......................            3  75842 & TC.........            3  75860 & TC........            3
75870 & TC......................            3  75872 & TC.........            3  75880 & TC........            3
75885 & TC......................            3  75887 & TC.........            3  75889 & TC........            3
75891 & TC......................            3  75893 & TC.........            3
----------------------------------------------------------------------------------------------------------------
                                            TRANSCATHETER PROCEDURES
----------------------------------------------------------------------------------------------------------------
75894 & TC......................            3  75896 & TC.........            3  75898 & TC........            3
75900 & TC......................            3  75940 & TC.........            3  75945 & TC........            3
75946 & TC......................            3  75960 & TC.........            3  75961 & TC........            3
75962 & TC......................            3  75964 & TC.........            3  75966 & TC........            3
75968 & TC......................            3  75970 & TC.........            3  75978 & TC........            3
75980 & TC......................            3  75982 & TC.........            3  75984 & TC........            3
75989 & TC......................            3
----------------------------------------------------------------------------------------------------------------
                                            TRANSLUMINAL ATHERECTOMY
----------------------------------------------------------------------------------------------------------------
75992 & TC......................            3  75993 & TC.........            3  75994 & TC........            3
75995 & TC......................            3  75996 & TC.........            3
----------------------------------------------------------------------------------------------------------------
                                                OTHER PROCEDURES
----------------------------------------------------------------------------------------------------------------
76000 & TC......................            3  76001 & TC.........            3  76003 & TC........            3
76010 & TC......................            1  76020 & TC.........            1  76040 & TC........            1
76061 & TC......................            1  76062 & TC.........            1  76065 & TC........            1
76066 & TC......................            1  76070 & TC.........            1
76075 & TC......................            1  76076 & TC.........            1  76078 & TC........            1
76080 & TC......................            3  76086 & TC.........            3  76088 & TC........            3
76090 & TC......................            9  76091 & TC.........            9  76092.............            9
76093 & TC......................            1  76094 & TC.........            1  76095 & TC........            3
76096 & TC......................            3  76098 & TC.........            1  76100 & TC........            2
76101 & TC......................            2  76102 & TC.........            2  76120 & TC........            2
76125 & TC......................            2  76140..............            9  76150.............            1
76350...........................            2  76355 & TC.........            3  76360 & TC........            3
76365 & TC......................            3  76370 & TC.........            2  76375 & TC........            1
76380 & TC......................            1  76400 & TC.........            1  76499 & TC........            9
----------------------------------------------------------------------------------------------------------------
                                              DIAGNOSTIC ULTRASOUND
----------------------------------------------------------------------------------------------------------------
                                                  HEAD AND NECK
----------------------------------------------------------------------------------------------------------------
76506 & TC......................            2  76511 & TC.........            2  76512 & TC........            2
76513 & TC......................            2  76516 & TC.........            2  76519 & TC........            2
76529 & TC......................            2  76536 & TC.........            2    ................
----------------------------------------------------------------------------------------------------------------
                                                      CHEST
----------------------------------------------------------------------------------------------------------------
76604 & TC......................            2  76645 & TC.........            2
----------------------------------------------------------------------------------------------------------------
                                           ABDOMEN AND RETROPERITONEUM
----------------------------------------------------------------------------------------------------------------
76700 & TC......................            2  76705 & TC.........            2  76770 & TC........            2
76775 & TC......................            2  76778 & TC.........            2    ................
----------------------------------------------------------------------------------------------------------------

[[Page 59066]]


                                                  SPINAL CANAL
----------------------------------------------------------------------------------------------------------------
76800 & TC......................            2
----------------------------------------------------------------------------------------------------------------
                                                     PELVIS
----------------------------------------------------------------------------------------------------------------
76805 & TC......................            2  76810 & TC.........            2  76815 & TC........            2
76816 & TC......................            2  76818 & TC.........            2  76825 & TC........            2
76826 & TC......................            2  76827 & TC.........            2  76828 & TC........            2
76830 & TC......................            3  76856 & TC.........            2  76857 & TC........            2
76870 & TC......................            2  76872 & TC.........            3    ................
----------------------------------------------------------------------------------------------------------------
                                                   EXTREMITIES
----------------------------------------------------------------------------------------------------------------
76880 & TC......................            2
----------------------------------------------------------------------------------------------------------------
                                                VASCULAR STUDIES
----------------------------------------------------------------------------------------------------------------
                                          ULTRASONIC GUIDANCE PROCEDURES
----------------------------------------------------------------------------------------------------------------
76930 & TC......................            3  76932 & TC.........            3  76934 & TC........            3
76936 & TC......................            3  76938 & TC.........            3  76941 & TC........            3
76942 & TC......................            3  76945 & TC.........            3  76946 & TC........            3
76948 & TC......................            3  76950 & TC.........            2  76960 & TC........            2
76965 & TC......................            3    .................                 ................
----------------------------------------------------------------------------------------------------------------
                                                 OTHER PROCEDURES
----------------------------------------------------------------------------------------------------------------
76970 & TC......................            9  76975 & TC.........            3  76986 & TC........            3
76999 & TC......................            9    .................                 ................
----------------------------------------------------------------------------------------------------------------
                                               RADIATION ONCOLOGY
----------------------------------------------------------------------------------------------------------------
77417...........................            1
----------------------------------------------------------------------------------------------------------------
                                           DIAGNOSTIC NUCLEAR MEDICINE
----------------------------------------------------------------------------------------------------------------
                                                ENDOCRINE SYSTEM
----------------------------------------------------------------------------------------------------------------
78000 & TC......................            2  78001 & TC.........            2  78003 & TC........            2
78006 & TC......................            2  78007 & TC.........            2  78010 & TC........            2
78011 & TC......................            2  78015 & TC.........            2  78016 & TC........            2
78017 & TC......................            2  78018 & TC.........            2  78070 & TC........            2
78075 & TC......................            2  78099 & TC.........            9    ................
----------------------------------------------------------------------------------------------------------------
                             HEMATOPOIETIC, RETICULOENDOTHELIAL, AND LYMPHATIC SYSTEM
----------------------------------------------------------------------------------------------------------------
78102 & TC......................            2  78103 & TC.........            2  78104 & TC........            2
78110 & TC......................            2  78111 & TC.........            2  78120 & TC........            2
78121 & TC......................            2  78122 & TC.........            2  78130 & TC........            2
78135 & TC......................            2  78140 & TC.........            2  78160 & TC........            2
78162 & TC......................            2  78170 & TC.........            2  78172 & TC........            2
78185 & TC......................            2  78190 & TC.........            2  78191 & TC........            2
78195 & TC......................            2  78199 & TC.........            9    ................
----------------------------------------------------------------------------------------------------------------
                                             GASTROINTESTINAL SYSTEM
----------------------------------------------------------------------------------------------------------------
78201 & TC......................            2  78202 & TC.........            2  78205 & TC........            2
78215 & TC......................            2  78216 & TC.........            2  78220 & TC........            2
78223 & TC......................            2  78230 & TC.........            2  78231 & TC........            2
78232 & TC......................            2  78258 & TC.........            2  78261 & TC........            2
78262 & TC......................            2  78264 & TC.........            2  78270 & TC........            2
78271 & TC......................            2  78272 & TC.........            2  78278 & TC........            2
78282 & TC......................            2  78290 & TC.........            2  78291 & TC........            2
78299 & TC......................            9    .................                 ................
----------------------------------------------------------------------------------------------------------------
                                              MUSCULOSKELETAL SYSTEM
----------------------------------------------------------------------------------------------------------------
78300 & TC......................            2  78305 & TC.........            2  78306 & TC........            2
78315 & TC......................            2  78320 & TC.........            2  78350 & TC........            2
78351...........................            9  78399 & TC.........            9    ................
----------------------------------------------------------------------------------------------------------------

[[Page 59067]]


                                              CARDIOVASCULAR SYSTEM
----------------------------------------------------------------------------------------------------------------
78414 & TC......................            2  78428 & TC.........            2  78445 & TC........            2
78455 & TC......................            2  78457 & TC.........            2  78458 & TC........            2
78459 & TC......................            9  78460 & TC.........            2  78461 & TC........            2
78464 & TC......................            2  78465 & TC.........            2  78466 & TC........            2
78468 & TC......................            2  78469 & TC.........            2  78472 & TC........            2
78473 & TC......................            2  78478 & TC.........            2  78480 & TC........            2
78481 & TC......................            2  78483 & TC.........            2  78499 & TC........            9
----------------------------------------------------------------------------------------------------------------
                                               RESPIRATORY SYSTEM
----------------------------------------------------------------------------------------------------------------
78580 & TC......................            2  78584 & TC.........            2  78585 & TC........            2
78586 & TC......................            2  78587 & TC.........            2  78591 & TC........            2
78593 & TC......................            2  78594 & TC.........            2  78596 & TC........            2
78599 & TC......................            9
----------------------------------------------------------------------------------------------------------------
                                                 NERVOUS SYSTEM
----------------------------------------------------------------------------------------------------------------
78600 & TC......................            2  78601 & TC.........            2  78605 & TC........            2
78606 & TC......................            2  78607 & TC.........            2  78608.............            9
78609...........................            9  78610 & TC.........            2  78615 & TC........            2
78630 & TC......................            2  78635 & TC.........            2  78645 & TC........            2
78647 & TC......................            2  78650 & TC.........            2  78660 & TC........            2
78699 & TC......................            9
----------------------------------------------------------------------------------------------------------------
                                              GENITOURINARY SYSTEM
----------------------------------------------------------------------------------------------------------------
78700 & TC......................            2  78701 & TC.........            2  78704 & TC........            2
78707 & TC......................            2  78710 & TC.........            2  78715 & TC........            2
78725 & TC......................            2  78726 & TC.........            2  78727 & TC........            2
78730 & TC......................            2  78740 & TC.........            2  78760 & TC........            2
78761 & TC......................            2  78799 & TC.........            9
----------------------------------------------------------------------------------------------------------------
                                  OTHER DIAGNOSTIC NUCLEAR MEDICINE PROCEDURES
----------------------------------------------------------------------------------------------------------------
78800 & TC......................            2  78801 & TC.........            2  78802 & TC........            2
78803 & TC......................           2`  78805 & TC.........            2  78806 & TC........            2
78807 & TC......................            2  78810 & TC.........            9  78891 & TC........            9
78990...........................            9  78999 & TC.........            9
----------------------------------------------------------------------------------------------------------------
                                            PATHOLOGY AND LABORATORY
----------------------------------------------------------------------------------------------------------------
85060...........................            9  85095..............            9  85102.............            9
86485...........................            1  86490..............            1  86510.............            1
86580...........................            1  86585..............            1  86586.............            9
88104 & TC......................            9  88106 & TC.........            9  88107 & TC........            9
88108 & TC......................            9  88125 & TC.........            1  88160 & TC........            9
88161 & TC......................            9  88162 & TC.........            9  88170 & TC........            1
88171 & TC......................            1  88172 & TC.........            9  88173 & TC........            9
88180 & TC......................            9  88182 & TC.........            9  88300 & TC........            9
88302 & TC......................            9  88304 & TC.........            9  88305 & TC........            9
88307 & TC......................            9  88309 & TC.........            9  88311 & TC........            1
88312 & TC......................            9  88313 & TC.........            9  88314 & TC........            9
88318 & TC......................            9  88319 & TC.........            9  88323 & TC........            9
88331 & TC......................            9  88332 & TC.........            9  88342 & TC........            9
88346 & TC......................            9  88347 & TC.........            9  88348 & TC........            9
88349 & TC......................            9  88355 & TC.........            9  88356 & TC........            9
88358 & TC......................            9  88362 & TC.........            9  88365 & TC........            9
89350...........................            1  89360..............            9
----------------------------------------------------------------------------------------------------------------
                                                    MEDICINE
----------------------------------------------------------------------------------------------------------------
                                                GASTROINTESTINAL
----------------------------------------------------------------------------------------------------------------
91000 & TC......................            3  91010 & TC.........            3  91011 & TC........            3
91012 & TC......................            3  91020 & TC.........            3  91030 & TC........            3
91032 & TC......................            3  91033 & TC.........            3  91052 & TC........            3
91055 & TC......................            3  91060 & TC.........            3  91065 & TC........            1
91100...........................            9  91105..............            9  91122 & TC........            3
----------------------------------------------------------------------------------------------------------------

[[Page 59068]]


                                        SPECIAL OPHTHALMOLOGICAL SERVICES
----------------------------------------------------------------------------------------------------------------
92015...........................            9  92081 & TC.........            1  92082 & TC........            1
92083 & TC......................            1  92100..............            9  92120.............            9
92130...........................            9  92140..............            9  92230.............            9
92235 & TC......................            2  92240 & TC.........            2  92250 & TC........            2
92260...........................            9
----------------------------------------------------------------------------------------------------------------
                                           OTHER SPECIALIZED SERVICES
----------------------------------------------------------------------------------------------------------------
92265 & TC......................            3  92270 & TC.........            3  92275 & TC........            3
92283 & TC......................            1  92284 & TC.........            3  92285 & TC........            2
92286 & TC......................            3  92287..............            9
----------------------------------------------------------------------------------------------------------------
                                     SPECIAL OTORHINOLARYNGOLOGIC SERVICES
----------------------------------------------------------------------------------------------------------------
92506...........................            9  92507..............            9  92508.............            9
92511...........................            9  92512..............            9  92516.............            9
92520...........................            9  92525..............            9  92526.............            9
----------------------------------------------------------------------------------------------------------------
                                   VESTIBULAR FUNCTION TESTS WITH OBSERVATION
----------------------------------------------------------------------------------------------------------------
92531...........................            9  92532..............            9  92533.............            9
92534...........................            9
----------------------------------------------------------------------------------------------------------------
                                   VESTIBULAR FUNCTION TESTS WITH OBSERVATION
----------------------------------------------------------------------------------------------------------------
92531...........................            9  92532..............            9  92533.............            9
92534...........................            9
----------------------------------------------------------------------------------------------------------------
                                    VESTIBULAR FUNCTION TESTS WITH RECORDING
----------------------------------------------------------------------------------------------------------------
92541 & TC......................            2  92542 & TC.........            2  92543 & TC........            2
92544 & TC......................            2  92545 & TC.........            2  92546 & TC........            2
92547...........................            2  92548 & TC.........            2
----------------------------------------------------------------------------------------------------------------
                                            AUDIOLOGIC FUNCTION TESTS
----------------------------------------------------------------------------------------------------------------
92551...........................            9  92552..............            5  92553.............            5
92555...........................            5  92556..............            5  92557.............            5
92559...........................            9  92560..............            9  92561.............            5
92562...........................            5  92563..............            5  92564.............            5
92565...........................            5  92567..............            5  92568.............            5
92569...........................            5  92571..............            5  92572.............            5
92573...........................            5  92575..............            5  92576.............            5
92577...........................            5  92579..............            5  92582.............            5
92583...........................            5  92584..............            5  92585 & TC........            5
92587 & TC......................            5  92588 & TC.........            5  92589.............            5
92590...........................            9  92591..............            9  92592.............            9
92593...........................            9  92594..............            9  92595.............            9
92596...........................            5  92597..............            9  92598.............            9
----------------------------------------------------------------------------------------------------------------
                                                  CARDIOGRAPHY
----------------------------------------------------------------------------------------------------------------
93000...........................            1  93005..............            1  93010.............            9
93012...........................            1  93014..............            9  93015.............            3
93016...........................            3  93017..............            3  93018.............            9
93024 & TC......................            3  93040..............            1  93041.............            1
93042...........................            9  93224..............            1  93225.............            1
93226...........................            1  93227..............            9  93230.............            1
93231...........................            1  93232..............            9  93233.............            9
93235...........................            1  93236..............            1  93237.............            9
93268...........................            1  93270..............            1  93271.............            1
93272...........................            9  93278 & TC.........            1
----------------------------------------------------------------------------------------------------------------
                                                ECHOCARDIOGRAPHY
----------------------------------------------------------------------------------------------------------------
93303 & TC......................            2  93304 & TC.........            2  93307.............            2
93308 & TC......................            2  93312 & TC.........            3  93313.............            9
93314...........................            9  93315 & TC.........            3  93316.............            9
93317...........................            9  93320 & TC.........            2  93321 & TC........            2
93325 & TC......................            2  93350 & TC.........            3
----------------------------------------------------------------------------------------------------------------

[[Page 59069]]


                                             CARDIAC CATHETERIZATION
----------------------------------------------------------------------------------------------------------------
93501 & TC......................            3  93503..............            9  93505 & TC........            3
93510 & TC......................            3  93511 & TC.........            3  93514 & TC........            3
93524 & TC......................            3  93526 & TC.........            3  93527 & TC........            3
93528 & TC......................            3  93529 & TC.........            3  93536.............            9
93539...........................            9  93540..............            9  93541.............            9
93542...........................            9  93543..............            9  93544.............            9
93545...........................            9  93555 & TC.........            3  93556 & TC........            3
93561 & TC......................            3  93562 & TC.........            3
----------------------------------------------------------------------------------------------------------------
                                  INTRACARDIAC ELECTROPHYSIOLOGICAL PROCEDURES
----------------------------------------------------------------------------------------------------------------
93600 & TC......................            3  93602 & TC.........            3  93603 & TC........            3
93607 & TC......................            3  93609 & TC.........            3  93610 & TC........            3
93612 & TC......................            3  93615 & TC.........            3  93616 & TC........            3
93618 & TC......................            3  93619 & TC.........            3  93620 & TC........            3
93621 & TC......................            3  93622 & TC.........            3  93623 & TC........            3
93624 & TC......................            3  93631 & TC.........            3  93640 & TC........            3
93641 & TC......................            3  93642 & TC.........            3  93650.............            9
93651...........................            9  93652..............            9  93660 & TC........            3
----------------------------------------------------------------------------------------------------------------
                                             OTHER VASCULAR STUDIES
----------------------------------------------------------------------------------------------------------------
93720...........................            1  93721..............            1  93722.............            9
93724 & TC......................            3  93731..............            2  93732.............            3
93733 & TC......................            2  93734 & TC.........            2  93735 & TC........            3
93736 & TC......................            2  93737 & TC.........            3  93738 & TC........            3
93740 & TC......................            2  93760..............            9  93762.............            9
93770 & TC......................            3  93784..............            9  93786.............            9
93788...........................            9  93790..............            9
----------------------------------------------------------------------------------------------------------------
                                        CEREBROVASCULAR ARTERIAL STUDIES
----------------------------------------------------------------------------------------------------------------
93875 & TC......................            2  93880 & TC.........            2  93882 & TC........            2
93886 & TC......................            2  93888 & TC.........            2
----------------------------------------------------------------------------------------------------------------
                                           EXTREMITY ARTERIAL STUDIES
----------------------------------------------------------------------------------------------------------------

93922 & TC......................            2  93923 & TC.........            2  93924 & TC........            2
93925 & TC......................            2  93926 & TC.........            2  93930 & TC........            2
93931 & TC......................            2
----------------------------------------------------------------------------------------------------------------
                                            EXTREMITY VENOUS STUDIES
----------------------------------------------------------------------------------------------------------------
93965 & TC......................            2  93970 & TC.........            2  93971 & TC........            2
----------------------------------------------------------------------------------------------------------------
                                      VISCERAL AND PENILE VASCULAR STUDIES
----------------------------------------------------------------------------------------------------------------
93975 & TC......................            2  93976 & TC.........            2  93978 & TC........            2
93979 & TC......................            2  93980 & TC.........            2  93981 & TC........            2
----------------------------------------------------------------------------------------------------------------
                                                   PULMONARY
----------------------------------------------------------------------------------------------------------------
94010 & TC......................            1  ...................  ...........  94070 & TC........            3
94150 & TC......................            9  94200 & TC.........            1  94240 & TC........            1
94250 & TC......................            1  94260 & TC.........            1  94350 & TC........            1
94360 & TC......................            1  94370 & TC.........            1  94375 & TC........            1
94400 & TC......................            2  94450 & TC.........            2  94620 & TC........            3
94640...........................            9  94642..............            9  94650.............            9
94651...........................            9  94652..............            9  94656.............            9
94657...........................            9  94660..............            9  94662.............            9
94664...........................            2  94665..............            2  94667.............            9
94668...........................            9  94680 & TC.........            2  94681 & TC........            2
94690 & TC......................            1  94720 & TC.........            1  94725 & TC........            1
94750 & TC......................            1  94760..............            1  94761.............            1
94762...........................            1  94770 & TC.........            1  94772 & TC........            1
94799 & TC......................            9
----------------------------------------------------------------------------------------------------------------
                                                    ALLERGY
----------------------------------------------------------------------------------------------------------------
95004...........................            2  95010..............            9  95015.............            9

[[Page 59070]]


95024...........................            2  95027..............            2  95028.............            2
95044...........................            2  95052..............            2  95056.............            2
95060...........................            3  95065..............            3  95070.............            3
95071...........................            3  95075..............            9  95078.............            3
----------------------------------------------------------------------------------------------------------------
                                     NEUROLOGY AND NEUROMUSCULAR PROCEDURES
----------------------------------------------------------------------------------------------------------------
                                                 SLEEP TESTING
----------------------------------------------------------------------------------------------------------------
95805 & TC......................            1  95807 & TC.........            1  95808 & TC........            1
95810 & TC......................            1  95812 & TC.........            1  95813 & TC........            1
95816 & TC......................            2  95819 & TC.........            2  95822 & TC........            1
95824 & TC......................            1  95827 & TC.........            1  95829 & TC........            1
95830...........................            9  95831..............            9  95832.............            9
95833...........................            9  95834..............            9  95851.............            9
95852...........................            9  95857..............            9  95858 & TC........            3
95860 & TC......................            6  95861 & TC.........            6  95863 & TC........            6
95864 & TC......................            6  95867 & TC.........            6  95868 & TC........            6
95869 & TC......................            6  95870 & TC.........            6  95872 & TC........            3
95875 & TC......................            3
95900 & TC......................            7  95903 & TC.........            7  95904 & TC........            7
95920 & TC......................            2  95921 & TC.........            2  95922 & TC........            3
95923 & TC......................            3  95925 & TC.........            2  95926 & TC........            2
95927 & TC......................            2  95930 & TC.........            2  95933 & TC........            7
95934 & TC......................            7  95936 & TC.........            7  95937 & TC........            7
95950 & TC......................            1  95951 & TC.........            1  95953 & TC........            1
95954 & TC......................            3  95955 & TC.........            2  95956 & TC........            1
95957 & TC......................            1  95958 & TC.........            3  95961 & TC........            3
95962 & TC......................            3  95999..............            9
----------------------------------------------------------------------------------------------------------------
                                       CENTRAL NERVOUS SYSTEM ASSESSMENTS
----------------------------------------------------------------------------------------------------------------
96100...........................            4  96105..............            4  96110.............            4
96111...........................            4  96115..............            4  96117.............            4
----------------------------------------------------------------------------------------------------------------
                                                 ALPHA-NUMERICS
----------------------------------------------------------------------------------------------------------------
G0001...........................            9  G0002..............            9  G0004.............            1
G0005...........................            1  G0006..............            1  G0007.............            9
G0015...........................            1  G0016..............            9  G0026.............            9
G0027...........................            9  G0030 & TC.........            2  G0031 & TC........            2
G0032 & TC......................            2  G0033 & TC.........            2  G0034 & TC........            2
G0035 & TC......................            2  G0036 & TC.........            2  G0037 & TC........            2
G0038 & TC......................            2  G0039 & TC.........            2  G0040 & TC........            2
G0041 & TC......................            2  G0042 & TC.........            2  G0043 & TC........            2
G0044 & TC......................            2  G0045 & TC.........            2  G0046 & TC........            2
G0047 & TC......................            2  G0050..............            1  M0302.............            9
P2028...........................            9  P2029..............            9  P2031.............            9
P2033...........................            9  P2038..............            9  P3000.............            9
P3001...........................            9  P7001..............            9  P9610.............            9
P9615...........................            9  Q0035 & TC.........            1  Q0091.............            1
Q0092...........................            9  Q0111..............            9  Q0112.............            9
Q0113...........................            9  Q0114..............            9  Q0115.............            9
R0070...........................            9  R0075..............            9  R0076.............            9
V5008...........................            9  V5010..............            9  V5011.............            9
V5014...........................            9  V5020..............            9  V5362.............            9
V5363...........................            2  V5364..............            2
----------------------------------------------------------------------------------------------------------------

3. Independent Diagnostic Testing Facility
    Section 2070.5 of the Medicare Carriers Manual (HCFA Pub. 14-3) is
the current policy basis for the coverage of Independent Physiological
Laboratory (IPL) services. The section does not define the term
``physiological'' and specifically mentions only electrocardiograms and
electroencephalograms as types of services the entity that has come to
be known as an IPL may furnish. The section says little about the
nature of IPLs other than that they operate independently of a
hospital, physician's office, or rural health clinic and meet
applicable State and local licensure laws. Few States regulate
diagnostic services, other than x-rays, and the requirement for State
and local licensure has had little meaning in practice. The other
requirements for the coverage of IPL services are that the services be
ordered by a ``referring'' physician and that the services be
determined by the carrier to be reasonable and necessary. The
requirement that the diagnostic services must be ordered by a referring
physician has been addressed by the policy we adopted in the final rule
for the 1997

[[Page 59071]]

physician fee schedule published in the Federal Register November 22,
1996 (61 FR 59497 through 59498), under which the physician who orders
a diagnostic service must be a physician who is treating the patient.
    We are setting aside the term ``IPL'' and are defining a new entity
independent of a hospital or physician's office in which diagnostic
tests are performed by licensed, certified nonphysician personnel under
appropriate physician supervision. We are calling this entity an
Independent Diagnostic Testing Facility (IDTF). The new entity will
replace the IPL. The regulations are intended to resolve confusion
surrounding the structure of entities Medicare previously classified as
IPLs, as well as the services they furnish and to address the potential
for abuse and the quality and safety concerns raised by the lack of
Federal and State IPL licensure and certification requirements. The
regulations will not apply to approved portable x-ray suppliers or to
procedures furnished in physicians' offices including group practices
or multispecialty clinics.
    We are defining an IDTF as a fixed location, a mobile entity, or an
individual nonphysician practitioner. The following diagnostic tests,
which are payable under the physician fee schedule, are not required to
be furnished in accordance with the IDTF criteria when furnished by a
nonhospital entity:
    <bullet> Diagnostic mammograms, the coverage of which is required
by law to be regulated by the Food and Drug Administration rather than
by HCFA.
    <bullet> Diagnostic tests personally furnished by a ``qualified
audiologist'' as defined in section 1861(ll)(3) of the Act. These
include ``audiology services'' as defined in section 1861(ll)(2) of the
Act that are payable by Medicare carriers under the physician fee
schedule. We are excluding these diagnostic tests from the physician
supervision requirement because the Congress has defined these services
without requiring physician supervision of their performance.
    <bullet> Diagnostic psychological testing services personally
furnished by a qualified psychologist practicing independently of an
institution, agency, or physician's office as currently defined in
section 2070.2 of the Medicare Carriers Manual (HCFA Pub. 14-3). The
services are distinguished from services of clinical psychologists,
which are covered under section 1861(ii) of the Act rather than
1861(s)(3). We are excluding these tests from the physician supervision
requirement because we do not believe that these services require
physician supervision of their performance.
    IDTFs must meet the following requirements:
    <bullet> An IDTF must have one or more supervising physicians who
are responsible for the direct and ongoing oversight of the quality of
the testing performed, the proper operation and calibration of the
equipment used to perform tests, and the qualification of nonphysician
personnel who use the equipment. This level of supervision equates to
general supervision as discussed in this section II.D. and
Sec. 410.32(b)(3)(i).
    <bullet> The supervising physician must evidence proficiency in the
performance and interpretation of each type of diagnostic procedure
performed by the IDTF; however, there is no requirement that the IDTF's
supervising physician actually furnish the interpretation. (For
example, a physician might purchase tests from the IDTF that he or she
will interpret.) Proficiency may be documented by certification in
specific medical specialties or subspecialties or by criteria
established by the carrier for the service area in which the IDTF is
located. In the case of a procedure which would require the direct or
personal supervision of a physician pursuant to II.D. in this section
and Sec. 410.32(b)(3)(ii) and (b)(3)(iii), respectively, the IDTF's
supervising physician must personally furnish this level of supervision
whether the procedure is performed in the IDTF or, in the case of
mobile services, at a remote location. The IDTF must maintain
documentation to demonstrate sufficient physician attendance during all
hours of operation to assure that the required physician supervision is
furnished. In the case of procedures requiring direct supervision, the
supervising physician may oversee concurrent procedures.
    <bullet> Any nonphysician personnel used by the IDTF to perform
tests must demonstrate the basic qualifications to perform the tests in
question and have appropriate training and proficiency as evidenced by
licensure or certification by the appropriate State health or education
department. In the absence of a State licensing board, the technician
must be certified by the appropriate national credentialing body. The
IDTF must maintain documentation available for review that these
requirements are met.
    <bullet> All procedures performed by the IDTF must be specifically
ordered in writing by a physician who treats the beneficiary, that is,
the physician who is furnishing a consultation or treating a
beneficiary for a specific medical problem and who uses the results in
the management of the beneficiary's specific medical problem. This
requirement would be met when a beneficiary's primary care physician
orders testing the results of which may determine whether or not the
physician refers the beneficiary to a specialist. In other words, that
physician is managing the patient's care. The order must specify the
diagnosis or other basis for the testing. The supervising physician for
the IDTF may not order tests performed by the IDTF, and the IDTF may
not add any procedures based on internal protocols without written
order from the treating physician.
    <bullet> An IDTF that operates across State boundaries must
maintain documentation that its supervising physicians and technicians
are licensed and certified in each of the States in which it is
furnishing services.
    Below is a discussion of the public comments we received on this
proposal and our responses:
    Comment: We received many favorable comments (with reservations)
from representatives of existing IPLs who indicated their preference
for national standards rather than different standards in each carrier
service area. Many expressed frustration with the current situation in
which there is no national policy on the procedures an IPL may perform,
and carriers have differing local medical review policies on these
procedures.
    One commenter indicated that limiting the types of diagnostic tests
an IPL or IDTF can furnish is a better way to prevent unneeded and
medically unnecessary testing than our proposal. He stated that
adoption of the IDTF proposal will produce a rise in expenditures for
diagnostic testing without a concomitant decrease in expenditures from
other entities that currently bill Medicare for diagnostic tests.
    Response: We believe that the time has come to change the current
situation under which there are different local medical review policies
on the services an IPL may perform in different carrier service areas.
If a facility meets the standards established for IDTFs, including the
appropriate level of physician supervision, it should be able to
furnish the same range of procedures as other entities in the service
area. Carriers should be denying claims for procedures that are not
reasonable and necessary for individual patients.
    Comment: A supplier of mobile bone density procedures commented
that it had been erroneously classified as a portable x-ray supplier
and supported the proposal as a clarification of its

[[Page 59072]]

mobile status under Medicare as an IDTF. The commenter supported the
proposal.
    Response: Under the IDTF policy, a mobile diagnostic facility may
furnish the same procedures as a stationary facility unless there is a
national policy indicating otherwise.
    Comment: With regard to the credentialing criteria for IDTF
personnel, several commenters questioned the need for the IDTF proposal
and pointed out that there already were voluntary certification
organizations in existence that possessed greater expertise than we did
in these matters. Commenters cited organizations that have been granted
membership by the National Commission for Certifying Agencies, such as
The American Registry of Diagnostic Medical Sonographers for
ultrasonography physician and nonphysician personnel, the Intersocietal
Commission for the Accreditation of Vascular Laboratories, which deals
with noninvasive vascular procedures, and the Intersocietal Commission
for the Accreditation of Echocardiographic Laboratories for
echocardiographic procedures. The commenters indicated that criteria
established by these organizations are more specific than the vague
criteria we proposed.
    Response: We have no desire to interfere with these private
accreditation activities. The IDTF should maintain documentation of
recognition by these organizations for verification by the carrier as
necessary. However, we do not believe that the standards for
accreditation by these agencies are equivalent to ours. For example, in
commenting on our proposal, one of the listed organizations indicated
that it required records of the source of the order for the test in the
accredited laboratories. However, this requirement is not the same as
assuring that all tests are ordered by a physician who is treating the
patient.
    Comment: One commenter indicated that the proposal that the
supervising physician in an IDTF cannot order tests performed by the
IDTF is unrealistic. The commenter stated that if the IDTF is
appropriately accredited and the supervising physician's income is
fixed (rather than related to volume of testing), the supervising
physician should be able to order any necessary test for his or her
patients.
    Response: We have decided to modify the prohibition in
Sec. 410.33(d) against the supervising physician's ordering of tests to
be performed by the IDTF although we continue to believe there are
potential problems in permitting such a practice. However, we
acknowledge that there could be situations in which the IDTF's
supervising physician is, in fact, the beneficiary's treating
physician. The modified wording of the requirement indicates that, in
these situations, the physician in question would have had a
relationship with the beneficiary prior to the testing and would be
treating the beneficiary for a specific medical problem.
    Comment: Some commenters expressed concern that the policy requires
State-credentialed nonphysician personnel to perform tests; commenters
point out the varying State standards that may be applied. Some
believed that credentialing by a national standardized body was
preferable.
    Response: We believe that credentialing of nonphysician
technologists by either a State government or a recognized national
organization should be sufficient.
    Comment: Several commenters stated that the requirement that all
procedures performed by IDTFs must be specifically ordered in writing
by the treating physician would be very burdensome for the referring
physician, patient, and the examiner if it is found that the patient
needs additional tests and has to come back another day with written
orders for them. Some indicated that the generally-applicable ordering
provisions of Sec. 410.32(a) were sufficient.
    One commenter indicated that the requirement for written orders was
redundant, time-consuming, and costly, and requested the rationale for
the additional requirement applicable only to IDTFs.
    Response: We believe that the physician responsible for the
management of the patient's care (or some aspect of the patient's care)
should be aware of the testing being performed. For that reason, we
adopted a modification to Sec. 410.32 to that effect in the physician
fee schedule final rule of November 22, 1996. That rule did not
explicitly require written orders but served to establish the link
between test ordering and the treating physician as a matter of
national Medicare law. If the testing entity chose not to maintain a
file of written orders from physicians for the tests it performed, the
entity might not be able to demonstrate the medical necessity of the
tests to a reviewer from a Medicare carrier or another government
agency. Some commenters have requested the rationale for requiring
specific written orders for tests performed by IDTFs while not imposing
the same requirement on testing in physicians' offices.
    The rationale for requiring testing by IDTFs to be ordered in
writing by the treating physician is based in our (and, more
specifically, HCFA's contractors') experience with IPLs. There have
been instances in which IPLs have offered ``free'' screening to
Medicare beneficiaries in shopping malls and senior citizen centers,
which meant that the IPL accepted the carrier payment for the procedure
and waived billing the beneficiary for the coinsurance. There have been
instances of mass testing in nursing facilities with questionable
orders for the tests performed and little regard for the medical
necessity of the tests. There have been numerous instances of IPLs
performing tests in addition to those ordered by referring physicians.
    The manual (Medicare Carriers Manual section 2070.5) has always
required that the diagnostic services be ordered by a referring
physician. Therefore, we believe there is little in this requirement
that is new other than the explicit provision that the orders be in
writing. While we are certain that many IPLs did not engage in the
practices referred to above, we anticipate that the new rules will give
the carriers tools to use to address abusive situations, when they do
occur, through post-payment reviews. We believe that our experiences
with waste and abuse in IPLs justify these requirements, including
requiring the treating physician's order for a procedure.
    In response to the absence of regulation of IPLs, we are creating
the IDTF designation to establish a degree of national regulation of a
diagnostic facility that is distinct from a physician's office and does
not directly use the test results to treat a beneficiary. The
facility's sole purpose is to furnish a test. We believe that any
distinctions in treatment between IDTFs and physicians' offices or
hospitals are justified by our experiences with the entities and the
different degrees of regulation to which the entities have been
subject.
    We do not agree that the requirement for written orders is an
unnecessarily burdensome requirement, or that there is any necessity
for a beneficiary to return with written orders on another day. If an
IDTF determines that a patient needs further testing, the IDTF may
contact the ordering physician's office and receive a FAX order for the
additional testing.
    Comment: One commenter indicated that the term ``referring
physician'' must be broadened to include appropriate ``licensed medical
practitioners,'' including podiatrists, chiropractors,

[[Page 59073]]

optometrists and other similar allied-health care professionals. The
commenter further stated that IDTF testing procedures should be ordered
only by an appropriately licensed medical professional.
    Response: The term ``referring physician'' was used in the proposal
only in the description of the existing IPL policy. The current
proposals refer to ``ordering physician'' and ``supervising
physician.'' Podiatrists and optometrists (when operating within the
scope of their State licensure) are included in the Medicare definition
of a ``physician'' set forth in section 1861(r) of the Act and do not
need to be singled out as appropriate persons to order tests.
Chiropractors may not order tests for Medicare beneficiaries under any
circumstances. The changes made to Sec. 410.32 by the physician fee
schedule final rule of November 22, 1996 (61 FR 59490) provided for the
ordering of diagnostic tests by nonphysician practitioners under
certain conditions. We have modified proposed Sec. 410.33(d) in this
final rule to make it clear that nonphysician practitioners who are
working within the scope of the laws of their States may order testing
from IDTFs.
    Comment: Several commenters expressed concern about the exemption
of physicians' offices, group practices, and multispecialty groups from
the rules governing IDTFs. One commenter indicated that such an
exemption would lead to the potential for abuse and quality and safety
concerns. Others said that the proposed rules would put IDTFs at a
competitive disadvantage with entities such as hospitals and
physicians' offices in the furnishing of diagnostic tests and that the
same rules should apply in all settings.
    Response: In several responses immediately preceding this one, we
have given our reasoning regarding the application of specific
requirements to IDTFs that do not apply to physicians' offices. Our
reasoning is that hospitals are currently regulated, and physicians
must have State licensure to perform the services they furnish. (We
would like to reiterate here, however, that the physician supervision
requirements for specific tests discussed elsewhere in this rule apply
to all diagnostic tests payable under the physician fee schedule
whether they are performed in an IDTF, physicians' office, or other
setting.)
    On the other hand, IPLs do not exist because of a specific
statutory provision but because of unique circumstances. HCFA has, for
a number of years, permitted payment for diagnostic tests to entities
that were not created by law. The implementing manual instruction for
IPLs (section 2070.5 of the Medicare Carriers Manual) clearly presumes
the existence of ``applicable State and local licensure laws'' for
these facilities although very little regulation actually exists.
    Comment: A commenter objected to the requirement in
Sec. 410.33(b)(2) that the supervising physician must have demonstrated
proficiency in the performance and interpretation of each type of
diagnostic test performed by the IDTF when there is no such requirement
for hospital outpatient departments or physician groups. The commenter
indicated that, for radiology procedures, State Board Certification in
Radiology should be deemed sufficient for supervision of procedures
requiring direct or general supervision.
    Response: As we have pointed out elsewhere in this discussion,
hospitals are regulated through the accreditation process. For example,
Sec. 482.26(c) of the Medicare Conditions of Participation for
Hospitals establishes standards for a qualified supervisory radiologist
in a hospital. Further, all States have licensure requirements that
apply to physicians' offices, and we are not aware of significant
problems with physicians and physician groups performing tests they are
not qualified to perform.
    On the other hand, the performance of diagnostic tests in IPLs
(including the physician supervision of this testing) is generally not
regulated by State or local laws. Our regional offices and carriers
cite many problems with the way diagnostic procedures have been
furnished in IPLs, such as IPLs entering into arrangements with
physicians to serve as pro forma supervisors when these physicians had
little expertise in the area of diagnostic testing involved. Because of
systemic problems in IPLs, we believe that it is reasonable for
Medicare to require physicians who supervise the performance of tests
in IDTFs to demonstrate proficiency in the type of testing being
performed while not imposing the same requirement on physicians'
offices, which operate under the authority of the physician's State
licensure.
    Comment: A commenter indicated that the nonphysician credentialing
requirements would impose significant additional costs and requirements
on IDTFs that would not be borne by medical groups or hospitals.
    Response: Most commenters from existing IPLs, many of whom
indicated that their employees had already met these standards, did not
raise this issue, and, therefore, we believe that any burden on IPLs
will not be widespread. We believe it to be entirely appropriate to
require the technologists who perform tests in IDTFs to possess
appropriate credentialing while not imposing the same requirements on
hospitals that must meet accreditation standards imposed by
governmental and other bodies or on physicians' offices that operate
under the authority of the physician's State licensure.
    Comment: One commenter objected to the proposed requirement for
documentation of physician supervision in IDTFs not being required of
other entities.
    Response: We believe that this requirement is justified by the past
performance of IPLS. Moreover, when carriers identify a problem with
lack of supervision of diagnostic testing in physicians' offices, they
may request this information from the physician in the same way they
currently request additional information on the medical necessity of a
service or procedure.
    Comment: One commenter indicated that record retention for CLIA
laboratories was determined to be 2 years and that the same requirement
should apply to IDTFs.
    Response: We will review our record retention guidelines and will
provide further advice through program instructions.
    Comment: One commenter indicated that an IDTF should be allowed to
bill globally for radiological procedures when it contracts with a
medical group for interpretations and the medical group reassigns
benefits to the IDTF.
    Response: These billings are permitted under the policy in section
3060.5 of the Medicare Carriers Manual. In these situations, the IDTF
would bill the carrier in such a way as to identify itself as an IDTF.
    Comment: One commenter objected to the proposed requirement that an
IDTF that operates across State boundaries maintain documentation that
its supervising physicians are licensed in each of the States in which
it is furnishing services. The commenter indicated that this
requirement would be unnecessarily burdensome and cost prohibitive if
the facility must engage physicians licensed in every State the
facility serves.
    Response: We believe it appropriate for a physician who is
supervising the performance of tests performed in State to be licensed
in that State.
    Comment: One commenter indicated that we are creating a new
regulatory scheme without Congressional authorization. The commenter
stated that if a problem exists with respect to independent diagnostic
facilities, the problem should be explored and

[[Page 59074]]

debated in public before rules are established.
    Response: The commenter is correct in recognizing that IPLs are not
created in the Medicare statute. Nonetheless, we have paid for services
they furnish for a number of years. Over the years, however, a number
of problems have become manifest in the operation of these entities. We
believe that our general rulemaking authority is sufficient to permit
us to deal with these problems and that the facts require our exercise
of that authority. In addition, the publication of a proposed rule has
provided the opportunity for public comment and debate.
    Comment: Several commenters indicated that the regulation should
address the competency of physicians to perform interpretations of,
rather than supervision of, diagnostic tests. Some suggested that the
responsibilities of the supervising physician in an IDTF include
interpretation of the results of the procedures. One commenter
supported the proposal that technologists in IDTFs be certified and
recommended a requirement that radiologic procedures performed in IDTFs
be interpreted by physicians who are qualified through: (1) Completing
an approved residency program, (2) postresidency training, or (3)
sufficient clinical experience.
    Response: The performance of the interpretation (the physician's
service covered under section 1861(s)(1) of the Act, as opposed to the
diagnostic test covered under section 1861(s)(3) of the Act) is beyond
the scope of this proposal except for the requirement that an IDTF's
supervising physician evidence proficiency in the interpretation of
each type of diagnostic procedure performed by the facility. In
developing the IDTF proposal, we considered requiring IDTFs to furnish
the interpretation as well as the test, but we decided not to include
such a requirement because of the likelihood it would lead to
unintended problems. For example, the physician who provides the
general supervision for an IDTF may not be available to furnish an
interpretation for a period of time and that could unnecessarily delay
making a diagnosis in an urgent situation. In another situation, a
beneficiary might want his or her test interpreted by a particular
physician he or she has dealt with in the past.
    Comment: One commenter pointed out that the proposal indicated that
the IDTF policy did not apply to procedures furnished in physicians'
offices and suggested that we clarify the status of procedures
performed by IDTFs in physicians' offices.
    Response: The IDTF requirements would apply to any procedures
furnished by the IDTF either in its own facility or in a physician's
office, clinic, or other nonprovider setting. For example, if a
procedure requires direct supervision, it would be necessary for the
IDTF's supervising physician to be present in the suite during
performance. We have modified Sec. 410.33(a)(1) to state that the IDTF
policy applies to procedures performed by IDTFs in physicians' offices.
    Comment: One commenter indicated that the IDTF proposal should
apply to any noninvasive vascular procedure performed by portable x-ray
suppliers.
    Response: Noninvasive vascular procedures (or any test other than
certain x-rays, diagnostic mammography, and EKGs) are not included in
the portable x-ray benefit. If an approved portable x-ray supplier
wishes to furnish these procedures, it would have to become an IDTF. No
transportation payment would be made in connection with these types of
procedures.
    Comment: A national organization representing psychologists pointed
out that, as written, the IDTF proposal would apply to individual
nonphysician practitioners, including clinical psychologists and asked
us to clarify that clinical psychologists do not have to become IDTFs
and perform diagnostic psychological testing under physician
supervision.
    Response: We did not intend the IDTF proposal to apply to
diagnostic psychological testing personally performed by clinical
psychologists because these services are not covered under section
1861(s)(3) of the Act. However, in order to promote understanding of
the policy by all concerned, we are explicitly excluding diagnostic
psychological testing personally performed by clinical psychologists
from the requirement that out-of-hospital, out-of-physician-office
tests that must be performed under the supervision of a physician in an
IDTF. In other words, a clinical psychologist does not have to become
an IDTF to be paid by the carrier for the performance of diagnostic
psychological testing.
    Comment: A State Department of Health cited several aspects of the
IDTF proposal that would conflict with the laws of its State. The
commenter also indicated that the proposed rule did not define the
types of diagnostic tests that could be covered by Medicare when
performed by an IDTF, whether IDTFs can furnish radiologic services, or
who will receive the Medicare payments for services performed by an
IDTF.
    Response: In making the IDTF proposal, we were recognizing the
problems with the existing situation of largely unregulated entities
that performed diagnostic tests. Neither IDTFs nor IPLs were
established because of statutory mandate from the Congress. In making
this proposal, it is not our intention to preempt any State licensing
requirements; however, it is not clear to us how IPLs could have
operated in a State and IDTFs cannot. However, in order to address
these concerns, we have added an additional requirement in paragraph
(f) of Sec. 410.33 (Independent Diagnostic Testing Facility). Under
this requirement, an IDTF must comply with the applicable laws of any
State in which it operates. In IDTFs, Medicare would cover all tests
payable under the Medicare physician fee schedule, including radiologic
procedures, other than clinical laboratory tests. In many cases, the
carrier will pay the IDTF for the technical component of the
procedures. In some cases, an IDTF may purchase the interpretation of
the test from a physician and bill for both professional and technical
components, while in other cases, an interpreting physician may
purchase the test from the IDTF and bill for both professional and
technical components.
    Comment: Some commenters expressed concern about the January 1,
1998 effective date of the IDTF proposal. They suggested transition
periods of up to 1 year.

Response: We are addressing these comments in the discussion below.

    Result of evaluation of comments: We are adopting the proposal to
have IDTFs replace IPLs with the modifications or clarifications
discussed above. In addition, we are providing that the replacement
occur on a phased-in basis scheduled to be completed on July 1, 1998.
Entities wishing to be recognized as IDTFs must send a letter to the
Part B carrier for their service areas attesting that they meet all
IDTF criteria. As soon as a carrier accepts the entity as an IDTF, the
carrier notifies the entity of its new status and billing number. Once
an entity becomes an IDTF, it is no longer subject to local medical
review policies that currently preclude IPLs from furnishing procedures
or groups of procedures while allowing other entities to perform them.
An IDTF must comply with the applicable laws of any State in which it
operates.

[[Page 59075]]

E. Reasonable Compensation Equivalent Limit Update Factor

1. Background
    Section 1887(a)(2)(B) of the Act provided for the reasonable
compensation equivalent limits used to determine the reasonableness of
costs incurred by providers for professional services furnished by
physicians for the benefit of provider patients in a hospital or
skilled nursing facility. Regulations set forth at Sec. 415.70 (Limits
on compensation for physician services in providers), paragraph (b),
concerning the methodology for establishing limits, established a
methodology for determining reasonable annual compensation equivalents,
considering average physician incomes by specialty and type of
location, to the extent possible using the best available data. The
regulations also expanded the application of the reasonable
compensation equivalent limits to include comprehensive outpatient
rehabilitation facilities. The initial and still current methodology
for establishing reasonable compensation equivalent limits is based on
an internal working paper (``A Methodology for Determination of
Reasonable FTE Compensation for Hospital-Based Physicians'' by James R.
Cantwell and William J. Sobaski (Working Paper No. OR-32, revised
December 1982)) developed by HCFA's Office of Strategic Planning,
(formerly the Office of Research and Demonstrations). Copies of this
paper are available on request from: OSP Publications, Office of
Strategic Planning, Health Care Financing Administration, Room C3-20-
11, 7500 Security Boulevard, Baltimore, MD 21244, (410) 786-6588. The
inflation factor employed in the methodology used to develop the
initial limits and, subsequently, to update those limits to reflect
increases in net physician compensation was the Consumer Price Index
for All Urban Consumers (CPI-U).
2. Change in the Methodology Used to Develop Reasonable Compensation
Equivalent Limits
    The methodology currently employed to update the physician fee
schedule uses an inflation factor distinct from the CPI-U, which is
used to update the reasonable compensation equivalent limits. To
achieve a measure of consistency in the methodologies employed to
determine reasonable payments to physicians for physicians' direct
medical and surgical services furnished to individual patients and
reasonable compensation levels for physicians' services that benefit
provider patients generally, we are revising the methodology used to
update the reasonable compensation equivalent limits that would entail
the adoption of the physician fee schedule's inflation factor (the MEI)
to update the reasonable compensation equivalent limits. For cost
reporting periods beginning on or after January 1, 1998, updates to the
reasonable compensation equivalent limits would be calculated using the
MEI.
    Comment: One association favored the adoption of the MEI in place
of the CPI-U as the update factor for the reasonable compensation
equivalent limits. Another medical association stated that, while it
did not object to the adoption of the MEI, it recommended that the
reasonable compensation equivalent limits methodology be replaced with
a relative value based methodology.
    Response: We will consider the development of a relative value
based reasonable compensation equivalent limits methodology in the
immediate future, but we are proceeding with the adoption of the MEI as
the reasonable compensation equivalent limits update factor at the
present time.
    Result of evaluation of comments: As proposed, we are revising the
reasonable compensation equivalent limits update methodology by
replacing the CPI-U with the MEI as the update factor.

F. Payment to Participating and Nonparticipating Suppliers

    Section 1848(a)(1) of the Act requires that payment for physician
services (as defined in 1848(j)(3)) be based on the lesser of the
actual charge for the service or the fee schedule amount. We proposed
to revise the regulations at Sec. 414.21 (Medicare payment basis) to
ensure that they contain this statutory provision. (Our proposed
definition of ``actual charges'' was discussed separately in section
II.J. of our June 18, 1997 proposed rule (62 FR 33192).)
    Section 1848(a)(3) of the Act provides incentives for participating
physicians and suppliers by setting the fee schedule amount for those
who participate at 100 percent of the amount calculated under the fee
schedule for the service as provided in the formula at section
1848(b)(1) of the Act. It also provides that the fee schedule amount
for nonparticipating physicians and suppliers be set at 95 percent of
the amount for participating physicians and suppliers. Since
regulations at Sec. 400.202 (Definitions specific to Medicare) define
the term ``supplier'' as including physicians and all other persons who
provide services for which payment may be made under Part B except for
``providers of services'' as defined in 1861(u) of the Act, we proposed
to define nonparticipating suppliers in Sec. 400.202 as being suppliers
who do not have a Part B participation agreement in effect on the date
of the service. We also proposed to define participating suppliers as
being suppliers who have an agreement to participate in Part B in
effect on the date of the service. These definitions mirror the
definitions of participating and nonparticipating physicians,
suppliers, and other persons that are in section 1842(h) of the Act.
    Section 1848(g)(2)(C) of the Act states that the Medicare limiting
charge is to be set at 115 percent of the ``* * * payment amount for
nonparticipating physicians or nonparticipating suppliers or other
persons.'' Hence, we proposed to reflect this requirement in
regulations in proposed Sec. 414.48(b) (concerning specific limits on
actual charges of nonparticipating suppliers).
    We received two comments related to these proposed changes.
    Comment: Some physicians objected to being considered
``suppliers,'' and some physicians did not recognize that, under
current regulations, the term ``supplier'' includes physicians. These
commenters wanted us to revise the terminology in the regulations to
consider physicians not to be ``suppliers.''
    Response: We did not accept this comment because the term
``supplier'' is used to include physicians for all other Medicare
regulations (except where otherwise specified), all of which would have
to be revised if we were to remove physicians from the definition of
``supplier'' for general Medicare regulations. Doing this would be
impractical and would risk removing rules that apply to physicians in
the same manner in which they apply to other persons who bill and are
paid for services covered under Part B of Medicare.
    Comment: Some commenters objected to the requirement that Medicare
fee schedule payment be based on the lower of the actual charge or the
fee schedule amount. They argued that the fee schedule amount should be
the only basis for payment.
    Response: We did not accept this comment because the law requires
that the payment be based on the lesser of the actual charge or the fee
schedule amount. Including it should have no practical effect on
payment since carriers are already instructed to compare the submitted
charge to the fee schedule amount and to base payment on the lesser of
the two amounts. Moreover, we believe that some of these commenters may
have confused this

[[Page 59076]]

general requirement with our proposed definition of ``actual charges''
(which is discussed in section II. J. of this preamble).
    Result of evaluation of comments: We are making final the technical
change to the regulations to conform them to statutory provisions and
operating instructions (Medicare Carriers Manual).

G. Increase in Work Relative Value Units for Global Surgical Services
to Account for the 1997 Increases for Work Relative Value Units in
Evaluation and Management Services

    In our November 22, 1996 final rule with comment period, as part of
the 5-year review of all physician work RVUs, we increased most of the
work RVUs for evaluation and management services for hospital and
office or other outpatient visits. We revised the work RVUs for
evaluation and management services partly in recognition of the
increase in preservice and postservice work. At that time, we made no
adjustments to the work RVUs assigned to global surgical services,
which, in addition to the surgical procedure, include the related
preservice and postservice evaluation and management visits a surgeon
provides within a defined period of time.
    Upon further examination of this issue, we are increasing the work
RVUs for global surgical services to be consistent with the 1997
increases in the work RVUs for evaluation and management services.
    Because the increases in the work RVUs for global surgical services
will cause an increase in payments for those services, we must reduce
all work payments by 0.7 percent to maintain budget neutrality.
    We received the following public comments on this proposal:
    Comment: Several commenters, ranging from individual physicians to
physician specialty societies, expressed support for our proposal
because it makes the increased work associated with the preservice and
postservice work of global surgical services consistent with the
increases that were made to evaluation and management services for the
1997 physician fee schedule.
    Response: We agree that our proposal will make payment amounts for
the increased evaluation and management services present in the
preservice and postservice work of global surgical services more
consistent with the increases in work that were made to evaluation and
management services.
    Comment: Several commenters expressed concerns that our proposal
did not include all global surgical services. Commenters requested that
we review our list of global surgical services to be affected by these
work RVU increases.
    Response: We agree with commenters that we inadvertently omitted
certain global surgical services from our proposal. We addressed this
oversight by reviewing the list of global surgical services,
identifying those services which were omitted. After this residual list
of services was compiled, we contacted the specialty societies most
closely identified with the omitted CPT codes in order to attach the
appropriate number of office visits associated with each individual CPT
code.
    Result of evaluation of comments: We are adopting our proposal to
increase the work RVUs associated with global surgical services to
reflect the increased evaluation and management present in the
preservice and postservice portions of these services. We have added
the services referred to above. This will assure that the evaluation
and management portions of global surgical services are consistent with
our 1997 increases to evaluation and management services. Those codes
that have been changed due to the increase of work RVUs of global
surgical services are identified in Addendum B.

H. Caloric Vestibular Testing

    We proposed to reduce the RVUs for caloric vestibular testing, CPT
code 92543, to 25 percent of what the values would have otherwise been.
We made this proposal in order to permit physicians and suppliers to
bill four units of service instead of the one unit now permitted. The
use of four units is consistent with the AMA's interpretation of the
code.
    Addendum C in the June 18, 1997 proposed rule contained an error.
The reduction to 25 percent of the RVUs otherwise applicable was
reflected for the practice expense RVUs, but we incorrectly published
unreduced RVUs for work and malpractice. On August 18, 1997, we
published a correction notice (62 FR 43962) to reflect the correct
values. The new values for work and malpractice were 25 percent of the
numbers previously published.
    The reduction to the direct practice expense RVUs had been
correctly noted in the proposed rule. However, because the indirect
practice expense RVUs are partially based on the work RVUs, the
reduction to the work RVUs caused a reduction to the indirect practice
expense RVUs. The new total practice expense RVUs published in the
correction notice reflect the reduced indirect practice expense RVUs.
    Because resource-based practice expense RVUs will not be
implemented effective January 1998, the practice expense RVUs published
in this final rule differ from those published in the proposed rule and
the correction notice. The final practice expense RVUs continue to be
based on charge-based data and are simply 25 percent of the charge-
based RVUs currently in effect. The final work and malpractice RVUs are
those published in the correction notice. They too are 25 percent of
the values currently in effect.
    Two physician organizations expressed support for this change.
Other comments are discussed below.
    Comment: One commenter suggested that Medicare should recognize
four units of service when four irrigations are performed but that we
should not make a reduction in RVU amounts.
    Response: This change is not intended to reflect a decision that
our relative payment amounts are too low for caloric vestibular
testing. Medicare has not made such a decision. Instead, we are simply
reconciling our interpretation of the code with the AMA's
interpretation and, in order to do this in a budget neutral fashion, we
are reducing the RVUs to 25 percent of the amount otherwise applicable.
    Comment: Another commenter did not oppose this proposal but opposed
the proposed resource-based practice expense RVUs for the service.
    Response: Since we are no longer proceeding with resource-based
practice expense RVUs for 1998, the merits of these comments will not
be addressed in this final rule.
    Result of evaluation of comments: Beginning in 1998, when a
physician performs and interprets four irrigations, the physician will
bill Medicare for four units of CPT code 92543 (that is, the global
service). When a physician interprets four irrigations, the physician
will bill four units of CPT code 92543-26. When a physician or supplier
performs four irrigations, the physician or supplier will bill four
units of CPT code 92543-TC.

I. Clinical Consultations

    There are two CPT codes for clinical consultations, CPT codes 80500
(Clinical pathology consultation; limited, without review of patient's
history and medical records) and 80502 (Clinical pathology
consultation; comprehensive, for a complex diagnostic problem, with
review of patient's history and medical records), which were added to
the CPT in 1985.
    The regulations set forth at Sec. 415.130 (Conditions for payment:
Physician pathology services), paragraph (b)

[[Page 59077]]

(Clinical consultation services), require that a clinical consultation
meet four criteria before it can be paid. One of these criteria is that
the clinical consultation must be requested by the patient's attending
physician. As we indicated in the preamble to the proposed rule, we
have allowed a standing order policy to be used as a substitute for the
individual request by the patient's attending physician since a 1984
law suit. However, we believe that this policy is no longer
appropriate. Because the policy was not embodied in the court's
judgment or otherwise required by law and because we view it as
creating opportunities for abuse and waste, effective January 1, 1998,
we are not accepting a standing order as a substitute for the
individual request by the attending physician. We are instructing the
Medicare carriers to enforce Sec. 415.130(b) as it is presently
written.
    Comment: We received comments from two organizations and many
individual pathologists from Florida. These commenters argue that
standing orders are an efficient mechanism of providing interpretive
reports of specific clinical laboratory tests to attending physicians
without prolonging care or the length of a hospital stay. Therefore,
the proposed elimination of standing orders would create unnecessary
delays and could adversely affect patient care and increase the cost of
care.
    Response: As we explained in the June 1997 proposed rule,
pathologists could use a standing order policy to generate unnecessary
consultations. These consultations may occur even though the attending
physician can properly interpret the test results and does not need the
assistance of the pathologist. We readily admit that standing orders
can offer efficiencies over individual requests by attending physicians
when attending physicians need interpretations from pathologists.
However, we must balance this concern with the risk that the Medicare
program may be inappropriately paying for medically unnecessary
services under a standing order policy.
    Comment: Individual commenters stated that there are several tests
when prompt interpretation of tests is needed and the tests require
interpretation by pathologists. Examples of these tests include cardiac
enzymes, serum protein electrophoresis, and immunoelectrophoresis.
    Response: These commenters appear to be confusing our policy on
clinical laboratory interpretation services with clinical
consultations. Before the implementation of the physician fee schedule
in 1992, we worked with the College of American Pathologists and our
carrier medical directors to identify those clinical laboratory tests
for which the attending physician would ordinarily need the
pathologist's interpretation. The clinical laboratory tests, which the
commenters mentioned, were on the original list of tests which our
carrier medical directors reviewed. Working with the carrier medical
directors, we identified a list of 15 clinical laboratory tests for
which we would recognize a clinical laboratory interpretation service.
These tests were listed in the November 1991 final rule (56 FR 59565)
and can be found at section 15020 E of the Medicare Carriers Manual.
The list includes CPT codes 86320, 86325 and 86327, which describe
immunoelectrophoresis services, and CPT code 84165, which describes
serum protein electrophoresis. Since these tests are ordinarily
interpreted by a pathologist, we allow a standing order policy to be
used in place of an individual request by an attending physician.
    Result of evaluation of comments: Except for the clinical
laboratory tests mentioned above, we will not accept a standing order
as a substitute for the individual request by the attending physician.
We will instruct the Medicare carriers to enforce Sec. 415.130(b) as it
is presently written.

J. Actual Charges

    In the June 18, 1997 proposed rule (62 FR 33184), we defined the
term ``actual charge'' to be the lesser of the amount the physician,
supplier, or other person charges for the service to a particular
beneficiary or the amount they have voluntarily agreed to accept as
payment in full under a private plan contract that also covers the
beneficiary when Medicare is primary and the private plan is secondary.
We proposed this policy to protect Medicare beneficiaries from
incurring greater deductible and coinsurance expenses as a result of
enrollment in Part B of Medicare if the private plan's payment amount
is less than the Medicare payment, and the Medicare coinsurance is more
than the private plan's copayment.
    For example, a retiree age 64, enrolled in a managed care plan, has
a cataract removed by a physician who participates in Medicare and in
the managed care plan. The managed care plan pays $800 of the
physician's $1,500 actual charge. The retiree pays a $5 copayment. The
physician cannot bill the retiree for the remaining amount under the
terms of the contract with the managed care plan.
    The retiree reaches age 65 and enrolls in Medicare Part B, which is
usually required by the employer or the plan in order for the
beneficiary to stay in the managed care plan. The beneficiary pays the
Medicare premium each month and has the second cataract removed.
Medicare is now the primary payer and the managed care plan is a
secondary payer. The physician takes assignment on the Medicare claim
and Medicare allows $1,000 of the physician's $1,500 charge. Medicare
pays $800, its share of the payment. The physician bills the managed
care plan for the $200 coinsurance but the plan may refuse to pay
because the physician has already received the $800 that the plan
considers to be payment in full. The physician may attempt to collect
the coinsurance from the beneficiary. When this occurs, the beneficiary
may have more out-of-pocket expense after age 65 than before. The
potential for higher out-of-pocket expenses occurs also with the
services of other practitioners and suppliers, especially suppliers of
durable medical equipment, prosthetics, orthotics, and supplies, who
often deeply discount the price they charge managed care organizations
in exchange for exclusivity and guaranteed business.
    We received numerous comments from individual physicians and
suppliers and the organizations that represent them in opposition of
this proposal. In general, the comments have the following common
themes:
    <bullet> Physicians and suppliers do not know what the plans will
pay for their services, either because the plans change the payment
amounts without notice or, in the case of physicians, because of
withholds and bonuses that do not permit establishing actual payment
for the service until after the end of the year--certainly not in time
for the actual payment to be placed on the claim for Medicare payment.
    <bullet> The proposal would increase physicians' and suppliers'
administrative cost and burden to bill Medicare.
    <bullet> There is no statutory basis for interpreting the term
``actual charges'' in any manner other than the plain meaning of the
words, for example, whatever the physician or supplier chooses to
charge.
    <bullet> There is no standard coding and/or bundling among payers,
hence, there is no standard description of services on which to base a
comparison of Medicare and managed care payments.
    <bullet> The proposal constitutes a breach of faith with the
physician community that supports the physician fee schedule because of
the participatory nature of its development.
    As a result of our review of the comments, we have decided that the

[[Page 59078]]

actual charge issue, including the implications for beneficiary out-of-
pocket expense, requires further study. Although we are not issuing a
final rule requiring physicians and suppliers to show the lower
negotiated payment as their submitted charge for the service, we
continue to believe that the lower negotiated rate should be the
submitted charge in this situation.

III. Implementation of the Balanced Budget Act of 1997

    In addition to the physician fee schedule provisions of the
Balanced Budget Act of 1997, the new legislation expands the previously
enacted Medicare screening mammography benefit and adds several new
screening benefits to the law--the colorectal cancer screening benefit
and the screening pelvic examination benefit effective January 1, 1998.
For many years physicians have understood the value of prevention and
early detection measures in dealing with medical problems. Preventive
services for the early detection of disease have also been associated
with substantial reductions in morbidity. For example, dramatic
reductions in the incidence of invasive cervical cancer and in cervical
cancer mortality have occurred following the implementation of
screening programs using Papanicolaou testing to detect cervical
dysplasia.
    Although sound clinical reasons exist for emphasizing prevention in
medicine, studies have shown that clinicians often fail to provide
recommended clinical preventive services. This is due to a variety of
factors, including inadequate reimbursement for preventive services,
fragmentation of health care delivery, and insufficient time with
patients to deliver the range of preventive services that are
recommended. It is our expectation that implementation of the recently
enacted new Medicare benefit provisions should help to overcome at
least some of the barriers to the use of preventive services, and may
lead to substantial reductions in morbidity and mortality.

A. Changes in Practice Expense Relative Value Units for 1998

    Section 4505 of the Balanced Budget Act of 1997 delays the
implementation of the resource-based practice expense RVU system until
January 1, 1999 and specifies the manner in which practice expense RVUs
in 1998 are adjusted.
    The 1998 practice expense RVUs for certain services are reduced to
110 percent of their work RVUs for the service. The reductions are used
to increase practice expense RVUs for office visits. (Section 4505 of
the BBA 1997 also provides the Secretary with the authority to adjust
the 110 percent figure if the aggregate amount of reductions exceeds
$390 million. Since the application of the 110 percent results in
reductions of about $330 million, we did not need to make an additional
adjustment.)
    There are two categories of services that are excluded from this
limitation: (1) The service provided more than 75 percent of the time
in an office setting; and (2) the service had a proposed resource-based
practice expense RVU (that is, the practice expense RVU for the service
published in the June 18, 1997 proposed rule (62 FR 33158 et seq.))
that was an increase from its 1997 practice expense RVU.
    In addition, there are services whose work RVU is zero and
therefore are not affected by this provision. These services include
technical component (TC) services (such as the TC of radiology
services, surgical pathology services, and other services that have a
corresponding PC service) and diagnostic tests, such as psychological
tests, that are not TC services (because there is no corresponding PC
service).
    The exclusion for services because they have a value that increased
in the June 1997 proposed rule (62 FR 33160) is applied separately by
site-of-service with the distinction made between in-office and out-of-
office services. For most codes, the June 1997 proposed rule provided a
practice expense RVU for both the in-office and the out-of-office
setting. Thus, if the proposed 1998 resource-based practice expense RVU
for a code for the in-office setting increased in relation to its 1997
practice expense RVU even though the proposed value exceeded 110
percent of the work RVU, this code, for this service and this site, was
excluded from the practice expense RVU reduction. Similarly, if the
proposed 1998 resource-based practice expense RVU for the same code for
the out-of-office setting decreased in relation to its 1997 practice
expense RVU and the proposed value exceeded 110 percent of the work
RVU, then this code, for this service and this site, was subject to the
practice expense RVU reduction.
    For 1998, the carriers will apply the same site-of-service
differential policy they applied in 1997. Under the site-of-service
differential, the practice expense RVUs for a procedure code that is
furnished outside the office are reduced by 50 percent. There are
approximately 700 codes affected by this policy. To coordinate this
policy with the site-of-service distinctions in the June 1997 proposed
rule and the interaction of the provisions of section 4505 of the BBA
1997, we are listing in Addendum B the practice expense RVUs for the
two sites for the 700 procedure codes instead of allowing the carrier
to calculate the 50 percent reduction.
    The practice expense RVUs for office visit procedure codes are
increased by a uniform percentage. This uniform percentage (13 percent)
is calculated so that the aggregate increase in practice expense RVUs
for office visit procedures is equal to the decrease in Practice
expense RVUs for services whose practice expense RVUs are reduced. This
results in an increase in total payments of between 3 percent and 5
percent for the office visit codes.

B. Coverage of Screening Mammography and Related Payment Changes

    Before the enactment of the BBA 1997, section 1834(c)(2) of the Act
prescribed certain limitations on the frequency of coverage of
mammography screenings for women over 39 years of age with no waiver of
the yearly Part B deductible requirement. Specifically, for a woman
over age 39 but under 50 years of age, the law provided for coverage of
screening mammography either once a year or twice a year depending upon
whether the woman was considered to be at high risk of developing
breast cancer, as determined pursuant to factors identified by the
Secretary and specified in regulations. In the case of a woman over 49
years of age but under 65 years of age, the law specified that payment
could be made for a screening mammography once a year (that is, if at
least 11 months had passed following the month in which the last
screening mammography was performed). Finally, in the case of a woman
over 64 years of age, the law provided that payment could be made for a
screening mammography once every 2 years following the month in which
the last screening mammography was performed.
    Section 4101(a) of the BBA 1997 amends section 1834(c)(2)(A) of the
Act effective January 1, 1998 to simply provide that in the case of any
woman over 39 years of age, payment may be made for a screening
mammography if at least 11 months have passed following the month in
which the last screening mammography was performed. Section 4101(b) of
the BBA 1997 amends sections 1833(b) and 1834(c)(1)(C) of the Act to
waive the Part B deductible requirement.
    In view of the statutory changes in the (1) limitations on the
frequency of coverage of screening mammographies for all women over 39
years of age and (2) the Part B deductible requirement as

[[Page 59079]]

it relates to all screening mammography services, we are amending
Sec. 410.34(d) (relating to limitations on coverage of screening
mammography) and are adding a new exception as paragraph (5) in
Sec. 410.160(b) (relating to exceptions to the Part B annual
deductible) to reflect these changes in the regulations.

C. Colorectal Cancer Screening

    Section 4104 of the BBA 1997 provides for Medicare coverage of
colorectal cancer screening tests effective for services provided on or
after January 1, 1998. The law provides for coverage for screening
fecal-occult blood tests, screening flexible sigmoidoscopy, screening
colonoscopy, and other tests we determined to be appropriate, subject
to certain frequency and payment limits.
    Present Medicare coverage policy allows payment for diagnostic
tests to diagnose colorectal cancer and related medically necessary
services that are furnished to beneficiaries. Under this policy,
diagnostic colorectal cancer tests are covered if they are medically
necessary to evaluate a specific complaint from or monitor an existing
medical condition of an individual who has had a history of colon
cancer or inflammatory bowel disease. This coverage is based, in part,
on section 1861(s)(3) of the Act, which provides general Medicare
coverage for diagnostic x-ray, clinical laboratory, and other
diagnostic tests. However, prior to the enactment of the BBA 1997,
screening colorectal cancer tests have been excluded from coverage
based on section 1862(a)(7) of the Act, which states that routine
physical checkups are excluded services. This exclusion is described in
Medicare regulations in Sec. 411.15(a).
1. Coverage Determination in Screening Barium Enemas
    Section 4104(a)(2) of the BBA 1997 requires us to publish a notice
in the Federal Register related to the coverage of screening barium
enema as a colorectal cancer screening test. As provided by section
4104(a)(2) of the BBA 1997, this notice is to be published in the
Federal Register by November 3, 1997, within 90 days after the date of
enactment.
    To the three colorectal cancer screening tests specifically
designated as covered under sections 1861(pp)(1)(A), (B), and (C) of
the Act, section 4104(a)(2) of the BBA 1997 added a new section
1861(pp)(1)(D) to the Act to provide that colorectal cancer screening
tests may also include coverage of other tests or procedures the
Secretary determines to be appropriate based on consultation with
appropriate organizations.
    As required by section 1861(pp)(1)(D) of the Act, we, acting on
behalf of the Secretary, consulted with appropriate Federal government
organizations and other organizations regarding the efficacy of a
barium enema examination for detecting colorectal cancer. We also
inquired about how this coverage should be included under Medicare. We
contacted representatives of various Federal agencies, including the
Agency for Health Care Policy and Research, the Centers for Disease
Control and Prevention, the Food and Drug Administration, and the
National Cancer Institute, knowledgeable about using a barium enema as
a screening test to detect colorectal cancer. We also consulted with
staff from the American Cancer Society. In addition, the American
Medical Association convened a preventive medicine expert panel that
included representatives from the United States Preventive Services
Task Force and various medical specialty organizations, such as the
American Medical Association Council on Scientific Affairs, the
American Medical Association Council on Medical Services, the American
Academy of Family Physicians, the American College of Physicians, the
American College of Preventive Medicine, the American College of
Radiology, and the American Society of Colon and Rectal Surgeons.
    Based on our review of this information and our evaluation of other
data, we concluded that while there is not a consensus in the medical
community regarding the specific role of a barium enema examination
under the Medicare colorectal cancer screening benefit when compared to
the use of the flexible sigmoidoscopy and colonoscopy examinations,
there is a sufficient basis for us to include the use of barium enema
as part of the new national Medicare coverage for colorectal screening.
    In its Executive Summary, (AHCPR Publication Number 97-0302)
Evidence Report No. 1: Colorectal Cancer Screening, the Agency for
Health Care Policy and Research concluded that there is indirect
evidence that supports the use of double contrast barium enema in
screening for colorectal cancer. They also noted that the double
contrast barium enema can image the entire colon and detect cancers and
large polyps. (Medicare policy already allows payment for diagnostic
barium enemas that are performed to evaluate a beneficiary's specific
complaint or to monitor an existing medical condition for an individual
with a history of colon cancer.) Additionally, the role of the barium
enema examination as a colorectal cancer screening examination has
recently been studied by several multi-disciplinary expert panels and,
as a result of those studies, it appears that the usefulness of the
examination is becoming widely accepted in the United States. First,
the American Gastroenterological Association initially in conjunction
with the Agency for Health Care Policy and Research, completed their
report earlier this year. The double contrast barium enema was
recommended as a screening option for all average risk patients (those
with no predisposing factors) and selected groups of high risk patients
(those with a history of prior polyps, or those with a first degree
relative with colorectal cancer). Only in the case of the subset of
patients at high risk with a family history of familial adenomatous
polyposis, hereditary non-polyposis colorectal cancer, and inflammatory
bowel disease was a colonoscopy recommended as the only screening
modality. (This subset of patients represents a minority of the high
risk population as defined by statute.) Second, earlier this year the
American Cancer Society recently revised their guidelines to include
the double contrast barium enema as an option for patients at average
and moderate risk (nearly identical to the above described American
Gastroenterological Association guidelines).
    The American Gastroenterological Association and the National
Cancer Institute studies have indicated that one of the major
advantages of the barium enema examination is that it permits the
imaging of the entire colorectum and it appears to have the ability to
detect precursor adenomas as well as colorectal cancers. Anatomic
visualization of the entire colorectum is believed to be highly
desirable and is widely considered optimum for evaluating the colon.
(It is generally acknowledged that one limitation of the flexible
sigmoidoscopy examination is that it only allows for direct examination
of the lower third to one-half of the colorectum.) There is also some
evidence that racial differences exist in the distribution of
colorectal cancers, with African-Americans having a higher proportion
of cancers in the right side of the colon than Caucasians. Thus, tests
that allow full structural coverage of the entire colorectum are needed
as a choice for certain segments of the population.
    Furthermore, on the basis of the information we have reviewed, the
barium enema screening examination appears to have a superior safety
profile

[[Page 59080]]

when compared to the screening flexible sigmoidoscopy and colonoscopy
examinations, and it does not require sedation as is the case with
colonoscopy examinations. Our information indicates that patients are
typically exposed to 300 to 500 mrad of radiation during a barium enema
examination, which is about equivalent to the dose of radiation that
results from a single screening mammography examination. Considering
the age and frequency at which screening is recommended for a barium
enema examination, it is estimated by the American College of Radiology
that a screening strategy using a barium enema x-ray every 2 or 4 years
would deliver a lifetime dose of radiation that is lower than the
radiation that would result from use of the annual Medicare screening
mammography benefit.
    Specifically, in view of the information summarized above, we have
determined that a barium enema is a reasonable and necessary screening
test for colorectal cancer, and have decided to cover screening barium
enema examinations in the following manner:
    First, such a screening examination may be covered as an
alternative to a flexible sigmoidoscopy examination (that is, as a
substitute for, and not as an added optional benefit) for an individual
attaining age 50 and not at high risk for colorectal cancer, if the
individual's attending physician orders the test in writing after a
determination that the test is the appropriate screening test. That is,
the attending physician must determine that, in the case of a
particular individual, the estimated screening potential for the barium
enema is equal to or greater than the screening potential that has been
estimated for a flexible sigmoidoscopy for that same individual. For
example, in the case of an individual who is taking anti-coagulant
medications, the individual's attending physician may decide to order a
barium enema instead of a flexible sigmoidoscopy because it is less
likely to produce bleeding and typically allows for a total inspection
of the colon, while the flexible sigmoidoscopy does not.
    Second, we are establishing a frequency limitation for the coverage
of the screening barium enema for an individual age 50 and over who is
not at high risk for colorectal cancer at the same time interval that
is specified in the statute for screening flexible sigmoidoscopy
examination (that is, once every 48 months for the same individual.)
    Third, we are providing that a screening barium enema may be
covered as an alternative to a screening colonoscopy (that is, as a
substitute and not as an added optional benefit) for individuals at
high risk for colorectal cancer, if the individual's attending
physician orders the test in writing following a determination that the
screening barium enema is the appropriate test for that particular
individual. This means that the attending physician must determine, in
the case of a particular individual, that the estimated screening
potential for the barium enema examination is equal to or greater than
the screening potential that has been estimated for the colonoscopy
examination. For instance, in the case of an individual at high risk
for colorectal cancer who may not be able to receive a complete
colonoscopy due to a markedly long and twisting loop(s) of colon, the
individual's attending physician may decide to order a barium enema in
lieu of a screening colonoscopy because it is more likely to permit a
complete view of the entire colon.
    Fourth, we are establishing the frequency limitation for coverage
of the screening barium enema for an individual who is at high risk for
colorectal cancer at the same time interval that is specified in the
statute for screening colorectal examinations (that is, once every 24
months for the same individual.)
    Fifth, we are establishing the double contrast barium enema as the
standard type of screening barium enema that will be covered under the
Medicare program because, based on information obtained from the
American College of Radiology, we understand that it is regarded as the
most sensitive for small colonic lesions in patients who are adequately
prepared and optimally imaged. In the case of some patients who are
infirm, immobile, or debilitated, however, a technically optimal double
contrast examination may not be possible. In these patients a single
contrast barium examination may be performed with high quality results
despite the limitations of the patient's condition. In these
situations, we are covering the single contrast method if it would
satisfy the test described above for allowing coverage of the barium
enema examination as an alternative to one of the other two colorectal
cancer screening tests. That is, the individual's attending physician
would have to determine that the estimated screening potential from the
use of the single contrast barium enema is equal to or exceeds the
estimated screening potential that would result from the use of the
flexible sigmoidoscopy and the colonoscopy examinations.
    In summary, effective January 1, 1998, we will pay for screening
barium enemas as an alternative to either a screening flexible
sigmoidoscopy or a screening colonoscopy, in accordance with the same
frequency parameters specified in the law for the other two colorectal
screening services identified.
2. Provisions of the Final Rule
    We are specifying an exception to the list of examples of routine
physical checkups excluded from coverage in Sec. 411.15(a)(1)
(Particular services excluded from coverage). The exception is for
colorectal cancer screening tests that meet the frequency limitations
and the conditions for coverage that we are specifying under
Sec. 410.37. Coverage of colorectal cancer screening tests is provided
under Medicare Part B only.
3. Frequency Limits and Conditions of Coverage
    Section 4104 of the BBA 1997 adds new subparagraph (R) to section
1861(s)(2) of the Act authorizing Medicare coverage of certain
colorectal screening services as defined in section 1861(pp) that are
furnished on or after January 1, 1998. These statutorily mandated
colorectal services include screening fecal-occult blood tests,
screening flexible sigmoidoscopy examinations, and screening
colonoscopy examinations. Section 4104(b) of the BBA 1997 also
establishes frequency of coverage limitations for all three of these
colorectal screening services. The frequency of coverage limitations
specified for fecal-occult blood tests is that payment may be made only
for an individual 50 years of age or over, if the test has not been
performed within the 11 months that have passed following the month in
which the last screening fecal-occult blood test was performed. The
frequency of coverage limitation indicated for screening flexible
sigmoidoscopy examinations is that payment may be made only for an
individual age 50 years of age or over, if the procedure has not been
performed within the 47 months that have passed following the month in
which the last screening flexible sigmoidoscopy examination was
performed. In the case of screening colonoscopy examinations, section
4104 of the BBA 1997 provides for coverage of screening colonoscopies
for individuals at high risk for developing colorectal cancer (as now
defined in section 1861(pp)(2) of the Act), if the screening
examination has not been performed within the 23 months that have
passed following the month in which the last screening colonoscopy was
performed.

[[Page 59081]]

    We have added Sec. 410.37 to provide for coverage of four types of
colorectal cancer screening tests. First, we are specifying several
definitions of terms that are included to implement the statutory
provisions and to help the reader in understanding the regulation
provisions. These include definitions of the terms (1) colorectal
cancer screening tests, (2) fecal-occult blood test, (3) individual at
high risk for colorectal cancer, (4) screening barium enema, and (5)
attending physician. Second, we are establishing conditions of coverage
for all four of the colorectal cancer screening tests that we will be
paying for, effective January 1, 1998. Under our authority under the
``reasonable and necesary'' clause of the Act, section 1862(a)(1)(A),
we are establishing conditions under which we would cover colorectal
screening services. In Sec. 410.37(b) (Conditions for coverage of
screening fecal-occult blood tests) and Sec. 410.37 (h) (Conditions for
coverage of screening barium enemas) we are specifying that coverage is
available for screening fecal-occult blood tests and screening barium
enema examinations only if they are ordered in writing by the
beneficiary's attending physician. We are including these coverage
requirements to make certain that beneficiaries receive appropriate
preventive counseling about the implications and possible results of
having these examinations performed. In addition, in the case of the
screening barium enema, which we will cover as an alternative to either
the screening flexible sigmoidoscopy or the colonoscopy examination, we
want to ensure that the beneficiary's attending physician has made a
determination that the screening potential of that exam is at least
equal to or greater than the screening potential for the alternative
examination. Third, in order to ensure that the screening flexible
sigmoidoscopy and screening colonoscopy exams are performed as safely
and accurately as possible, we are requiring in Sec. 410.37(d)
(Conditions for coverage of screening flexible sigmoidoscopies) and
Sec. 410.37(f) (Conditions for coverage of screening colonoscopies)
that the examinations must be performed by a doctor of medicine or
osteopathy (as defined in section 1861(r)(1) of the Act.)
    Additionally, in Secs. 410.37(c), 410.37(e), 410.37(g), and
410.37(i) (Limitations on coverage of screening fecal-occult blood
tests, Limitations on coverage of screening flexible sigmoidoscopies,
Limitations on coverage of screening colonoscopies, and limitations on
coverage of screening barium enemas, respectively), we are setting
forth the following frequency and payment restrictions for the four
types of colorectal cancer screening test covered, which are mandated
by sections 1834(d)(1)(B), 1834(d)(2)(E) and 1834(d)(3)(E) of the Act,
except for those relating to screening barium enema examinations, which
the law did not specifically address.

Limits on Fecal-Occult Blood Tests

    <bullet> Payment may not be made for a screening fecal-occult blood
test performed for an individual under age 50.
    <bullet> For an individual 50 years of age or over, payment may be
made for a screening fecal-occult blood test performed after at least
11 months have passed following the month in which the last fecal-
occult blood test was performed.

Limits on Flexible Sigmoidoscopies

    <bullet> Payment may not be made for a screening flexible
sigmoidoscopy performed for an individual under age 50.
    <bullet> For an individual 50 years of age or over, payment may be
made for a screening flexible sigmoidoscopy performed after at least 47
months have passed following the month in which the last screening
flexible sigmoidoscopy, or the last screening barium enema was
performed.

Limits on Colonoscopies

    <bullet> Payment may not be made for a screening colonoscopy
performed for an individual who is not at high risk for colorectal
cancer.
    <bullet> Payment may be made for a screening colonoscopy performed
for an individual at high risk for colorectal cancer after at least 23
months have passed following the month in which the last screening
colonoscopy or the last screening barium enema was performed.

Limits for Barium Enemas

    <bullet> In the case of an individual age 50 and over who is not at
high risk for colorectal cancer, payment may be made for a screening
barium enema after 47 months have passed following the month in which
the last screening barium enema, or the last screening flexible
sigmoidoscopy was performed.
    <bullet> In the case of an individual who is at high risk for
colorectal cancer, payment may be made for a screening barium enema
after at least 23 months have passed following the month in which the
last screening barium enema, or the last screening colonoscopy was
performed.
    As indicated previously, in explaining our national coverage
determination on screening barium enemas, we have decided to pay for
this examination as an alternative to either the flexible sigmoidoscopy
or the colonoscopy coverage provisions (that is, as a substitute for,
and not as add-on coverage.) In reviewing the matter of the appropriate
frequency limits for screening barium enemas, we did consider the
possibility of providing for payment for these services as an add-on to
the other two major screening coverage provisions. However, since the
screening barium enema allows for a complete examination of the colon,
we have not adopted this alternative because we believe it would be
duplicative for us to permit coverage of both a screening barium enema
and a screening flexible sigmoidoscopy (or a screening colonoscopy for
an individual at high risk of colorectal cancer) during the same 2 or 4
year time period, respectively. In the case of a suspicious or
equivocal examination, other tests would be necessary but would be
considered diagnostic tests, not screening, and would be covered under
Medicare. It is generally unnecessary to perform duplicate screening
tests.
4. Payment Limits
    Payment amounts for screening fecal-occult blood tests, screening
sigmoidoscopies, screening colonoscopies, and barium enemas as follows:
    <bullet> Screening fecal occult blood tests are covered at a
frequency of once every 12 months for beneficiaries who have attained
age 50. Section 1834(d)(1) of the Act provides that screening fecal
occult blood tests are paid at the same rate as diagnostic fecal-occult
blood tests (CPT code 82270) are paid under the clinical laboratory fee
schedule. We have created a new HCPCS code G0107, colorectal cancer
screening; fecal-occult blood test, one to three simultaneous
determinations, to be used for screening fecal-occult blood tests. This
code will be carrier-priced at the payment amount that the Medicare
carrier pays for CPT code 82270 under the clinical laboratory fee
schedule.
    <bullet> Screening flexible sigmoidoscopy is covered at a frequency
of once every 48 months for beneficiaries who have attained age 50.
Section 1861(pp)(2) of the Act provides that payment for screening
flexible sigmoidoscopies be paid at rates consistent with payment for
similar or related services under the physician fee schedule, not to
exceed the rates for a diagnostic flexible sigmoidoscopy (CPT code
45330).

[[Page 59082]]

    We have created a new HCPCS code G0104, colorectal cancer
screening; flexible sigmoidoscopy, to be used for screening flexible
sigmoidoscopy. We believe that the work is the same whether the
procedure is a screening or a diagnostic sigmoidoscopy and are,
therefore, assigning the same RVUs to HCPCS code G0104 as those
assigned to CPT code 45330 in Addendum B. If during the course of the
screening flexible sigmoidoscopy a lesion or a growth is detected that
results in a biopsy or removal of the growth, section 1834(d)(2)(D) of
the Act provides that the physician should bill for a flexible
sigmoidoscopy with biopsy or removal, rather than using the screening
HCPCS code G0104.
    <bullet> Screening colonoscopy is covered at a frequency of once
every 24 months for beneficiaries at high risk for colorectal cancer
under section 1834(d)(3)(E) of the Act. Section 1861(pp)(2) of the Act
defines high risk as a person who, because of family history, prior
experience of cancer or precursor neoplastic polyps, a history of
chronic digestive disease condition (including inflammatory bowel
disease, Crohn's disease, or ulcerative colitis), the presence of any
appropriate recognized gene markers for colorectal cancer, or other
predisposing factors, faces a high risk for colorectal cancer. The law
provides that payment for screening colonoscopies be paid at rates
consistent with payment for similar or related services under the
physician fee schedule, not to exceed the rates for a diagnostic
colonoscopy (CPT code 45378).
    We have created a new HCPCS code G0105, colorectal cancer
screening; colonoscopy for an individual at high risk, to be used for
screening colonoscopy. We believe that the work is the same whether the
procedure is a screening or a diagnostic colonoscopy, and we are,
therefore, assigning the same RVUs to HCPCS code G0105 as those
assigned to CPT code 45378 in Addendum B. If during the course of the
screening colonoscopy a lesion or growth is detected that results in a
biopsy or removal of the growth, section 1834(d)(3)(D) of the Act
provides that the physician should bill for a colonoscopy with biopsy
or removal, rather than using the screening HCPCS code G0105.
    <bullet> The frequency of payment limitations for the screening
barium exams will be exactly the same as the frequency of payment
limitations that would apply if the barium examination were not being
substituted for the other screening service (that is, once every 4
years for a flexible sigmoidoscopy examination for individuals age 50
or over and once every 2 years for colonoscopy screening for
individuals at high risk for colorectal cancer).
    We have created the following new HCPCS codes:

------------------------------------------------------------------------
            HCPCS code                           Descriptor
------------------------------------------------------------------------
G0106.............................  Colorectal cancer screening;
                                     alternative to G0104, screening
                                     sigmoidoscopy, barium enema.
G0120.............................  Colorectal cancer screening;
                                     alternative to G0105, screening
                                     colonoscopy, barium enema.
G0121.............................  Colorectal cancer screening;
                                     colonoscopy on individual not
                                     meeting criteria for high risk (non-
                                     covered).
G0122.............................  Colorectal cancer screening; barium
                                     enema (non-covered).
------------------------------------------------------------------------

The first two codes (G0106, and G0120) are to be used for the barium
enema when the barium enema is being substituted for either the
sigmoidoscopy or the colonoscopy, as indicated by the code
nomenclature. The RVUs for these procedures will be the same as for the
diagnostic barium enema procedure, CPT code 74280, and are shown in
Addendum B.
    The second two codes are to be used when the high risk criteria are
not met, or a barium enema is performed but not a substitute for either
a sigmoidoscopy or colonoscopy. These are non-covered services.
5. Screening Colonoscopy in an Ambulatory Surgical Center
    CPT code 45378, which is used to code a diagnostic colonoscopy, is
on the list of procedures approved by Medicare for payment of an
ambulatory surgical center (ASC) facility fee under section 1833(I) of
the Act. CPT code 45378 is currently assigned to ASC payment group 2.
We propose to add the new HCPCS code G0105, colorectal cancer
screening; colonoscopy on individual at high risk, to the ASC list. We
believe that the facility services are the same whether the procedure
is a screening or a diagnostic colonoscopy and are, therefore,
assigning HCPCS code G0105 to payment group 2, which is the same
payment rate assigned to CPT code 45378. If during the course of the
screening colonoscopy performed at an ASC a lesion or growth is
detected which results in a biopsy or removal of the growth, the
appropriate procedure classified as a colonoscopy with biopsy or
removal should be billed and paid rather than HCPCS code G0105.

D. Coverage of Screening Pelvic Examination (Including a Clinical
Breast Examination) and Related Payment Changes

    Section 4102 of the BBA 1997 provides for coverage of screening
pelvic examinations (including a clinical breast examination) for all
female beneficiaries, effective January 1, 1998, subject to certain
frequency and other limitations. A screening pelvic examination
(including a clinical breast examination) should include at least seven
of the following eleven elements:
    <bullet> Inspection and palpation of breasts for masses or lumps,
tenderness, symmetry, or nipple discharge.
    <bullet> Digital rectal examination including sphincter tone,
presence of hemorrhoids, and rectal masses. Pelvic examination (with or
without specimen collection for smears and cultures) including:
    <bullet> External genitalia (for example, general appearance, hair
distribution, or lesions).
    <bullet> Urethral meatus (for example, size, location, lesions, or
prolapse).
    <bullet> Urethra (for example, masses, tenderness, or scarring).
    <bullet> Bladder (for example, fullness, masses, or tenderness).
    <bullet> Vagina (for example, general appearance, estrogen effect,
discharge, lesions, pelvic support, cystocele, or rectocele).
    <bullet> Cervix (for example, general appearance, lesions, or
discharge).
    <bullet> Uterus (for example, size, contour, position, mobility,
tenderness, consistency, descent, or support).
    <bullet> Adnexa/parametria (for example, masses, tenderness,
organomegaly, or nodularity).
    <bullet> Anus and perineum.
    This description is from Documentation Guidelines for Evaluation
and Management Services, published in May 1997, and was developed by
the Health Care Financing Administration and the American Medical
Association. Section 1862(a)(1)(A) of the Act provides that Medicare
cover only services that are reasonable and necessary for the diagnosis
or treatment of illness or injury. We believe that a pelvic screening
procedure should examine

[[Page 59083]]

various anatomical structures to avoid missing detection of as many
potential disorders as practical. We will be including this description
in instructions in the Medicare Carriers Manual.
    This coverage allows payment for one pelvic examination for every
female beneficiary every 3 years but includes the allowance of payment
once every year for certain women of childbearing age as well as
certain women at high risk for cervical or vaginal cancer.
Specifically, section 4102(a) of the BBA 1997 provides for the
following frequency of coverage limitations:
    As reflected in the law, payment may be made for a screening pelvic
examination on an annual basis if one of the following occurs:
    <bullet> The woman is of childbearing age and has had an
examination indicating the presence of cervical or vaginal cancer or
other abnormality during any of the preceding 3 years.
    <bullet> The woman is considered by her physician or other
practitioner to be at high risk of developing cervical or vaginal
cancer as we have defined in these regulations.
    We are adding Sec. 410.56 (Screening pelvic examinations) to
include this new coverage. In Sec. 410.56(a) (Conditions for screening
pelvic examinations), we are requiring that to be covered by Medicare
Part B the screening pelvic examination must be performed by a doctor
of medicine or osteopathy (as defined in section 1861(r)(1) of the
Act), or by a certified nurse midwife (as defined in section 1861(gg)
of the Act), or a physician assistant, nurse practitioner, or clinical
nurse specialist (as defined in section 1861(aa) of the Act) who is
authorized under State law to perform the examination. We have included
this requirement to ensure that the screening exam is performed as
safely and accurately as possible.
    To implement the statutory mandate that requires us to identify in
regulations the high risk factors for cervical and vaginal cancer, we
are specifying in Sec. 410.56(b)(2) (More frequent screening based on
high-risk factors), the following factors that have been recommended to
us by the National Cancer Institute and the Centers for Disease
Prevention and Control. While other factors may have been identified
such as low socioeconomic status, the lack of precise and verifiable
definitions does not make them amenable to regulation at this time.
1. High Risk Factors for Cervical Cancer
    <bullet> Early onset of sexual activity (under 16 years of age).
    <bullet> Multiple sexual partners (five or more in a lifetime).
    <bullet> History of a sexually transmitted disease (including the
human immunodeficiency virus (HIV).
    <bullet> Absence of three negative Pap smears or any Pap smears
within the previous 7 years.
2. High Risk Factors for Vaginal Cancer
    <bullet> Prenatal exposure to diethylstilbestrol.
    Based on consultation with representatives of the American College
of Gynecologists and Obstetricians and others, we have defined a woman
of childbearing age in Sec. 410.56(b)(3) (More frequent screening for
women of childbearing age) to mean a woman who is premenopausal, and
has been determined by her physician or other practitioner, as
specified in Sec. 410.56(a), to be of childbearing age, based on her
medical history or other findings.
    This new section also provides for a waiver of the Part B
deductible requirement that would otherwise be applicable to these
services.

E. Reinstatement of the Payment for Transportation of EKG Equipment

    As set forth in section 4559 of the BBA 1997, effective for
services furnished after December 31, 1997 and before January 1, 1999,
carriers will make separate payments for HCPCS code R0076
(Transportation of portable EKG to facility or location, per patient)
based upon payment methods in effect for these services as of December
31, 1996. EKG transportation payments are made at the carrier-priced
level that was in effect on December 31, 1996. The procedure codes
involved are CPT code 93000 (a 12-lead EKG with interpretation and
report) or CPT code 93005 (a 12-lead EKG, tracing only, without
interpretation and report). When multiple patients receive services at
the same site, the transportation payment amount must be prorated among
all patients seen. These payments may be made only under the following
circumstances:
    <bullet> The transportation service is furnished in connection with
standard EKG procedures furnished by approved suppliers of portable x-
ray services as set forth in section 2070.4.F. of the Medicare Carriers
Manual.
    <bullet> The transportation service is furnished in connection with
standard EKG procedures by an independent diagnostic testing facility
or an independent physiological laboratory under the conditions set
forth in section 2070.1.G. of the Medicare Carriers Manual.

F. Waiver of Proposed Rulemaking for Provisions in the Balanced Budget
Act of 1997

    We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite prior public comment on proposed rules. We
have found good cause that a notice-and-comment procedure can be waived
for the BBA 1997 provisions discussed above. A complete explanation of
reasons is given in section VII. of this preamble.

IV. Refinement of Relative Value Units for Calendar Year 1998 and
Responses to Public Comments on Interim Relative Value Units for 1997

A. Summary of Issues Discussed Related to the Adjustment of Relative
Value Units

    Section IV.B. of this final rule describes the methodology used to
review the comments received on the RVUs for physician work and the
process used to establish RVUs for new and revised CPT codes. Changes
to codes on the physician fee schedule reflected in Addendum B are
effective for services furnished beginning January 1, 1998.

B. Process for Establishing Work Relative Value Units for the 1998 Fee
Schedule

    Our November 22, 1996 final rule on the 1997 physician fee schedule
(61 FR 59490) announced the final RVUs for Medicare payment for
existing procedure codes under the physician fee schedule and interim
RVUs for new and revised codes. The RVUs contained in the rule apply to
physician services furnished beginning January 1, 1997. We announced
that we considered the RVUs for the interim codes to be subject to
public comment under the annual refinement process. In this section, we
summarize the refinements to the interim work RVUs that have occurred
since publication of the November 1996 final rule and our establishment
of the work RVUs for new and revised codes for the 1998 fee schedule.
1. Work Relative Value Unit Refinements of Interim and Related Relative
Value Units (Includes Table 1--Work Relative Value Unit Refinements of
1997 Interim and Related Relative Value Units)
    Although the RVUs in the November 1996 final rule were used to
calculate 1997 payment amounts, we considered the RVUs for the new or
revised codes to be interim. We accepted comments for a period of 60
days. We received substantive comments from

[[Page 59084]]

approximately five specialty societies on approximately nine CPT codes
with interim RVUs. Only comments received on codes listed in Addendum C
of the November 1996 final rule were considered this year.
    Due to the low volume of comments we received for 1997 CPT codes
with interim RVUs, we adjusted the refinement process we have used in
previous years. (See the November 22, 1996 final rule on the physician
fee schedule (61 FR 59536) for a detailed explanation of the refinement
of CPT codes with interim RVUs.) Instead, we invited one representative
from each of the five specialty societies from which comments were
received to attend a discussion of the codes commented on by their
respective societies. In attendance at this meeting were the following
representatives:
    <bullet> A clinician representing each of the specialties most
identified with the procedures in question. Each specialist was
nominated by the specialty society that submitted the comments.
    <bullet> Representatives from the AMA's RUC.
    <bullet> Carrier medical directors.
    <bullet> HCFA medical officers.
    <bullet> HCFA staff.
    The group discussed the work involved in each procedure under
review in comparison to the work associated with other services on the
fee schedule. We had assembled a set of reference services and asked
the group members to compare the clinical aspects of the work of
services they believed were incorrectly valued to one or more of the
reference services. In compiling the set, we attempted to include: (1)
Services that are commonly performed whose work RVUs are not
controversial; (2) services that span the entire spectrum from the
easiest to the most difficult; and (3) at least three services
performed by each of the major specialties so that each specialty would
be represented. The set listed approximately 300 services. Group
members were encouraged to make comparisons to reference services.
    The specialty society's recommendations were accepted for all nine
of the CPT codes that were reviewed. We will continue with the regular
refinement process for future years.

Table 1--Work Relative Value Unit Refinements of 1997 Interim and
Related Relative Value Units

    Table 1 lists the interim and related codes reviewed during the
1997 refinement process described in this section. This table includes
the following information:
    <bullet> CPT Code. This is the CPT code for a service.
    <bullet> Description. This is an abbreviated version of the
narrative description of the code.
    <bullet> 1997 Work RVU. The work RVUs that appeared in the November
1996 rule are shown for each reviewed code.
    <bullet> Requested Work RVU. This column identifies the work RVUs
requested by commenters.
    <bullet> 1998 Work RVU. This column contains the final RVUs for
physician work.
    The new values emerged from analysis of the specialty
representative's presentation.

                         Table 1.--Work RVU Refinement of 1997 Interim and Related RVUs
----------------------------------------------------------------------------------------------------------------
                                                                            1997 work    Requested    1998 work
  CPT*              MOD                          Description                   RVU        work RVU       RVU
----------------------------------------------------------------------------------------------------------------
37250..  .........................  Intravascular us.....................         1.51         2.10         2.10
37251..  .........................  Intravascular us.....................         1.15         1.60         1.60
56300..  .........................  Pelvis laparoscopy, dx...............         3.65         5.00         5.00
56305..  .........................  Pelvic laparoscopy, biopsy...........         3.97         5.30         5.30
75945..  26                         Intravascular us.....................         0.29         0.40         0.40
75946..  26                         Intravascular us.....................         0.29         0.40         0.40
95921..  26                         Autonomic nerve function test........         0.45         0.90         0.90
95922..  26                         Autonomic nerve function test........         0.48         0.96         0.96
95923..  26                         Autonomic nerve function test........         0.45         0.90        0.90
----------------------------------------------------------------------------------------------------------------
* All CPT and descriptors copyright 1997 American Medical Association

2. Establishment of Interim Work Relative Value Units for New and
Revised Physicians' Current Procedural Terminology Codes and New HCFA
Common Procedure Coding System Codes for 1998
    a. Methodology (Includes Table 2--American Medical Association
Specialty Society Relative Value Update Committee and Health Care
Professionals Advisory Committee Recommendations and HCFA's Decisions
for New and Revised 1998 CPT Codes). One aspect of establishing work
RVUs for 1998 was related to the assignment of interim work RVUs for
all new and revised CPT codes. As described in our November 25, 1992
notice on the 1993 fee schedule (57 FR 55938) and in section III.B. of
our November 26, 1996 final rule (61 FR 59505 through 59506), we
established a process, based on recommendations received from the AMA's
Specialty Society Relative Value Update Committee (RUC), for
establishing interim RVUs for new and revised codes.
    We received work RVU recommendations for approximately 208 new and
revised codes from the RUC. Physician panels consisting of carrier
medical directors and our staff reviewed the RUC recommendations by
comparing them to our reference set or to other comparable services on
the fee schedule for which work RVUs had been established previously,
or to both of these criteria. The panels also considered the
relationships among the new and revised codes for which we received the
RUC recommendations. We agreed with a majority of those relationships
reflected in the RUC values. In some cases when we agreed with the RUC
relationships, we revised the work RVUs recommended by the RUC in order
to achieve work neutrality within families of codes. That is, the work
RVUs have been adjusted so that the sum of the new or revised work RVUs
(weighted by projected frequency of use) for a family of codes will be
the same as the sum of the current work RVUs (weighted by their current
frequency of use). For approximately 96 percent of the RUC
recommendations, proposed work RVUs were accepted or increased, and,
for approximately 4 percent, work RVUs were decreased.
    We received 11 recommendations from the Health Care Professionals
Advisory Committee (HCPAC) for new or revised codes for which the RUC
did not provide a recommendation. For 7 of the HCPAC's recommendations,
the proposed work RVUs were accepted.

[[Page 59085]]

    There were also 5 CPT codes for which HCFA did not receive a RUC
recommendation. HCFA established interim work RVUs for 3 of these
codes.
    Table 2 is a listing of those codes that will be new or revised in
1998 as well as their associated work RVUs. This table includes the
following information:
    <bullet> A ``#'' identifies a new code for 1998.
    <bullet> CPT code. This is the CPT code for a service.
    <bullet> Modifier. A ``26'' in this column indicates that the work
RVUs are for the professional component of the code.
    <bullet> Description. This is an abbreviated version of the
narrative description of the code.
    <bullet> RUC recommendations. This column identifies the work RVUs
recommended by the RUC.
    <bullet> HCPAC recommendations. This column identifies work RVUs
recommended by the HCPAC.
    <bullet> HCFA decision. This column indicates whether we agreed
with the RUC recommendation (``agree''); we established work RVUs that
are higher than the RUC recommendation (``increase''); or we
established work RVUs that were less than the RUC recommendation
(``decrease''). Codes for which we did not accept the RUC
recommendation are discussed in greater detail following Table 2 in
section IV.B.2.b. below. An ``(a)'' indicates that no RUC
recommendation was provided. A discussion follows the table in section
IV.B.2.b.
    <bullet> HCFA work RVUs. This column contains the RVUs for
physician work based on our reviews of the RUC recommendations. The
RVUs shown for global surgical services have not been adjusted to
account for the 1997 increases for work RVUs in evaluation and
management services.
    1998 work RVUs. This column contains the 1998 RVUs for physician
work. The RVUs shown for global surgical services have been adjusted to
account for the 1997 increases for work RVUs in evaluation and
management.
    This table includes only those codes that were reviewed by the full
RUC or for which we received a recommendation from the HCPAC.

                            Table 2.--AMA RUC and HCPAC Recommendations and HCFA Decisions for New and Revised 1998 CPT Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               RUC              HCPAC
    CPT* code           MOD            Description       recommendation    recommendation         HCFA decision         HCFA work RVU    1998 work <SUP>b RVU
--------------------------------------------------------------------------------------------------------------------------------------------------------
11055#...........  .............  Paring, Cutting, and  ................              0.43  Decrease................              0.27              0.27
                                   Trimming of Nails.
11056#...........  .............  Paring, Cutting, and  ................              0.61  Decrease................              0.39              0.39
                                   Trimming of Nails.
11057#...........  .............  Paring, Cutting, and  ................              0.79  Decrease................              0.50              0.50
                                   Trimming of Nails.
11719#...........  .............  Paring, Cutting, and  ................              0.17  Decrease................              0.06              0.06
                                   Trimming of Nails.
11200............  .............  Destruction of                    0.69  ................  Decrease................              0.67              0.77
                                   lesions.
11201............  .............  Destruction of                    0.35  ................  Decrease................              0.29              0.29
                                   lesions.
15756............  .............  Free muscle flap....             33.23  ................  Agree...................             33.23             35.23
17000............  .............  Destruction of                    0.55  ................  Agree...................              0.55              0.60
                                   lesions.
17003#...........  .............  Destruction of                    0.15  ................  Agree...................              0.15              0.15
                                   lesions.
17004#...........  .............  Destruction of                    2.65  ................  Agree...................              2.65              2.79
                                   lesions.
17110............  .............  Destruction of                    0.55  ................  Agree...................              0.55              0.65
                                   lesions.
17111#...........  .............  Destruction of                    0.82  ................  Agree...................              0.82              0.92
                                   lesions.
17250............  .............  Destruction of                    0.50  ................  Agree...................              0.50              0.50
                                   lesions.
19120............  .............  Excision of cyst....              5.35  ................  Agree...................              5.35              5.56
20664#...........  .............  Application of halo.              7.00  ................  Agree...................              7.00              8.06
22818#...........  .............  Kyphectomy..........             30.00  ................  Agree...................             30.00             31.83
22819#...........  .............  Kyphectomy..........             34.50  ................  Agree...................             34.50             36.44
29860#...........  .............  Arthroscopy of hip..              7.75  ................  Agree...................              7.75              8.05
29861#...........  .............  Arthroscopy of hip..              9.00  ................  Agree...................              9.00              9.15
29862#...........  .............  Arthroscopy of hip..              9.50  ................  Agree...................              9.50              9.90
29863#...........  .............  Arthroscopy of hip..              9.50  ................  Agree...................              9.50              9.90
29891#...........  .............  Arthroscopy of ankle              8.00  ................  Agree...................              8.00              8.40
29892#...........  .............  Arthroscopy of ankle              8.60  ................  Agree...................              8.60              9.00
29893#...........  .............  Arthroscopy of ankle  ................              4.92  Agree...................              4.92              5.22
32200............  .............  Percutaneous abscess             13.10  ................  Agree...................             13.10             15.29
                                   drainage.
32201#...........  .............  Percutaneous abscess              4.00  ................  Agree...................              4.00              4.00
                                   drainage.
33496#...........  .............  Repair of non-                   25.64  ................  Agree...................             25.64             27.25
                                   structural valve
                                   dysfunction.
33530............  .............  Repair of non-                    5.86  ................  Agree...................              5.86              5.86
                                   structural valve
                                   dysfunction.
35400#...........  .............  Intraoperative                    3.00  ................  Agree...................              3.00              3.00
                                   Endovascular
                                   Angioscopy.
36215............  .............  Coronary Angiography              4.68  ................  Agree...................              4.68              4.68
37195#...........  .............  Thrombolytic therapy              0.00  ................  Agree...................              0.00              0.00
                                   for acute ischemic.
37250............  .............  Intravascular us....              1.51  ................  Agree...................              1.51              2.10
37251............  .............  Intravascular us....              1.15  ................  Agree...................              1.15              1.60
43116............  .............  Partial                          29.67  ................  Agree...................             29.67             31.22
                                   esophagectomy.
43496............  .............  Free jejunum                   carrier  ................  Agree...................           carrier           carrier
                                   transfer.
43635............  .............  Vagotomy............              2.06  ................  Agree...................              2.06              2.06
44625............  .............  Closure of colostomy             12.10  ................  Agree...................             12.10             13.41
44626#...........  .............  Closure of colostomy             21.29  ................  Agree...................             21.29             22.59
44700#...........  .............  Intestinal sling                 13.00  ................  Agree...................             13.00             14.35
                                   procedure.
44900............  .............  Percutaneous abscess              7.86  ................  Agree...................              7.86              8.82
                                   drainage.
44901#...........  .............  Percutaneous abscess              3.38  ................  Agree...................              3.38              3.38
                                   drainage.
45112............  .............  Proctectomy with                 24.02  ................  Agree...................             24.02             25.96
                                   coloanal
                                   anastomosis.
45119#...........  .............  Proctectomy with                 23.50  ................  Increase................             24.50             26.21
                                   coloanal
                                   anastomosis.
47010............  .............  Percutaneous abscess              8.75  ................  Agree...................              8.75             10.28
                                   drainage.
47011#...........  .............  Percutaneous abscess              3.70  ................  Agree...................              3.70              3.70
                                   drainage.
48510............  .............  Percutaneous abscess             11.22  ................  Agree...................             11.22             12.96
                                   drainage.
48511#...........  .............  Percutaneous abscess              4.00  ................  Agree...................              4.00              4.00
                                   drainage.
49040............  .............  Percutaneous abscess              8.74  ................  Agree...................              8.74              9.94
                                   drainage.
49041#...........  .............  Percutaneous abscess              4.00  ................  Agree...................              4.00              4.00
                                   drainage.
49060............  .............  Percutaneous abscess             10.55  ................  Agree...................             10.55             11.66
                                   drainage.
49061#...........  .............  Percutaneous abscess              3.70  ................  Agree...................              3.70              3.70
                                   drainage.
49062#...........  .............  Lymphocele drainage.             10.78  ................  Agree...................             10.78             11.36
49423#...........  .............  Percutaneous abscess              1.46  ................  Agree...................              1.46              1.46
                                   drainage.

[[Page 59086]]


49424#...........  .............  Percutaneous abscess              0.76  ................  Agree...................              0.76              0.76
                                   drainage.
49560............  .............  Ventral                           9.48  ................  Agree...................              9.48              9.88
                                   herniorgraphy.
49565............  .............  Ventral                           9.48  ................  Agree...................              9.48              9.88
                                   herniorgraphy.
49568............  .............  Ventral                           4.89  ................  Agree...................              4.89              4.89
                                   herniorgraphy.
50020............  .............  Percutaneous abscess             12.41  ................  Agree...................             12.41             14.66
                                   drainage.
50021#...........  .............  Percutaneous abscess              3.38  ................  Agree...................              3.38              3.38
                                   drainage.
51840............  .............  Burch procedure.....              9.78  ................  Agree...................              9.78             10.71
52281............  .............  Cystourethroscopy...              2.80  ................  Agree...................              2.80              2.80
52282#...........  .............  Urethral                          6.40  ................  Agree...................              6.40              6.40
                                   endoprosthesis.
53850#...........  .............  Transurethral                     9.58  ................  Decrease................              9.25              9.45
                                   destruction of
                                   prostate.
53852#...........  .............  Transurethral                     9.58  ................  Agree...................              9.58              9.88
                                   destruction of
                                   prostate.
56300............  .............  Laparoscopic surgery              5.00  ................  Agree...................              5.00              5.10
56301............  .............  Laparoscopic surgery              5.50  ................  Agree...................              5.50              5.60
56302............  .............  Laparoscopic surgery              5.50  ................  Agree...................              5.50              5.60
56303............  .............  Laparoscopic surgery             10.50  ................  Increase................             10.95             11.79
56304............  .............  Laparoscopic surgery             10.00  ................  Increase................             10.45             11.29
56305............  .............  Laparoscopic surgery              5.30  ................  Agree...................              5.30              5.40
56306............  .............  Laparoscopic surgery              5.60  ................  Agree...................              5.60              5.70
56309............  .............  Laparoscopic surgery             13.79  ................  Agree...................             13.79             14.21
56310#...........  .............  Laparoscopic surgery             13.50  ................  Agree...................             13.50             14.44
56314#...........  .............  Laparoscopic surgery              8.93  ................  Agree...................              8.93              9.48
56318#...........  .............  Laparoscopic surgery             10.63  ................  Agree...................             10.63             10.96
56345#...........  .............  Laparoscopic surgery  ................  ................  (<SUP>a).....................           carrier           carrier
56346#...........  .............  Laparoscopic surgery              7.18  ................  Agree...................              7.18              7.73
56347#...........  .............  Laparoscopic surgery  ................  ................  (<SUP>a).....................           carrier           carrier
56348#...........  .............  Laparoscopy with                 20.00  ................  Increase................             21.00             22.04
                                   intestinal
                                   resection.
56349#...........  .............  Laparoscopic surgery             17.75  ................  Decrease................             16.47             17.25
56350............  .............  Hysteroscopy........              3.33  ................  Agree...................              3.33              3.33
56351............  .............  Hysteroscopy........              4.75  ................  Agree...................              4.75              4.75
56352............  .............  Hysteroscopy........              6.17  ................  Agree...................              6.17              6.17
56353............  .............  Hysteroscopy........              7.00  ................  Agree...................              7.00              7.00
56354............  .............  Hysteroscopy........             10.00  ................  Agree...................             10.00             10.00
56355............  .............  Hysteroscopy........              5.21  ................  Agree...................              5.21              5.21
56356............  .............  Hysteroscopy........              9.50  ................  Decrease................              6.17              6.17
57308............  .............  Closure of                        9.31  ................  Agree...................              9.31              9.94
                                   rectovaginal
                                   fistula.
57531............  .............  Radical                          28.00  ................  Agree...................             28.00             29.60
                                   trachelectomy.
58152............  .............  Burch procedure.....             14.10  ................  Agree...................             14.10             15.09
58340............  .............  Hysterosonography...              0.88  ................  Agree...................              0.88              0.88
58820............  .............  Percutaneous abscess              3.96  ................  Agree...................              3.96              4.22
                                   drainage.
58822............  .............  Percutaneous abscess              9.06  ................  Agree...................              9.06             10.13
                                   drainage.
58823#...........  .............  Percutaneous abscess              3.38  ................  Agree...................              3.38              3.38
                                   drainage.
59050............  .............  Fetal monitoring....              0.89  ................  Agree...................              0.89              0.89
59051............  .............  Fetal monitoring....              0.74  ................  Agree...................              0.74              0.74
59160............  .............  Curettage,                        2.66  ................  Agree...................              2.66              2.71
                                   postpartum.
59871#...........  .............  Removal of cerclage               2.13  ................  Agree...................              2.13              2.13
                                   suture.
61793............  .............  Stereotactic                     16.70  ................  Agree...................             16.70             17.24
                                   radiosurgery.
67027#...........  .............  Ganciclovir implant.             10.35  ................  Agree...................             10.35             10.85
70553............  26             MI, brain...........              2.36  ................  Agree...................              2.36              2.36
74283............  26             Therapeutic Enema...              2.02  ................  Agree...................              2.02              2.02
74740............  26             Hysterosonography...              0.38  ................  Agree...................              0.38              0.38
75989............  26             Percutaneous Abscess              1.19  ................  Agree...................              1.19              1.19
                                   drainage.
76070............  26             Bone density studies              0.25  ................  Agree...................              0.25              0.25
76075............  26             Bone density studies              0.30  ................  Agree...................              0.30              0.30
76076#...........  26             Bone density studies              0.22  ................  Agree...................              0.22              0.22
76078#...........  26             Bone density studies              0.20  ................  Agree...................              0.20              0.20
76080............  26             Percutaneous Abscess              0.54  ................  Agree...................              0.54              0.54
                                   drainage.
76095............  26             Stereotactic breast               1.59  ................  Agree...................              1.59              1.59
                                   biopsy.
76375............  26             Medical holography..              0.16  ................  Agree...................              0.16              0.16
76390#...........  26             Magnetic resonance                1.40  ................  Agree...................              1.40              1.40
                                   spectroscopy.
76815............  26             Echography, pregant               0.65  ................  Agree...................              0.65              0.65
                                   uterus.
76830............  26             Hysterosonography...              0.69  ................  Agree...................              0.69              0.69
76831#...........  26             Hysterosonography...              0.72  ................  Agree...................              0.72              0.72
76885#...........  26             Echography of infant              0.74  ................  Agree...................              0.74              0.74
                                   hip.
76886#...........  26             Echography of infant              0.62  ................  Agree...................              0.62              0.62
                                   hip.
77295............  26             Therapeutic                       4.57  ................  Agree...................              4.57              4.57
                                   radiology
                                   simulation-aided.
78350............  26             Bone density studies              0.22  ................  Agree...................              0.22              0.22
78351............  .............  Bone density studies              0.30  ................  Agree...................              0.30              0.30
78459............  26             PET myocardial                    1.88  ................  Agree...................              1.88              1.88
                                   perfusion imaging.
78491#...........  26             PET myocardial                    1.50  ................  Agree...................              1.50              1.50
                                   perfusion imaging.
78492#...........  26             PET myocardial                    1.87  ................  Agree...................              1.87              1.87
                                   perfusion imaging.
78707............  26             Renal nuclear                     0.96  ................  Agree...................              0.96              0.96
                                   medicine.
78708#...........  26             Renal nuclear                     1.21  ................  Agree...................              1.21              1.21
                                   medicine.
78709#...........  26             Renal nuclear                     1.41  ................  Agree...................              1.41              1.41
                                   medicine.
78710............  26             Kidney imaging......              0.66  ................  Agree...................              0.66              0.66
88108............  26             Cervical or vaginal               0.56  ................  Agree...................              0.56              0.56
                                   cytopathology.
88141#...........  .............  Cervical or vaginal               0.42  ................  Agree...................              0.42              0.42
                                   cytopathology.
90801............  .............  Psychotherapy.......              2.80  ................  Agree...................              2.80              2.80
90802#...........  .............  Psychotherapy.......              3.01  ................  Agree...................              3.01              3.01
90804#...........  .............  Psychotherapy.......              1.11  ................  Agree...................              1.11              1.11

[[Page 59087]]


90805#...........  .............  Psychotherapy.......              1.47  ................  Agree...................              1.47              1.47
90806#...........  .............  Psychotherapy.......              1.72  ................  Agree...................              1.72              1.72
90807#...........  .............  Psychotherapy.......              2.00  ................  Agree...................              2.00              2.00
90808#...........  .............  Psychotherapy.......              2.76  ................  Agree...................              2.76              2.76
90809#...........  .............  Psychotherapy.......              3.15  ................  Agree...................              3.15              3.15
90810#...........  .............  Psychotherapy.......              1.19  ................  Agree...................              1.19              1.19
90811#...........  .............  Psychotherapy.......              1.58  ................  Agree...................              1.58              1.58
90812#...........  .............  Psychotherapy.......              1.86  ................  Agree...................              1.86              1.86
90813#...........  .............  Psychotherapy.......              2.15  ................  Agree...................              2.15              2.15
90814#...........  .............  Psychotherapy.......              2.97  ................  Agree...................              2.97              2.97
90815#...........  .............  Psychotherapy.......              3.39  ................  Agree...................              3.39              3.39
90816#...........  .............  Psychotherapy.......              1.24  ................  Agree...................              1.24              1.24
90817#...........  .............  Psychotherapy.......              1.65  ................  Agree...................              1.65              1.65
90818#...........  .............  Psychotherapy.......              1.94  ................  Agree...................              1.94              1.94
90819#...........  .............  Psychotherapy.......              2.24  ................  Agree...................              2.24              2.24
90821#...........  .............  Psychotherapy.......              3.09  ................  Agree...................              3.09              3.09
90822#...........  .............  Psychotherapy.......              3.53  ................  Agree...................              3.53              3.53
90823#...........  .............  Psychotherapy.......              1.33  ................  Agree...................              1.33              1.33
90824#...........  .............  Psychotherapy.......              1.77  ................  Agree...................              1.77              1.77
90826#...........  .............  Psychotherapy.......              2.08  ................  Agree...................              2.08              2.08
90827#...........  .............  Psychotherapy.......              2.41  ................  Agree...................              2.41              2.41
90828#...........  .............  Psychotherapy.......              3.32  ................  Agree...................              3.32              3.32
90829#...........  .............  Psychotherapy.......              3.80  ................  Agree...................              3.80              3.80
90845............  .............  Psychotherapy.......              1.79  ................  Agree...................              1.79              1.79
90846............  .............  Psychotherapy.......              1.83  ................  Agree...................              1.83              1.83
90847............  .............  Psychotherapy.......              2.21  ................  Agree...................              2.21              2.21
90849............  .............  Psychotherapy.......              0.59  ................  Agree...................              0.59              0.59
90853............  .............  Psychotherapy.......              0.59  ................  Agree...................              0.59              0.59
90857............  .............  Psychotherapy.......              0.63  ................  Agree...................              0.63              0.63
90865#...........  .............  Psychotherapy.......              2.84  ................  Agree...................              2.84              2.84
90875............  .............  Psychotherapy.......  ................              1.20  Agree...................              1.20              1.20
90876............  .............  Psychotherapy.......  ................              1.90  Agree...................              1.90              1.90
90880............  .............  Psychotherapy.......              2.19  ................  Agree...................              2.19              2.19
90885#...........  .............  Psychotherapy.......              0.97  ................  Agree...................              0.97              0.97
90911............  .............  Biofeedback training              0.89  ................  Agree...................              0.89              0.89
91010............  .............  Esophageal motility               1.25  ................  Agree...................              1.25              1.25
                                   studies.
91020............  .............  Esophageal motility               1.44  ................  Agree...................              1.44              1.44
                                   studies.
92978............  26             Intravascular us....              1.80  ................  Agree...................              1.80              1.80
92979............  26             Intravascular us....              1.44  ................  Agree...................              1.44              1.44
92992............  .............  Atrial septectomy of           carrier  ................  Agree...................           carrier           carrier
                                   septostomy.
92997#...........  .............  Pulmonary artery                 12.00  ................  Agree...................             12.00             12.00
                                   angioplasty.
92998#...........  .............  Pulmonary artery                  6.00  ................  Agree...................              6.00              6.00
                                   angioplasty.
93320............  .............  Doppler echo........              0.38  ................  Agree...................              0.38              0.38
93325............  .............  Doppler echo........              0.07  ................  Agree...................              0.07              0.07
93508#...........  26             Coronary angiography              4.10  ................  Agree...................              4.10              4.10
93530#...........  26             Pediatric cardiac                 4.23  ................  Agree...................              4.23              4.23
                                   catheterization.
93531#...........  26             Pediatric cardiac                 8.35  ................  Agree...................              8.35              8.35
                                   catheterization.
93532#...........  26             Pediatric cardiac                10.00  ................  Agree...................             10.00             10.00
                                   catheterization.
93533#...........  26             Pediatric cardiac                 6.70  ................  Agree...................              6.70              6.70
                                   catheterization.
94010............  26             Spirometry..........              0.17  ................  Agree...................              0.17              0.17
94070............  26             Pulmonary procedures              0.60  ................  Agree...................              0.60              0.60
95805............  26             Sleep studies.......              1.88  ................  Agree...................              1.88              1.88
95806............  26             Sleep studies.......              1.85  ................  Decrease................              1.66              1.66
95807............  26             Sleep studies.......              1.66  ................  Agree...................              1.66              1.66
95811#...........  26             Sleep studies.......              3.80  ................  Agree...................              3.80              3.80
95860............  26             Needle EMG..........              0.96  ................  Agree...................              0.96              0.96
95861............  26             Needle EMG..........              1.54  ................  Agree...................              1.54              1.54
95863............  26             Needle EMG..........              1.87  ................  Agree...................              1.87              1.87
95864............  26             Needle EMG..........              1.99  ................  Agree...................              1.99              1.99
95869............  26             Needle EMG..........              0.37  ................  Agree...................              0.37              0.37
95870#...........  26             Needle EMG..........  ................  ................  (<SUP>a).....................              0.37              0.37
96902#...........  .............  Trichogram..........              0.41  ................  Agree...................              0.41              0.41
97001#...........  .............  Occupational and      ................              1.20  Agree...................              1.20              1.20
                                   Physical Therapy.
97002#...........  .............  Occupational and      ................              0.60  Agree...................              0.60              0.60
                                   Physical Therapy.
97003#...........  .............  Occupational and      ................              1.20  Agree...................              1.20              1.20
                                   Physical Therapy.
97004#...........  .............  Occupational and      ................              0.60  Agree...................              0.60              0.60
                                   Physical Therapy.
97780#...........  .............  Acupuncture.........  ................  ................  (<SUP>a).....................              0.00              0.00
97781#...........  .............  Acupuncture.........  ................  ................  (<SUP>a).....................              0.00              0.00
99141#...........  .............  Conscious sedation..              0.80  ................  Agree...................              0.80              0.80
99142#...........  .............  Conscious sedation..              0.60  ................  Agree...................              0.60              0.60
99217............  .............  Observation same day              1.28  ................  Agree...................              1.28              1.28
                                   discharge.
99234#...........  .............  Observation same day              2.56  ................  Agree...................              2.56              2.56
                                   discharge.
99235#...........  .............  Observation same day              3.42  ................  Agree...................              3.42              3.42
                                   discharge.
99236#...........  .............  Observation same day              4.27  ................  Agree...................              4.27              4.27
                                   discharge.
99315#...........  .............  Nursing facility                  1.20  ................  Decrease................              1.13              1.13
                                   discharge.
99316#...........  .............  Nursing facility                  1.60  ................  Decrease................              1.50              1.50
                                   discharge.
99341............  .............  Home care visits....              0.89  ................  Increase................              1.01              1.01
99342............  .............  Home care visits....              1.33  ................  Increase................              1.52              1.52
99343............  .............  Home care visits....              1.99  ................  Increase................              2.27              2.27

[[Page 59088]]


99344#...........  .............  Home care visits....              2.66  ................  Increase................              3.03              3.03
99345#...........  .............  Home care visits....              3.32  ................  Increase................              3.79              3.79
99347............  .............  Home care visits....              0.66  ................  Increase................              0.76              0.76
99348............  .............  Home care visits....              1.11  ................  Increase................              1.26              1.26
99349............  .............  Home care visits....              1.77  ................  Increase................              2.02              2.02
99350#...........  .............  Home care visits....              2.66  ................  Increase................              3.03              3.03
99374#...........  .............  Care plan oversight.              1.10  ................  Agree...................              1.10              1.10
99375............  .............  Care plan oversight.              1.73  ................  Agree...................              1.73              1.73
99377#...........  .............  Care plan oversight.              1.10  ................  Agree...................              1.10              1.10
99378#...........  .............  Care plan oversight.              1.73  ................  Agree...................              1.73              1.73
99379#...........  .............  Care plan oversight.              1.10  ................  Agree...................              1.10              1.10
99380#...........  .............  Care plan oversight.              1.73  ................  Agree...................              1.73              1.73
99436#...........  .............  Attendance at                     1.50  ................  Agree...................              1.50              1.50
                                   delivery.
--------------------------------------------------------------------------------------------------------------------------------------------------------
<SUP>a No RUC recommendation provided
<SUP>b Work RVU changes due to global surgery evaluation and management increases.
# New Codes
* All numeric HCPCS CPT Copyright 1997 American Medical Association

    b. Discussion of Codes for Which the RUC Recommendations Were Not
Accepted. The following is a summary of our rationale for not accepting
particular recommendations. It is arranged by type of service in CPT
code order. This summary refers only to work RVUs.
    CPT codes 11055 (Paring or cutting of benign hyperkeratotic lesion
(eg, corn or callus), single lesion), 11056 (two to four lesions),
11057 (more than four lesions), and 11719 (Trimming of nails)).
    CPT 1998 will include three new codes for paring or cutting of
benign hyperkeratotic lesion(s) and one new code for trimming of nails.
These new CPT codes will replace CPT codes 11050 through 11052 (Paring
or curettement of benign hyperkeratotic skin lesion(s)) and HCFA Common
Procedure Coding System (HCPCS) code M0101 (Cutting or removal of
corns, calluses and/or trimming of nails, application of skin creams
and other hygienic and preventive maintenance care).
    We agreed with the work RVU relationship established by the RUC
HCPAC Review Board for these four codes. However, we have not accepted
the actual work RVUs recommended because the total number of RVUs
associated with the new codes would exceed the total number of RVUs
associated with code M0101. We believe the expectation of the RUC HCPAC
Review Board was that the RVU recommendations would achieve work
neutrality within the family of codes. However, some of the services
previously reported with M0101 will now be reported with codes used to
report the destruction of skin lesions. These codes, for example, CPT
code 17000, have higher work RVUs than M0101. Thus, the result of the
coding changes and the recommended work RVUs would be an increase in
the total number of RVUs for these services. Consequently, we revised
the work RVUs recommended by the RUC HCPC Review Board in order to
achieve work neutrality within this family of codes. That is, the work
RVUs have been adjusted so that the sum of the new work RVUs (weighted
by projected frequency of use) for this family of codes will be the
same as the sum of the current work RVUs (weighted by their current
frequency of use).

------------------------------------------------------------------------
                                                                    Work
          CPT code                         Descriptor               RVUs
------------------------------------------------------------------------
11055.......................  Paring or cutting of benign           0.27
                               hyperkeratotic lesion (single).
11056.......................  Two to four lesions................   0.39
11057.......................  More than four lesions.............   0.50
11719.......................  Trimming of nails..................   0.06
------------------------------------------------------------------------

    CPT codes 11200 (Removal of skin tags, multiple fibrocutaneous
tags, any area; up to and including 15 lesions) and 11201 (each
additional ten lesions).
    The RUC recommended 0.69 work RVUs for CPT code 11200 and 0.35 work
RVUs for CPT code 11201. These codes encompass services that were
previously reported using CPT codes 11200, 11201, 17200, and 17201.
When valuing new and revised codes that replace deleted codes, we
typically have used Medicare frequency data and used the work RVUs of
the deleted and revised codes in order to arrive at weighted average
values for the revised codes in a budget neutral fashion. We have used
this method to arrive at the work RVUs for revised CPT codes 11200 and
11201. We are establishing 0.67 work RVUs for CPT code 11200, which is
a weighted average of CPT codes 17200 and 11200. We are establishing
0.29 work RVUs for CPT code 11201, which is the weighted average of CPT
codes 17201 and 11201.
    CPT code 45119  (Proctectomy, combined abdominoperineal pull
through procedure (eg, colo-anal anastomosis) with creation of colonic
reservoir (eg, J-pouch), with or without proximal diverting ostomy).
    CPT 1998 will include a new code for proctectomy with colo-anal
anastomosis. The RUC recommended 23.50 work RVUs for CPT code 45119.
Upon review of these values, we concluded that CPT code 45119 was
undervalued. CPT code 45119 is nearly an identical procedure to CPT
code 45112 with the exception of the creation of the colonic reservoir
included in CPT code 45119. We agree with the current work value for
CPT code 45112 (24.02 work RVUs). CPT code 45119 is a more extensive
procedure and should be valued higher than CPT code 45112. We believe
CPT code 45119 is undervalued, and we are increasing the RUC-
recommended work RVUs from 23.50 work RVUs to 24.50 work RVUs for the
1998 physician fee schedule.
    CPT code 53850  (Transurethral destruction of prostate tissue; by
microwave therapy) and 53852 (Transurethral destruction of prostate
tissue; by radiofrequency thermotherapy).
    CPT 1998 will include two new codes for the transurethral
destruction of prostate tissue. We agree with the RUC value for CPT
code 53852 (the RUC recommended 9.58 work RVUs) but not with the work
value assigned to CPT code 53850. The RUC recommendations would make
the work values for these two codes identical. While both procedures
require skillful technique, we believe the actual physician work
involved for microwave therapy (CPT code 53850) is less than that of
radiofrequency thermotherapy (CPT

[[Page 59089]]

code 53852). Radiofrequency thermotherapy requires the physician to
retract and reposition an electrode numerous times in order to destroy
selected prostate tissue. Microwave therapy on the other hand does not
require the repositioning of an electrode throughout the procedure. We
are decreasing the RUC recommendation of 9.58 work RVUs to 9.25 interim
work RVUs for CPT code 53850.
    CPT codes 56300 through 56349  (Laparoscopic surgery) and CPT code
56356 (Hysteroscopy).
    The RUC submitted recommendations to us during the 5-year review of
the resource-based relative value scale for increases in the work RVUs
for CPT code 56300 (Laparoscopy (peritoneoscopy), diagnostic; (separate
procedure)) and CPT code 56305 (with biopsy (single or multiple)). At
that time, we did not adopt those recommendations because we believed
they would create rank order anomalies within the laparoscopy and
hysteroscopy family of codes. Subsequently, at the request of HCFA, the
entire family of codes was reviewed by the RUC. Following is a
discussion of all of the codes that were affected by this review. The
discussion is in order by CPT code. In some instances, global periods
or work RVUs were changed in order to address inconsistencies within
this family of codes. We believe additional review of the global period
may be warranted and invite comment on this issue.
    CPT codes 56300  (Laparoscopy, diagnostic; (separate procedure))
and 56305 (with biopsy (single or multiple)).
    The RUC recommended 5.00 work RVUs for CPT code 56300 and 5.50 work
RVUs for CPT code 56305. We agree with these work RVUs but will be
changing the global period of both of these codes to 010 days.
    CPT code 56304  Laparoscopy, surgical; with fulguration of oviducts
(with or without transection), with lysis of adhesions).
    The RUC recommended 10.00 work RVUs for this CPT code. We generally
agree with the rank order of this recommendation but are increasing it
to 10.45 work RVUs. We are increasing this recommendation because we
added a level 2 office visit to the RUC recommendation (0.45 RVUs) to
account for changing the global period from 010 to 090 days.
Additionally, we will be discussing a change in the descriptor
associated with CPT code 56304 with the CPT Editorial Panel. We will be
asking the CPT Editorial Panel to revised the code descriptor to
specify that it includes an extensive lysis of adhesions. A limited
lysis of adhesions is included in CPT codes 56300 and 56305 and is not
paid separately. CPT code 56304 should only be used for extensive lysis
of adhesions.
    CPT code 56303  (Laparoscopy, surgical; with fulguration of
oviducts (with or without transection); with fulguration or excision of
lesions of the ovary, pelvic viscera, or peritoneal surface by any
method).
    The RUC recommended 10.50 work RVUs to CPT code 56303. We changed
this CPT code from a 010 day global period to a 090 day global period.
Due to this increase in the global period, we are adding a level 2
office visit to the RUC recommendation. The resulting work RVUs for CPT
code 56303 are 10.95.
    CPT code 56345  (Laparoscopy, surgical; splenectomy) and CPT code
56347 (Laparoscopy, surgical; jejunostomy (eg, for decompression or
feeding)).
    We did not receive a RUC recommendation for CPT codes 56345 and
56347. We decided that we will make these as carrier-priced codes until
we receive recommended RVUs from the RUC. Therefore, no RVUs are shown
for these codes.
    CPT code 56348  (Laparoscopy with intestinal resection).
    The RUC recommended 20.00 work RVUs for CPT code 56348. We believe
that the work involved with this procedure is comparable to that of CPT
code 44145 (Partial removal of colon), which is valued at 21.29 work
RVUs. We decided to value CPT code 56348 at the median value extracted
from a RUC survey issued to colorectal surgeons. For the 1998 physician
fee schedule, we are assigning 21.00 work RVUs to CPT code 56348.
    CPT code 56349  (Laparoscopy, surgical, esophagogastric fundoplasty
(eg, Nissen, Belsey IV, Hill, Toupet procedures)).
    The RUC stated that the work represented by CPT code 56349 is more
difficult than that in its corresponding open procedure (CPT code 43324
valued at 15.18 work RVUs). We do not agree that this procedure has
more work involved than either a lobectomy (CPT code 32540 valued at
13.31 work RVUs) or colon resection (CPT code 44140 valued at 16.97
work RVUs). We are reducing the RUC recommendation of 17.75 work RVUs
to 16.47 work RVUs for the 1998 physician fee schedule.
    CPT code 56356  (Hysteroscopy, ablation).
    The RUC recommended 9.50 work RVUs for CPT code 56356. Upon
comparison of CPT code 56356 to other codes within this family, we
decided to reduce the work RVUs to 6.17. This decision was based upon a
comparison of CPT code 56356 to CPT code 56352 (Hysteroscopy, surgical;
with sampling (biopsy) of endometrium and/or polypectomy, with or
without D&C, with lysis of intrauterine adhesions (any method)) which
is valued at 6.17 work RVUs. These codes had identical times and
intensities identified in the survey of the clinical vignettes supplied
to the RUC. Therefore, we decided to reduce the work RVU of CPT code
56356 to 6.17 work RVUs for the 1998 physician fee schedule.
    CPT codes 59150  (Laparoscopic treatment of ectopic pregnancy;
without salpingectomy and/or oophorectomy) and 59151 (Laparoscopic
treatment of ectopic pregnancy; with salpingectomy and/or
oophorectomy).
    The RUC stated that the survey respondents substantially
underestimated the number of post-procedure office visits associated
with these procedures. We agree with the RUC and are increasing the
work RVUs for both of these codes. We are assigning 11.20 work RVUs to
CPT code 59150, and 11.10 work RVUs to CPT code 59151 for the 1998
physician fee schedule.
    CPT code 95806  (Sleep study, simultaneous recording of
ventilation, respiratory effort, ECG or heart rate, and oxygen
saturation, unattended by a technologist).
    CPT 1998 will include a new code for an unattended sleep study.
Currently, CPT code 95807 (1.66 work RVUs) is used for a sleep study
that is attended by a technologist. The RUC recommended 1.85 work RVUs
for CPT code 95806. We do not agree that there is more work involved in
an unattended sleep study as opposed to an attended sleep study. We are
assigning 1.66 interim work RVUs to CPT code 95806, which will make the
work RVUs identical to those of CPT code 95807.
    CPT codes 99315  (Nursing facility discharge day management; 30
minutes or less) and 99316 (Nursing facility discharge day management;
more than 30 minutes).
    CPT 1998 will include two new codes for nursing facility discharge
day management. The RUC recommended 1.20 work RVUs for CPT code 99315
and 1.60 work RVUs for CPT code 99316. Upon review of these values, we
found that the projected utilization of these new nursing facility
discharge codes causes a significant work neutrality problem within the
family of nursing facility CPT codes. While the codes are new, the work
is already reflected within the current codes. In order to maintain the
same total pool of work RVUs within this family, we are

[[Page 59090]]

reducing the two new CPT codes (that is, CPT codes 99315 and 99316), as
well as six existing codes within the nursing facility family of codes
(CPT codes 99301, 99302, 99303, 99311, 99312, and 99313), by 6.0
percent.

------------------------------------------------------------------------
                                                                    Work
          CPT code                         Descriptor               RVUs
------------------------------------------------------------------------
99301.......................  Comprehensive nursing facility        1.20
                               assessment.
99302.......................  Comprehensive nursing facility        1.61
                               assessment.
99303.......................  Comprehensive nursing facility        2.01
                               assessment.
99311.......................  Subsequent nursing facility care...   0.60
99312.......................  Subsequent nursing facility care...   1.00
99313.......................  Subsequent nursing facility care...   1.42
99315.......................  Nursing facility discharge day        1.13
                               management; 30 minutes or less.
99316.......................  Nursing facility discharge day        1.50
                               management; more than 30 minutes.
------------------------------------------------------------------------

    CPT codes 99341 through 99345  (Home care visits; new patient) and
99347 through 99350 (Home care visits; established patient).
    The RUC-recommended RVUs for the home care visit codes were
established through comparisons to CPT's current office visit codes.
Although we agree with the use of the office visit codes as key
reference services, we believe that the RUC underestimated the pre-,
intra-, and post-service intensities associated with the home visit
codes. We note that the intensity values of the survey respondents were
higher for the home visit codes than the reference codes for office
visits. We increased the RUC recommendations by applying a uniform
intensity factor increase of 10 percent to the pre-, intra-, and post-
service times of the office visits codes. These increased intensities
were then multiplied by the typical times specified in the new and
revised CPT codes for the home visits.

------------------------------------------------------------------------
                                                                    Work
          CPT code                         Descriptor               RVUs
------------------------------------------------------------------------
99341.......................  Home services; new patient.........   1.01
99342.......................  Home services; new patient.........   1.52
99343.......................  Home services; new patient.........   2.27
99344.......................  Home services; new patient.........   3.03
99345.......................  Home services; new patient.........   3.79
99347.......................  Home services; established patient.    .76
99348.......................  Home services; established patient.   1.26
99349.......................  Home services; established patient.   2.02
99350.......................  Home services; established patient.   3.03
------------------------------------------------------------------------

C. Other Changes to the 1998 Physician Fee Schedule and Clarification
of CPT Definitions

    For the 1998 physician fee schedule, we are establishing or
revising several alpha-numeric HCPCS codes for the reporting of certain
services that are not clearly described by existing CPT codes. We view
these codes as temporary since we will be referring them to the CPT
Editorial Panel for possible inclusion in future editions of the CPT.
Additionally, included in this section are some clarifications of
proper usages of some new or revised codes.
    HCPCS codes G0062  (peripheral bone mineral density) and G0063
(central bone density).
    Effective January 1, 1998, HCPCS codes G0062, G0062-26, G0062-TC,
G0063, G0063-26, and G0063-TC have been deleted. Use the appropriate
code from the 70000 section of the CPT to bill for bone mineral density
studies.
    CPT code 35400  (Intraoperative endovascular angioscopy non-
coronary vessels or grafts).
    Although we agree with the recommended RUC work RVUs for this CPT
code, some clarification of proper usage is needed. When billing CPT
code 35400, units can only equal 1.00 because the code descriptor
specifies vessels or grafts. The RVUs assigned are based on an
assumption that angioscopy may be performed on multiple vessels.
    CPT codes 44625 and 44626 (Closure of colostomy).
    CPT codes 44625 and 44626 should not be billed with CPT code 44139,
which is used to report the immobilization (take down) of the splenic
flexure. By CPT definition, code 44139 can be used only in conjunction
with the partial colectomy codes 44140 through 44147. We will be
establishing a national claims edit to ensure that neither of these two
codes are billed with CPT code 44139.
    CPT codes 99217 and 99234 through 99236  (Observation same day
discharge).
    We will be consulting with the CPT Editorial Panel to clarify that
the use of these codes should be restricted to observation care
services of at least 12 hours duration.
    CPT code 49021  (Percutaneous abscess drainage).
    Based on the recommendation of the RUC, we are changing the global
period of CPT code 49021 from 010 days to 000 days. Post-operative care
during the 90 day period following the procedure is not typically
provided for this procedure.
    CPT codes 95860 through 95870  (Needle EMGs).
    Although we have accepted the RUC recommendations for this family
of codes, we believe some clarification on the proper use of these
codes would be beneficial.
    CPT codes 95860, 95861, 95863, and 95864 (Needle electromyogram of
1, 2, 3, or 4 limbs with or without paraspinals (cannot bill
paraspinals separately--unless studying paraspinals between T3-T11)).
    To bill these codes, extremity muscles innervated by three nerves
(for example, radial, ulnar, median, tibial, peroneal, femoral, not sub
branches) or four spinal levels must be evaluated, with a minimum of
five muscles studied.
    CPT code 95869  (Needle electromyography, thoracic paraspinals).
    This CPT code should be used when exclusively studying thoracic
paraspinals. One unit can be billed, despite the number of levels
studied or whether unilateral or bilateral. This cannot be billed with
CPT codes 95860, 95861, 95863, or 95864 if only T1 and/or T2 are
studied when an upper extremity was also studied.
    CPT code 95870  (Needle electromyography, limited study).
    This CPT code can be billed at one unit per extremity. Muscles on
the thorax or abdomen (unilateral or bilateral). One unit may be billed
for studying cervical or lumbar paraspinal muscles (unilateral or
bilateral), regardless of the number of level tested. This code should
not be billed when the paraspinal muscles corresponding to an extremity
are tested and when the extremity codes 95860, 95861, 95863, or 95864
are also billed.

PET Myocardial Perfusion Imaging (HCPCS Codes G0030 Through G0047)

    When the PET myocardial perfusion imaging tests were originally
valued, they were considered analogous to the SPECT codes. In
consultation with the RUC, we have decided to raise the values of the
PET procedures. Unlike the large field of view of SPECT scanners, PET
scanners have a much smaller field. In addition, due to the short half-
life of the Rb-82 tracer, physician involvement in patient positioning
is critical when using the PET scanner. For these reasons, we are
raising the single PET myocardial perfusion image to 1.50 work RVUs and
the multiple PET myocardial perfusion image to 1.87 work RVUs.

Cervical or Vaginal Cancer Screening; Pelvic and Clinical Breast
Examination (HCPCS Code G0101)

    The law provides for coverage and payment of screening pelvic and
clinical

[[Page 59091]]

breast examinations effective January 1, 1998. We decided that this
service is comparable to a level 2 evaluation and management new
patient office visit.

------------------------------------------------------------------------
                                                  Practice   Malpractice
              HCPCS code                 Work     Expense      Expense
                                         RVUs       RVUs         RVUs
------------------------------------------------------------------------
G0101.................................   0.45         0.28         0.02
------------------------------------------------------------------------

Colorectal Cancer Screening (HCPCS Codes G0104 Through G0107)

    Section 4104 of the BBA 1997 provides for Medicare coverage of
colorectal cancer screening tests effective for services provided on or
after January 1, 1998. The law provides for coverage and payment for
screening fecal-occult blood tests, screening flexible sigmoidoscopy,
screening colonoscopy, and other such tests determined to be
appropriate by the Secretary. We are setting payment amounts for
screening sigmoidoscopy, screening colonoscopy, barium enema, and
screening fecal-occult blood tests, as follows:

Flexible Sigmoidoscopy (HCPCS Code G0104)

    The law provides that payment for screening flexible
sigmoidoscopies be made at rates consistent with payment for similar or
related services under the physician fee schedule, not to exceed the
rates for a diagnostic flexible sigmoidoscopy (CPT 45330). We have
created a new code-- HCPCS code G0104 (Colorectal cancer screening;
flexible sigmoidoscopy)--to be used for screening flexible
sigmoidoscopy. We believe that the work is the same whether the
procedure is a screening or a diagnostic sigmoidoscopy and are
therefore assigning the same RVUs to HCPCS code G0104 as those assigned
to CPT code 45330 in Addendum B.

Screening Colonoscopy (HCPCS Code G0105)

    The law provides that payment for screening colonoscopies be paid
at rates consistent with payment for similar or related services under
the physician fee schedule, not to exceed the rates for a diagnostic
colonoscopy (CPT 45378). We have created a new code-- HCPCS code G0105
(Colorectal cancer screening; colonoscopy on individual at high risk)--
to be used for screening colonoscopy. We believe that the work is the
same whether the procedure is a screening or a diagnostic colonoscopy,
and we are therefore assigning the same RVUs to HCPCS code G0105 as
those assigned to CPT code 45378 in Addendum B.

Barium Enema (HCPCS Code G0106)

    The law provides that payment for colorectal cancer screening-
barium enema be paid at rates consistent with payment for similar or
related services under the physician fee schedule. We believe that the
work is analogous to CPT code 74280 (Contrast x-ray exam of the colon),
and we are therefore assigning the same RVUs to HCPCS code G0106 as
those assigned to CPT code 74280 in Addendum B.

Fecal-Occult Blood Tests (HCPCS Code G0107)

    The law provides that screening fecal-occult blood tests be paid at
the same rate as diagnostic fecal-occult blood tests (CPT code 82270)
paid under the clinical laboratory fee schedule. We have created a new
code-- HCPCS code G0107 (Colorectal cancer screening; fecal-occult
blood test, 1-3 simultaneous determinations)--to be used for screening
fecal-occult blood tests. This code will be carrier-priced at the
payment amount that the carrier pays for CPT code 82270 under the
clinical laboratory fee schedule.

------------------------------------------------------------------------
                                                  Practice   Malpractice
              HCPCS code                 Work     expense      expense
                                         RVUs       RVUs         RVUs
------------------------------------------------------------------------
G0104.................................   0.96         1.23         0.12
G0105.................................   3.70         4.13         0.39
G0106.................................   0.99         2.58         0.21
G0107.................................
(2) Lab Fee Schedule
------------------------------------------------------------------------

National Emphysema Treatment Trials (NETT) (CPT Codes G0110 Through
G0116)

    The following codes have been added to the physician fee schedule
for the use of physicians participating in the NETT study. The National
Emphysema Treatment Trials (NETT) are co-sponsored by HCFA and the
National Heart, Lung, and Blood Institute with the Johns Hopkins
University as the coordinating center for the study. The study is to
last 7 years starting August 1, 1997. Since the use of these codes will
be limited to some 18 clinical centers and physicians associated with
these centers, either directly, as in furnishing services in the
centers' outpatient departments or in rural areas where some of the
participating beneficiaries live, these codes will be listed as
restricted and can only be billed by those participating in the NETT
study.

------------------------------------------------------------------------
                                                 Practice
    HCPCS code        Descriptor     Work RVUs    expense    Malpractice
                                                   RVUs     expense RVUs
------------------------------------------------------------------------
G0110............  NETT Pulm              0.90        0.26          0.04
                    Rehab;
                    education/
                    skills
                    training,
                    individual.
G0111............  NETT Pulm              0.27        0.20          0.02
                    Rehab;
                    education/
                    skills
                    training,
                    group.
G0112............  NETT Pulm              1.72        0.97          0.10
                    Rehab;
                    nutritional
                    guidance--init
                    ial.
G0113............  NETT Pulm              1.29        0.77          0.09
                    Rehab;
                    nutritional
                    guidance--subs
                    equent.
G0114............  NETT Pulm              1.20        0.35          0.11
                    Rehab;
                    psychosocial
                    consultation.
G0115............  NETT Pulm              1.20        0.35          0.11
                    Rehab;
                    psychological
                    testing.
G0116............  NETT Pulm              1.11        0.35          0.05
                    Rehab; Psycho-
                    social
                    counseling--in
                    dividual.
------------------------------------------------------------------------

V. Provisions of the Final Rule

    The provisions of this final rule restate the provisions of the
June 18, 1997, proposed rule except as noted elsewhere in this
preamble. Following is a highlight of the exceptions:
    For our proposal relating to physician supervision, we are adopting
our proposal to assign an appropriate level of physician supervision to
every diagnostic test payable under the physician fee schedule with
exceptions for certain procedures personally performed by qualified
independent psychologists, clinical psychologists, qualified
audiologists, and physical therapists who are certified as qualified
electrophysiologic clinical specialists. With respect to several
groupings of diagnostic codes, we have changed our proposed policy
based on comments from the physician specialities most involved with
particular groups of codes. In some cases, such as CTs and MRIs
performed without the use of contrast materials, we have lowered the
level of required physician supervision. In others, such as ultrasound
procedures, we have increased the level of required supervision. We are
publishing a listing of diagnostic codes in the preamble of this
document with the level of physician supervision we

[[Page 59092]]

have determined to be appropriate. In addition, we are adding a field
to the physician fee schedule data base indicating the appropriate
level of supervision. We anticipate that there will continue to be
discussions among HCFA, physician specialty groups, and others about
these levels of supervision, and we expect that the indicators
applicable to individual procedures will be changed from time to time
as is currently the case with other data base indicators.
    As a result of our review of the comments, we have decided that the
actual charge issue, including the implications for beneficiary out-of-
pocket expense, requires further study. We received numerous comments
from individual physicians and suppliers and the organizations that
represent them in opposition to this proposal.
    Based on provisions in the BBA 1997, we are not implementing the
system of resource-based practice expense RVUs contained in the
proposed rule for 1998. Rather, we are implementing the provision of
the BBA 1997 that reduces practice expense RVUs for certain services
and uses the monies to increase practice expense RVUs for office
visits. Specifically, we are making the following changes from the
regulations proposed in our June 18, 1997 proposed rule:
    <bullet> In Sec. 414.22 (Relative value units (RVUs)), we are
stating that the practice expense RVUs for certain services are reduced
to 110 percent of the work RVUs for those services. We are also stating
that the following two categories of services are excluded from this
limitation:
    <bullet> The service is provided more than 75 percent of the time
in an office setting; or
    <bullet> The 1998 proposed resource-based practice expense RVUs (as
specified in the June 18, 1997 physician fee schedule proposed rule)
for the specific site, either in-office or out-of-office, increased
from its 1997 practice expense RVUs.
    In Sec. 414.32 (Determining payments for certain physician services
furnished in facility settings), we are revising paragraph (b) to state
that if physician services of the type routinely furnished in a
physician's office are furnished in facility settings, the fee schedule
amount for those services is determined by reducing the applicable
practice expense RVUs for the service by 50 percent.
    We are not revising Sec. 414.34 (Payment for services and supplies
incident to a physician's service) because our resource-based practice
expense system is not being implemented as proposed in the June 18,
1997 proposed rule.
    We are adding the following changes to regulations required by the
BBA 1997:
    <bullet> In Sec. 410.34 (Mammography services: Conditions for and
limitations on coverage), we are expanding coverage of screening
mammography services, effective January 1, 1998, to provide for payment
for annual screening for all women beneficiaries age 40 and over.
    <bullet> We are adding a new Sec. 410.37 (Colorectal cancer
screening tests: Conditions for and limitations on coverage) to provide
for Medicare coverage of colorectal cancer screening tests effective
for services provided on or after January 1, 1998.
    <bullet> We are adding a new Sec. 410.56 (Screening pelvic
examinations) to provide for new coverage of screening pelvic exams
(including a clinical breast exam) for all women beneficiaries subject
to certain frequency and payment limitations.

VI. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), agencies are
required to provide a 60-day notice in the Federal Register and solicit
public comment before a collection of information requirement is
submitted to the Office of Management and Budget (OMB) for review and
approval. In order to fairly evaluate whether an information collection
should be approved by OMB, section 3506(c)(2)(A) of the PRA requires
that we solicit comment on the following issues:
    <bullet> Whether the information collection is necessary and useful
to carry out the proper functions of the agency;
    <bullet> The accuracy of the agency's estimate of the information
collection burden;
    <bullet> The quality, utility, and clarity of the information to be
collected; and
    <bullet> Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
    Therefore, we are soliciting public comment on each of these issues
for the information collection requirements discussed below.
    Under 5 CFR 1320.3(b)(2), the burden associated with the time,
effort and financial resources necessary to comply with a collection of
information that would be incurred by persons in the normal course of
business is excluded from an information collection. The burden in
connection with such types of collection activities can be disregarded
if it can be demonstrated that such collection activities are usual and
customary. Each of the collection requirements referenced below are of
the type that are usual and customary in the conduct of commercial
business. Thus, we believe they fall under this exception.
    Under 5 CFR 1320.3(b)(3), a collection of information conducted or
sponsored by a Federal agency that is also conducted or sponsored by a
unit of State, local or tribal government is presumed to impose a
Federal burden except to the extent that the agency shows that such
State, local, or tribal requirement would be imposed even in the
absence of a Federal requirement.
    The following sections contain information collection requirements
that we believe meet these requirements listed above; therefore, the
burden is exempt from the Act.
    Section 410.33(b)(2) (Supervising physicians) must maintain
documentation of sufficient physician resources during all hours of
operation to assure that the required physician supervision is
furnished.
    Section 410.33(c) (Non-physician personnel) must maintain
documentation available for review certifying that non-physician
personnel have the training and proficiency as evidenced by licensure
or certification by the appropriate State health or education
department or, in the absence of a State licensing board, a national
credentialing body.
    Section 410.33(e) (Multi-State entities) that operate across State
boundaries must maintain documentation that its supervising physicians
and technicians are licensed and certified in each of the States in
which it is furnishing services.
    The information collection requirement and associated burden as
summarized below is subject to the PRA:
    Section 410.33(b)(2) (Supervising physicians) must evidence
proficiency in the performance and interpretation of each type of
diagnostic procedure performed by the IDTF. The proficiency may be
documented by certification in specific medical specialties or
subspecialties or by criteria established by the carrier for the
service area in which the IDTF is located.
    The public reporting burden for this record keeping requirement is
minimal. There are about 500 IPLs, which we assume will wish to become
IDTFs, each requiring five minutes to document proficiency by
certification in specific medical specialties or subspecialties or by
criteria established by the carrier for the service area in which the
IDTF is

[[Page 59093]]

located. The total public burden is 42 hours.
    We have submitted a copy of this final rule with comment to OMB for
its review of the information collection requirements in
Sec. 410.33(b)(2). This requirement is not effective until it has been
approved by OMB.
    If you comment on any of these information collection and
recordkeeping requirements, please mail copies directly to the
following:

Health Care Financing Administration, Office of Information Services,
Information Technology Investment Management Group, Division of HCFA
Enterprise Standards, Room C2-26-17, 7500 Security Boulevard,
Baltimore, MD 21244-1850, Attn: Louis Blank BPD-884
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Attn.: Allison Herron Eydt, HCFA Desk Officer

VII. Waiver of Proposed Rulemaking and Response to Comments

    We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite prior public comment on proposed rules. The
notice of proposed rulemaking can be waived, however, if an agency
finds good cause that a notice-and-comment procedure is impracticable,
unnecessary, or contrary to the public interest and it incorporates a
statement of the finding and its reasons in the rule issued. We find
good cause to waive the notice-and-comment procedure with respect to a
number of provisions included in this final rule, as explained below.
    With respect to the BBA 1997 provisions in this final rule
affecting payment under the RVU system, we noted that the BBA 1997 was
enacted shortly after the proposed rule was published. It delayed the
implementation of the resource-based practice expense RVU system until
January 1, 1999 and specifies the manner in which practice expense RVUs
in 1998 are adjusted. As explained in section III. A. of this preamble,
we are conforming the rules to be in compliance with these provisions
of the statute. Our change is technical in nature and does not
interpret the law. To submit such a technical, conforming change to
notice-and-comment rulemaking would be both impracticable and
unnecessary. Since the Congress intended that these provisions be
effective on January 1, 1998 and intended to forestall significant
adjustments in payment that would have occurred under the pre-amendment
practice expense provision, it is in the public interest to issue this
rule in final form.
    With respect to the BBA 1997 provisions relating to coverage of
screening mammography, coverage of screening pelvic examinations and
colorectal cancer screening, and the related payment changes, our
reasoning is somewhat similar. This rule conforms the regulations to
the revisions contained in sections 4104 and 4102 of the BBA 1997. In
addition, insofar as these regulations relate to coverage conditions
under authority granted by section 1862(a)(1)(A) of the Act, they are
exempted from public comment requirements pursuant to section
1869(b)(3)(B) of the Act. If we were to delay issuing a final rule
beyond January, 1998, the statutory effective date of the benefit, our
rules would be in conflict with the statute, which could cause
confusion and would not be in the public interest.
    We also note that, under express authority contained in section
1871(b)(2)(B) of the Act (42 U.S.C. 1395hh(b)(2)(B)) issuing a proposed
rule is unnecessary if a statute establishes a specific deadline for
the implementation of a provision and the deadline is less than 150
days after the enactment of the statute in which the deadline is
contained. The BBA 1997 was enacted on August 5, 1997, less than 150
days from the statute's effective date of January 1, 1998.
    The BBA 1997 provision related to colorectal cancer screening, as
described in section III. C. of this preamble, requires us to publish a
statement of coverage or noncoverage of screening barium enemas in the
Federal Register by November 3, 1997. As noted in our preamble
discussion, there was extensive consultation before we reached our
decision. According to the National Cancer Institute, colorectal cancer
is the second leading cause of death from cancer in the United States.
It is clearly in the public interest to make this benefit available
without delay and to bring our regulations into line with the expanded
coverage.
    In part IV. B. 2. of this preamble, we identify a number of interim
1997 codes. Since medical practice is dynamic, changes occur in coding
or procedures and it is always possible that some changes occur after
we have submitted our proposal for public comment. To address these
changes, we identify ``interim'' RVUs for new and revised codes. To the
extent possible, we subject these interim RVUs to all the procedures
and considerations applicable to all RVUs, except publishing them in
the Federal Register for public comment. It has been our practice to
implement these interim RVUs, along with the ``final'' RVUs so that
payment can be consistently made during the upcoming fee schedule year,
and to solicit comments on the interim codes. We evaluate and respond
to the comments in the next annual final rule. The public has
recognized over the years that this approach has been in the public
interest by allowing public participation yet permitting immediate,
consistent payment to be made.
    For the above reasons, we find good cause to waive notice-and-
comment rulemaking. We invite written comments on the BBA 1997
provisions and the interim RVUs for selected procedures identified in
Addendum C.
    Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the DATES
section of this preamble, and, if we proceed with a subsequent
document, we will respond to the comments in the preamble to that
document.

VIII. Regulatory Impact Analysis

    We have examined the impacts of this final rule under Executive
Order (E.O.) 12866, the Unfunded Mandates Act of 1995, and the
Regulatory Flexibility Act. E.O. 12866 directs agencies to assess all
costs and benefits of available regulatory alternatives and, when
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects; distributive impacts and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more annually). The
benefit changes in this final rule due to the BBA 1997 will result in
additional expenditures for calendar year 1998 in excess of $100
million.
    Because the expenditures resulting from this final rule are
expected to exceed $100 million, it is considered a major rule, and, as
required by law, this final rule is subject to congressional review.
Therefore, this final rule is being forwarded to the Congress for a 60-
day review period.
    The Unfunded Mandates Reform Act of 1995 also requires (in section
202) that agencies prepare an assessment of anticipated costs and
benefits for any rule that may result in an annual expenditure by
State, local, or tribal governments, in the aggregate, or by the
private sector, of $100 million. The final

[[Page 59094]]

rule has no consequential effect on State, local, or tribal
governments. We believe the private sector costs of this rule fall
below these thresholds, as well.

A. Regulatory Flexibility Act

    Consistent with the provisions of the Regulatory Flexibility Act we
analyze options for regulatory relief for small businesses and other
small entities. We prepare a Regulatory Flexibility Analysis (RFA)
unless we certify that a rule will not have a significant economic
impact on a substantial number of small entities. The RFA is to include
a justification of why action is being taken, the kinds and number of
small entities the final rule will affect, and an explanation of any
considered meaningful options that achieve the objectives and will
lessen any significant adverse economic impact on the small entities.
    For purposes of the Act, all physicians are considered to be small
entities. Thus, we have prepared the following analysis, which,
together with the rest of this preamble, meets all three assessment
requirements. It explains the rationale for and purposes of the rule,
details the costs and benefits of the rule, analyzes alternatives, and
presents the measures to minimize the burden on small entities.

B. Geographic Practice Cost Index Changes

    Changes in GPCIs do not affect total payments under the physician
fee schedule but rather redistribute payments among payment localities.
An estimate of the overall redistributive effects can be seen by
examining the changes in locality geographic adjustment factors or
GAFs. The GAFs are a weighted composite of the locality GPCIs. Addendum
F is a comparison of 1997 and 1999 locality GAFs. As this comparison
shows, 58 of the 89 localities will experience changes in payments of
less than 0.5 percent; 76 of the 89 localities will experience changes
in payments of less than 1 percent; and only 3 of the 89 localities
will experience changes in payment of 2 percent. The effects will be
even less in 1998 as the GPCI revisions are phased in equally over a 2-
year period. The effects of the GPCI revisions are thus negligible in
most cases, and very minimal in all others.

C. Fee Schedule for Clinical Psychologist Services

    Before January 1, 1997, the clinical psychologist fee schedule was
derived from the reasonable charge payment system and was updated by an
economic index different from that used for the physician fee schedule.
As a result, relative to physicians' services, Medicare allowances for
certain clinical psychologist services in many localities were
artificially high or low. Moreover, there were wide geographic
variations in Medicare rates for clinical psychologists as well as for
clinical social workers, whose rates are set, by statute, at 75 percent
of clinical psychologists' rates.
    Effective January 1, 1997, the fee schedule for clinical
psychologist services is linked to the physician fee schedule. The fee
schedule for clinical psychologist services is set at 100 percent of
the physician fee schedule amount for the corresponding service. This
payment policy was prompted by the creation of new psychotherapy codes
that make a distinction between services that include or exclude
medical evaluation and management.
    Both previous and current clinical psychologist fee schedules were
implemented through carrier instruction. Because this final rule will
codify current payment policy, there will be no impact on Medicare
program or beneficiary expenditures.

D. Diagnostic Tests

    Our policy specifies the level of physician supervision required
for diagnostic tests furnished in settings in which such services are
payable under the physician fee schedule. All of these tests will
require at least a general level of physician supervision (that is,
responsibility for the equipment and nonphysician personnel). The
following services will be excepted from this provision:
    <bullet> Diagnostic mammography procedures regulated by the FDA.
    <bullet> Certain tests personally performed by qualified
audiologists as discussed earlier.
    <bullet> Certain testing services personally performed by qualified
independent psychologists and clinical psychologists as discussed
earlier.
    This policy may result in some program savings due to the denial of
payments for tests that are not reasonable and necessary because the
required level of physician supervision was not furnished. However, we
do not have data on which to base an estimate of savings. We expect
that most testing entities that did not previously furnish testing with
the level of physician supervision required under the proposal in our
June 18, 1997 proposed rule (62 FR 33179 through 33181) will modify the
way they furnish testing services to conform to the new policy.
    We will also create a new type of entity known as an independent
diagnostic testing facility (IDTF) with specific national standards. It
will replace the existing IPL. Since the current IPL national policy is
based on State law and local Medicare carrier policy, it is likely that
some IPLs in certain areas will be more affected by this proposal than
others. We do not have any data upon which to base any estimates of
savings at this time. There are wide-spread allegations of unnecessary
testing furnished by IPLs under the current policy. Our new policy is
designed to assist Medicare carriers in addressing these allegations.

E. Reasonable Compensation Equivalent Limit Update Factor

    The methodology currently employed to update the physician fee
schedule uses an inflation factor distinct from the CPI-U used to
update the reasonable compensation equivalent limits. To achieve a
measure of consistency in the methodologies employed to determine
reasonable payments to physicians for physicians' direct medical and
surgical services furnished to individual patients and reasonable
compensation levels for physicians' services that benefit provider
patients generally, we are revising the methodology used to update the
reasonable compensation equivalent limits by adopting the physician fee
schedule's inflation factor (the MEI) to update the reasonable
compensation equivalent limits. For cost reporting periods beginning on
or after January 1, 1998, updates to the reasonable compensation
equivalent limits will be calculated using the MEI.
    Because we are not making an actual update to the reasonable
compensation equivalent limits at this time that is based on the MEI
for cost reporting periods beginning on or after January 1, 1998, this
change in policy will not have an impact on Medicare program or
beneficiary expenditures at this time.

F. Payment to Participating and Nonparticipating Suppliers

    We are revising the definitions at Sec. 414.2 (Definitions) to
define a ``participating supplier'' as being a supplier as defined in
Sec. 400.202, which includes physicians as suppliers, when they have an
agreement with HCFA to participate in Part B of Medicare in effect on
the date of the service. Similarly, we are defining ``nonparticipating
supplier'' as a supplier that does not have an agreement with HCFA to
participate in Part B of Medicare in effect on the date of the service.
    We are also revising Sec. 414.20 (Formula for computing payment
amounts) to clarify that the formula in

[[Page 59095]]

the section computes the fee schedule amount, which may differ from the
payment basis, and to clarify that the fee schedule amount for a
nonparticipating supplier is 95 percent of the fee schedule amount for
a participating supplier. We are also revising the heading of
Sec. 414.20 to read ``Formula for computing fee schedule amounts'' to
reflect more accurately the content of the section.
    We are revising Sec. 414.48 (Limits on actual charges of
nonparticipating suppliers), which describes the Medicare limiting
charge for nonparticipating suppliers to clarify that the limiting
charge is 115 percent of the fee schedule amount for nonparticipating
physicians as calculated in Sec. 414.20(b).
    The changes to Secs. 414.2, 414.20, and 414.48 will have no impact
on Medicare payment, beneficiaries, physicians, other suppliers of
physician services, Medicare carriers, or other insurers. We believe
that Medicare carriers are currently properly calculating the fee
schedule amounts for participating and nonparticipating suppliers and
are paying based on those properly calculated amounts. These changes
are intended to conform our regulations to the law and current
practice.

G. Increase in Work Relative Value Units for Global Surgical Services
to Account for the 1997 Increases for Work Relative Value Units in
Evaluation and Management Services

    In our November 22, 1996 final rule with comment period, as part of
the 5-year review of all physician work RVUs, we increased most of the
work RVUs for evaluation and management services for hospital and
office or other outpatient visits. We revised the work RVUs for
evaluation and management services partly in recognition of the
increase in preservice and postservice work. At that time, we made no
adjustments to the work RVUs assigned to global surgical services,
which, in addition to the surgical procedure, include the related
preservice and postservice evaluation and management visits a surgeon
provides within a defined period of time.
    Upon further examination of this issue, we are increasing the work
RVUs for global surgical services to be consistent with the 1997
increases in the work RVUs for evaluation and management services.
    Because the increases in the work RVUs for global surgical services
will cause an increase in payments for those services, we must reduce
all payments by 0.7 percent to maintain budget neutrality.

H. Caloric Vestibular Testing

    We are reducing the work and malpractice RVUs for CPT code 92543
global service and CPT code 92543-26, and the malpractice RVUs for CPT
code 92543-TC to 25 percent of what they would otherwise be. Therefore,
beginning in 1998, when a physician performs and interprets four
irrigations, the physician will bill Medicare for four units of CPT
code 92543 (that is, the global service). When a physician interprets
four irrigations, the physician will bill four units of CPT code 92543-
26. When a physician or supplier performs four irrigations, the
physician or supplier will bill four units of CPT code 92543-TC.
    As part of the overall policy of resource-based practice expense
RVUs for all codes, we are establishing practice expense RVUs for CPT
code 92543 global service, -26, and -TC based on the assumption that
one unit of the service equals one irrigation or the interpretation of
one irrigation.
    We expect the changes to the RVUs for caloric vestibular testing to
have no impact on Medicare program or beneficiary expenditures because
this is actually a change in coding interpretation rather than a change
in value. Medicare has interpreted one unit of CPT code 92543 to mean
up to four irrigations and has established its RVUs based on that
interpretation. The AMA interprets one unit to mean one irrigation.
Therefore, when the usual service is furnished (that is, a total of
four irrigations--two to each ear), Medicare instructed physicians to
bill for that as one unit of service, while the AMA's instructions
considered it four. We are now, in a budget-neutral fashion, adopting
the AMA interpretation to reduce billing confusion regarding this code.
The change is being made by having what used to be one service--for
Medicare purposes--now equal four services, while at the same time
establishing the RVU levels at 25 percent of what they would have
otherwise been.

I. Clinical Consultations

    The regulations set forth at Sec. 415.130 (Conditions for payment:
Physician pathology services), paragraph (b) (Clinical consultation
services), require that a clinical consultation meet four criteria
before it can be paid. One of these criteria is that the clinical
consultation must be requested by the patient's attending physician. We
have allowed a standing order policy to be used as a substitute for the
individual request by the patient's attending physician. However,
effective January 1, 1998, we will not accept a standing order as a
substitute for the individual request by the attending physician. We
will instruct the Medicare carriers to enforce Sec. 415.130(b) as it is
presently written.
    The national allowed charges for CPT code 80500 (Clinical pathology
consultation; limited, without review of patient's history and medical
records) for 1996 are $5.6 million. Of this amount, 70 percent of total
allowed charges are from seven States. These are: Florida, Texas,
Oklahoma, Illinois, Kentucky, California, and Missouri. Florida
accounts for $2.5 million or 45 percent of the total.
    We believe that the use of standing orders has clearly contributed
to increased payments for clinical consultations in Florida relative to
other States. We do not know the prevalence of standing orders in other
States but, generally, the data do not seem to indicate a widespread
problem.

J. Changes in Practice Expense Relative Value Units for 1998

    As discussed earlier, section 4505 of the BBA 1997 specifies the
manner in which practice expense RVUs in 1998 are adjusted. The 1998
practice expense RVUs for certain services are reduced to 110 percent
of their work RVUs for the service. The reductions are used to increase
practice expense RVUs for office visits. We estimate that the aggregate
reduction in the practice expense RVUs for services subject to this 110
percent is about $330 million. (See section III. A. above for a
detailed explanation of the calculation of this provision of the BBA
1997.) Because these funds are used to increase the practice expense
RVUs for office visits, there is no change in total spending as a
result of this provision.

K. Coverage of Screening Mammography and Related Payment Changes

    Section 4101 of the BBA 1997 provides for expanded coverage and
waiver of the Part B deductible for screening mammography services
furnished on or after January 1, 1998. Specifically, the revised
benefit will allow for annual coverage of screening mammographies for
all women age 40 and over, including women age 65 and over. Before
enactment of the BBA 1997, biennial coverage of screening mammograms
was available for (1) women at least age 40 but not yet age 50 who were
not at high risk for breast cancer, and (2) women age 65 and over.
Annual coverage of screening mammograms was only available for (1)
women at least age 40 but not yet age 50 who were at high risk for
breast

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cancer, and (2) women at least age 50 but not yet age 65. We estimate
that these changes in the frequency limitations and in the Part B
deductible will result in an increase in Medicare payments. These
payments will be made to many screening mammography suppliers,
including the physicians who interpret the results of these
examinations, as well as to other physicians who may be involved in
providing any medically necessary follow-up tests or treatment that may
be required as a result of the screening tests.

L. Colorectal Cancer Screening

    Section 4104 of the BBA 1997 authorizes coverage of certain
colorectal screening tests, effective January 1, 1998, subject to
certain frequency and payment limits. The new tests include (1)
screening fecal-occult blood tests, (2) screening flexible
sigmoidoscopy exams, (3) screening colonoscopy exams, and (4) screening
barium enema exams. Based on the projected utilization of these various
screening services and related medically necessary follow-up tests and
treatment that may be required for the beneficiaries screened, we
estimate that this new benefit will result in an increase in Medicare
payments. These payments will be made to many primary care physicians
for the screening fecal-occult blood tests, and mostly to physician
specialists such as gastroenterologists (in the case of screening
flexible sigmoidoscopies and screening colonoscopies) and radiologists
(in the case of screening barium enema procedures).

M. Coverage of Screening Pelvic Examination (Including a Clinical
Breast Examination) and Related Payment Changes

    Effective for services furnished beginning January 1, 1998, section
4102 of the BBA 1997 provides for coverage and waiver of the Part B
deductible for screening pelvic examinations (including a clinical
breast examination) subject to certain frequency and payment
limitations. We estimate that this new coverage provision will increase
program expenditures. These payments will be made to a large number of
physicians and other practitioners who provide these tests or any
medically necessary follow-up tests or treatment that may be required
as a result of the screening tests throughout the United States.

N. Reinstatement of the Payment for Transportation of EKG Equipment

    As set forth in section 4559 of the BBA 1997, effective for
services furnished after December 31, 1997 and before January 1, 1999,
carriers will make separate payments for HCPCS code R0076
(Transportation of portable EKG to facility or location, per patient)
based upon payment methods in effect for these services as of December
31, 1996. EKG transportation payments should be made at the carrier-
priced level that was in effect on December 31, 1996. The procedure
codes involved are CPT code 93000 (a 12-lead EKG with interpretation
and report) or CPT code 93005 (a 12-lead EKG, tracing only, without
interpretation and report). When multiple patients receive services at
the same site, the transportation payment amount must be prorated among
all patients seen. These payments may be made only under the following
circumstances:
    <bullet> The transportation service is furnished in connection with
standard EKG procedures furnished by approved suppliers of portable x-
ray services as set forth in section 2070.4.F. of the Medicare Carriers
Manual.
    <bullet> The transportation service is furnished in connection with
standard EKG procedures by an independent diagnostic testing facility
or an independent physiological laboratory under the condition set
forth in section 2070.1.G. of the Medicare Carriers Manual. We estimate
that this provision will result in some increase in program
expenditures.

O. Elimination of the Separate Budget-Neutrality Adjuster for the Work
Relative Value Units

    As discussed in the November 22, 1996 final rule (61 FR 59532) for
the 1997 physician fee schedule, we intend to eliminate the separate
8.3 percent budget-neutrality adjustment to the work RVUs that resulted
from changes made during the 5-year review of work RVUs. We will
accomplish this by increasing the practice and malpractice expense RVUs
by 8.3 percent and reducing the CF by 8.3 percent. This allows us to
eliminate the separate adjuster while not changing the payment for any
service. However, due to the affects of the BBA 1997, we are postponing
the elimination of the separate budget neutrality adjustment until
1999.

P. Effect of Changes Resulting From Adjustments to Relative Value Units

    Because the new RVUs cause an increase in total estimated payments
under the physician fee schedule, we must reduce payments by 0.8
percent in order to maintain budget neutrality as required by section
1848(c)(2)(B)(ii)(II) of the Act. This reduction in payments is being
implemented through a 0.8 percent reduction to the conversion factor.
    We anticipate that the reduction of net Medicare revenues for some
physician practices due to the changes contained in this regulation
will result in a volume and intensity response that will cause overall
physician expenditures to increase by 0.1 percent, requiring an
offsetting 0.1 percent reduction in the CF to maintain budget
neutrality. This 0.1 percent reduction is included in the 0.8 percent
reduction described above.
    We increased the Sustainable Growth Rate target for physician
spending by the anticipated 0.1 volume and intensity response. Because
we increased the target, if the anticipated volume and intensity
response does not occur, the Sustainable Growth Rate system will return
the 0.1 percent reduction to the CF in the form of higher future
updates.

Q. Net Impact of Relative Value Unit Changes on Medicare Specialties

1. Impact Estimation Methodology
    Physician fee schedule impacts were estimated by comparing
predicted physician payments under a continuation of the current RVUs
to the estimated payments under the new RVUs.
2. Overall Fee Schedule Impact
    As described above, we are making the budget neutrality adjustment
required for changes in relative value units through an adjustment to
the CF. In the discussion below of differential impacts by specialty,
we have incorporated the separate 0.8 percent downward adjustment on
the CF. The table below does not contain the impacts of the single CF.
3. Specialty Level Effect (Includes Table 3--Impact on Medicare
Payments by Specialty Due to Changes in Relative Value Units)
    Table 3, ``Impact on Medicare Payments by Specialty Due to Changes
in Relative Value Units,'' shows the estimated percentage change in
Medicare physician fees from the current RVUs to the new RVUs and by
specialty. The specialties are ranked according to the impact of the
changes to Medicare fees. The impact of the changes contained in this
regulation on the total revenue (Medicare and non-Medicare) for a given
specialty is less

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than impact displayed in Table 3 since physicians provide services to
Medicare and non-Medicare patients.

  Table 3.--Impact on Medicare Payments by Speciality Due to Changes in
                          Relative Value Units
                              [In percent]
------------------------------------------------------------------------
                                                              Impact on
                                    Impact on    Impact on     practice
            Specialty                 total         work       expense
                                     payments     payments     payments
------------------------------------------------------------------------
M.D./D.O. Physicians:
    Obstetrics/Gynecology........          3.0          2.8          3.9
    General Surgery..............          1.8          3.8         -0.4
    Plastic Surgery..............          1.7          3.9         -0.6
    Vascular Surgery.............          1.5          4.3          0.7
    Rheumatology.................          1.4         -0.9          5.0
    Family Practice..............          1.3         -1.0          5.3
    General Practice.............          1.2         -0.4          4.1
    Anesthesiology...............          0.9          1.0          0.7
    Hematology/Oncology..........          0.8         -0.6          2.5
    Orthopedic Surgery...........          0.8          4.0         -2.0
    Internal Medicine............          0.6         -0.9          3.0
    Otolaryngology...............          0.6          0.3          1.1
    Urology......................          0.4          0.6          0.3
    Dermatology..................          0.2         -0.6          1.7
    Neurology....................          0.0          0.7          1.2
    Clinics......................         -0.1         -0.3          0.2
    Neurosurgery.................         -0.2          3.2         -3.6
    Thoracic Surgery.............         -0.2          5.0         -4.7
    All Other Physicians.........         -0.2         -0.6          0.5
    Pulmonary....................         -0.4         -0.8          0.4
    Emergency Medicine...........         -0.6         -0.7         -0.5
    Psychiatry...................         -0.7         -0.9         -0.4
    Radiology....................         -0.7         -0.9          0.6
    Cardiac Surgery..............         -0.7          5.4         -5.9
    Radiation Oncology...........         -0.7         -0.7         -0.7
    Pathology....................         -1.1         -0.8         -1.5
    Nephrology...................         -1.2         -0.8         -1.9
    Gastroenterology.............         -1.3         -0.8         -2.0
    Cardiology...................         -1.4         -0.6         -2.3
    Ophthalmology................         -2.6          1.6         -6.8
Others:
    Podiatry.....................          0.8          0.5          1.4
    Optometry....................          0.1         -0.9          1.8
    Nonphysician Practitioner....         -0.6          0.3         -2.2
    Chiropractic.................         -0.8         -0.8         -0.8
    Suppliers....................         -1.0         -0.8         -1.1
------------------------------------------------------------------------

R. Five-Year Impacts of Benefit Changes (Includes Table 4--Projected
Budget Impact of New Benefits)

    We estimate that the benefit changes enacted in the BBA 1997
described in this final rule will result in the following Medicare
expenditures over the next 5 fiscal years:

                                Table 4.--Projected Budget Impact of New Benefits
                                                  [In millions]
----------------------------------------------------------------------------------------------------------------
                                               FY 1998       FY 1999       FY 2000       FY 2001       FY 2002
----------------------------------------------------------------------------------------------------------------
Total budget impact.......................         $160          $385          $510          $685          $780
----------------------------------------------------------------------------------------------------------------

S. Rural Hospital Impact Statement

    Section 1102(b) of the Act requires the Secretary to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the
Regulatory Flexibility Act. For purposes of section 1102(b) of the Act,
we define a small rural hospital as a hospital that is located outside
of a Metropolitan Statistical Area and has fewer than 50 beds.
    This final rule will have little direct effect on payments to rural
hospitals since this rule will change only payments made to physicians
and certain other practitioners under Part B of the Medicare program
and will make no change in payments to hospitals under Part A. We do
not believe the

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