Medicare Program; Changes to Medicare Payment for Drugs and Physician Fee Schedule Payments for Calendar Year 2004

AGENCY:

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

ACTION:

Interim final rule with comment period.

SUMMARY:

This interim final rule implements the provisions of the Medicare Prescription Drug, Improvement, and Modernization Act (MPDIMA) of 2003, Pub. L. 108-173, which are applicable in 2004 to Medicare payment for covered drugs and physician fee schedule services. These provisions revise the current payment methodology for Part B covered drugs and biologicals that are not paid on a cost or prospective payment basis; make changes to Medicare payment for furnishing or administering drugs and biologicals; revise the geographic practice cost indices and change the physician fee schedule conversion factor. The 2004 physician fee schedule conversion factor will be $37.3374. The 2004 national anesthesia conversion factor (prior to making adjustment for the geographic practice cost indices) will be $17.4969. The information contained in this final rule related to payment under the physician fee schedule supercedes the information contained in the November 7, 2003, final rule to the extent that the two are inconsistent. All other provisions of the November 7, 2003, final rule are unchanged unless otherwise noted. This rule also extends the “opt-out” provisions of 1802(b)(5)(3) of the Social Security Act to dentists, podiatrists, and optometrists.

DATES:

Effective date: These regulations are effective on January 1, 2004.

Comment date: We will consider comments if we receive them at the appropriate address, as provided in the addresses section, no later than 5 p.m. on March 8, 2004.

ADDRESSES:

In commenting, please refer to file code CMS-1372-FC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

Mail written comments (one original and two copies) to the following address only: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1372-FC, P.O. Box 8013, Baltimore, MD 21244-8013.

Please allow sufficient time for us to receive mailed comments on time in the event of delivery delays.

If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) to one of the following addresses: Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, or Room C5-14-03, 7500 Security Boulevard, Baltimore, MD 21244-8013.

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

Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and could be considered late.

For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:

Jennifer Fan, (410) 786-0548 regarding Medicare payment for Part B covered drugs and biologicals.

Rick Ensor, (410) 786-5617 regarding provisions related to geographic practice cost indices.

Diane Milstead, (410) 786-3355 for provisions related to the physician fee schedule.

Gaysha Brooks, (410) 786-9649 for questions related to obtaining Medicare physician fee schedule information from the CMS Web site.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments: Comments received timely will be available for public inspection as they are processed, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone (410) 786-7197.

Copies: To order copies of the Federal Register containing this document, send your request to: New Orders, Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date of the issue requested and enclose a check or money order payable to the Superintendent of Documents, or enclose your Visa or Master Card number and expiration date. Credit card orders can also be placed by calling the order desk at (202) 512-1800 or by faxing to (202) 512-2250. The cost for each copy is $10. As an alternative, you can view and photocopy the Federal Register document at most libraries designated as Federal Depository Libraries and at many other public and academic libraries throughout the country that receive the Federal Register.

This Federal Register document is also available from the Federal Register online database through GPO Access, a service of the U.S. Government Printing Office. The Web site address is http://www.access.gpo.gov/nara/index.html.

Accessing Physician Fee Schedule Web Site and Pricing Information

Information on the physician fee schedule and pricing files can be found on our home page. You can access this data at the following Web site: http://cms.hhs.gov/physicians/pfs or you can access this data by using the following directions:

1. Go to the CMS home page (http://www.cms.hhs.gov).

2. Place your cursor over the word “Professionals” in the blue area near the top of the page. Select “Physicians” from the drop-down menu.

3. Scroll down and under “Payment/Billing” select “Physician Fee Schedule”.

The Physician Fee Schedule pricing information is contained in two public use files.

(1) National Physician Fee Schedule Relative Value File—This file contains all CPT/HCPCS (excluding codes beginning with B, E, L, K, and 0), their short descriptions and a status indicator, which denotes whether or not the service is priced under the physician fee schedule. The file also contains the components used in the calculation of the annual pricing amount (that is, the RVUs, GPCIs, and conversion factor), anesthesia conversion factors, and the payment policy indicators used to price the claims with surgical modifiers. This file does not contain the calculated pricing amounts.

(2) Physician Fee Schedule Payment Amount File National/Carrier—This file contains the CPT code and the Medicare price for all services priced under the Physician Fee Schedule. These data can be downloaded for the entire country, or for a selected carrier (in most cases carriers correlate with States). There is no option of requesting data for selected HCPCS codes. The zip file, which is downloaded, contains a file named “PF04pc”, which explains the data contained in each column. This file also contains a description of pricing localities used in the Physician Fee Schedule. Due to the size of the national file (as well as many of the carrier-specific files), these data are provided in a comma-delimited format, which can be used to populate database applications. Generally speaking, these data are too large for Excel, however if a carrier specific file has 3 or fewer localities, Excel can be used.

Another file that may prove useful is the Zip Code to Carrier Locality file. This file will map ZIP Codes to CMS carriers and localities and map Zip Codes to their State and determine whether the ZIP Code has a rural designation as determined by CMS. You can access this file at the following Web site: http://cms.hhs.gov/providers/pufdownload/default.asp#alphanu or you can access this data by using the following directions:

1. Go to the CMS home page (http://www.cms.hhs.gov).

2. Place your cursor over the word “Professionals” in the blue area near the top of the page. Select “Physicians” from the drop-down menu.

3. Scroll down and under “Payment/Billing” select “Medicare Payment Systems.”

4. Scroll down and under Coding Files select “Zip Code to Carrier Locality File.”

Table of Contents

I. Background

A. Medicare Payment for Part B Covered Drugs and the Furnishing or Administration of Drugs

B. Geographic Practice Cost Indices and Physician Fee Schedule Conversion Factor

II. Provisions of the Final Rule

A. Application of Market-Based Systems of Medicare Payment for Part B Drugs

B. Payment for Inhalation Drugs

C. Pharmacy Supplying Fee for Certain Drugs and Biologicals

D. Physician Fee Schedule Provisions Related to the Administration of Drugs

1. Provisions Related to Budget Neutrality

2. Adjustments in Practice Expense Relative Value Units for Certain Drug Administration Services beginning with 2004

3. Pricing of Clinical Oncology Nurses in the Practice Expense Methodology

4. Work Relative Value Units for Certain Drug Administration Services

5. Adjustments in the Practice Expense Relative Value Units for Certain Drug Administration Services Beginning with 2005

6. Provisions for Appropriate Reporting and Billing for Physicians' Services Associated with the Administration of Covered Outpatient Drugs and Biologicals

7. Treatment of Other Services Currently in the Nonphysician Work Pool

8. Payment for Multiple Chemotherapy Agents Furnished on a Single Day through the Push Technique

9. Transitional Adjustment to Medicare Payment for Certain Drug Administration Services

E. Geographic Practice Cost Indices

F. Adjustments to the Work, Practice Expense and Malpractice Relative Value Units

G. Anesthesia and Physician Fee Schedule Conversion Factors for 2004

H. Publication of Addenda

III. Private Contracting with Medicare Beneficiaries

IV. Waiver of Proposed Rulemaking and Delay in Effective Date

V. Collection of Information Requirements

VI. Response to Comments

VII. Regulatory Impact Analysis

Addendum A—Explanation and Use of Addendum B

Addendum B—Relative Value Units and Related Information Used in Determining Medicare Payments for 2004

Addendum C—Codes with Interim Relative Value Units

Addendum D—2004 Geographic Practice Cost Indices by Medicare Carrier and Locality

Addendum E—2005 Geographic Practice Cost Indices by Medicare Carrier and Locality

Addendum F—List of Medicare Covered Part B Drugs Under Payment Reform

I. Background

A. Medicare Payment for Part B Covered Drugs and the Furnishing or Administration of Drugs

Medicare Part B covers a limited number of prescription drugs and biologicals. For the purposes of this final rule, the term “drugs” will hereafter refer to both drugs and biologicals. Currently, covered Medicare drugs generally fall into three categories: drugs furnished incident to a physician's service, durable medical equipment (DME) drugs, and drugs specifically covered by statute (for example, oral immunosuppressive drugs). Prior to January 1, 2004, drugs not paid on a cost or prospective payment basis are paid based on the lower of the actual charge or 95 percent of the average wholesale price (AWP) (section 1842(o)(1) of the Social Security Act (the Act), as added by section 4556 of the Balanced Budget Act of 1997 (Pub. L. 105-33)). In December 2000, the Congress passed the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA). Section 429(a) of BIPA required the GAO to conduct a study of the current payment methodology. Section 429(b) of BIPA requires the Secretary, notwithstanding any other provision of law, to revise the Medicare payment methodology for drugs based on the GAO study. In September 2001, the GAO presented its study to the Congress in a report titled, “Medicare: Payments for Covered Outpatient Drugs Exceed Providers’ Costs” (GAO-01-1118). Consistent with the recommendations in the report, we published four options for revising the current drug payment system in a proposed rule published August 20, 2003 (68 FR 50428), in the Federal Register. This proposed rule also discussed changes to Medicare payment under the physician fee schedule for furnishing or administering certain drugs and biologicals. However, as discussed in the November 7, 2003, final rule (68 FR 63196), “Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2004”, since the Congress was considering legislation to address these issues, we were reluctant to proceed with finalizing the proposals contained in the August 20, 2003, proposed rule. On November 25, 2003, the Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act (MPDIMA) of 2003, Pub L. 108-173. The President signed Pub. L. 108-173 into law on December 8, 2003. Sections 303 through 305 of MPDIMA make revisions to payment methodology for Part B covered drugs that are not paid on a cost or prospective payment basis. Sections 303 and 304 also require the Secretary of Health and Human Services to revise Medicare payments for the administration of drugs made using the physician fee schedule. We are using this final rule to implement those sections of MPDIMA that are effective January 1, 2004, and prior to January 1, 2006, and affect Medicare payment for covered Part B drugs and their administration.

B. Geographic Practice Cost Indices (GPCIs) and Physician Fee Schedule Conversion Factor

Section 1848(e) of the Act requires that payments vary among Medicare physician fee schedule areas according to the extent resource costs vary, as measured by Geographic Practice Cost Indices (GPCIs) for each of the three fee schedule components—work, practice expense and malpractice. As explained later in this document, for services provided on or after January 1, 2004, and prior to January 1, 2007, section 412 of MPDIMA requires that the work GPCI cannot be less than 1.00. Section 602 of MPDIMA requires that work, practice expense and malpractice GPCIs otherwise calculated cannot be less than 1.67 for services furnished in Alaska on or after January 1, 2004, or prior to January 1, 2006.

Sections 1848(d) and (f) of the Act establish a formula for determining the physician fee schedule update and conversion factor (CF). As indicated in the November 7, 2003, final rule (68 FR 63239), the application of the formula in the statute resulted in a 2004 physician fee CF of $35.1339, a reduction of 4.5 percent. However, section 601 of MPDIMA requires that the update to the physician fee schedule CF for 2004 cannot be less than 1.5 percent. We are using this final rule to announce the CF and GPCIs that will be used to determine physician fee schedule rates in 2004.

II. Provisions of the Final Rule

A. Application of Market-Based Systems of Medicare Payment for Part B Drugs

1. General Rule

Subject to the other provisions of MPDIMA, section 303(b) of MPDIMA specifies that drugs not paid on a cost or prospective payment basis will be paid at 85 percent of the average wholesale price (AWP) determined as of April 1, 2003.

2. Specific Provisions

Section 303(b)(1) of MPDIMA specifies that for CY 2004 the following drugs will be paid at 95 percent of the AWP:

• Blood clotting factors;
• A drug or biological furnished during 2004 that was not available for Medicare payment as of April 1, 2003;
• Pneumococcal and influenza vaccines as well as hepatitis B vaccine that is furnished to individuals at high or intermediate risk of contracting hepatitis B (as determined by the Secretary); and
• A drug or biological furnished during 2004 in connection with the furnishing of renal dialysis services if separately billed by renal dialysis facilities.

Section 303(b)(1) of MPDIMA also specifies that infusion drugs will be paid at 95 percent of the AWP in effect on October 1, 2003, when furnished through a covered item of durable medical equipment.

Section 303(b)(2) of MPDIMA specifies that the payment for a drug contained in the table entitled “Table 3—Medicare Part B Drugs in the Most Recent GAO and OIG Studies” published in the August 20, 2003, proposed rule (68 FR 50445) will be the percentage of the AWP indicated in the column entitled “Average of the GAO and OIG data (percent)”. This percentage will be applied to the AWP determined as of April 1, 2003. However, in the event that the percentage from Table 3 is less than 80 percent, the percentage applied to the AWP determined as of April 1, 2003, will be 80 percent. Table 1 below is a reprint of Table 3 from the August 20, 2003, proposed rule. Table 2 highlights the relevant column from the August 20, 2003, proposed rule table and applies the 80 percent limit where applicable.

We note that there was a typographical error in Table 3 as published on August 20, 2003, for J1642 “Heparin Sodium Lock Flush”. The percentage in the column specified in MPDIMA is missing for J1642. Given that this column is calculated as the average of the values in the preceding two columns for the drugs in this table, we will treat the missing value as the average of the values in the prior two columns for J1642, namely 66 percent. This is the percentage that would have been in that column in the table in the absence of the typographical error. We believe that this correction is consistent with Congress' intent to revise the percentage based on the average of accurate GAO and OIG data. This percentage will be subject to the 80 percent limitation described above.

We also note that there was another typographical error in Table 3 as published on August 20, 2003, for J9390 “Vinorelbine Tartrate (Navelbine).” The percentage listed under the column titled “GAO Average Widely Available Price as a Percent of AWP (2001)” for J9390 in Table 3 is incorrect and should not have been listed at all since GAO did not include this drug in its study. The percentage under the column titled “OIG Median Catalogue Price as a Percent of AWP (2000)” is correct. Since the column specified in MPDIMA is calculated as the average of the values in the preceding two columns for the drugs in this table, the correct percentage listed for J9390 under this column will be 81 percent based on the data from OIG. We believe that this correction is also consistent with Congress' intent to revise rates based on the average of accurate GAO and OIG data. This is the percentage that would have been in that column in the table in the absence of the typographical error.

Section 303(b)(2) of MPDIMA also provides an opportunity for the manufacturer of a drug to submit data and information requesting a different percentage from the percentage indicated in Table 1A or the 85 percent general rule. The Secretary may adjust the percentage based on this data and information beginning April 1, 2004. Section 303(b) of MPDIMA specifies that this data and information can be submitted after October 15, 2003, and before January 1, 2004. As required by the statute, manufacturers need to submit this data and information before January 1, 2004. Manufacturers may supplement this data and information; however, any additional supplemental information should be received by CMS before 5 p.m. e.s.t. on January 16, 2004. We will use the supplemental information to help us evaluate the initial submission of data and information.

We expect that the data and information submitted by a manufacturer would include the manufacturer's average sales price for the drug for the most recent quarter available. For the purposes of the exceptions process, the manufacturer's average sales price is calculated as the manufacturer's sales to all purchasers in the United States (excluding sales exempted below) for the quarter divided by the total number of units of such drug or biological sold by the manufacturer in that quarter. The submission should also specify the units used in the calculation (for example, micrograms).

In the calculation of the manufacturer's average sales price, a manufacturer should include volume discounts, prompt pay discounts, cash discounts, free goods that are contingent on any purchase requirement, chargebacks, and rebates (other than rebates under the Medicaid program). To the extent that there is a lag in the availability of this information applicable to the quarter, the manufacturer should apply a methodology based on the most recent 12-month period available to estimate costs attributable to these price concessions. The manufacturer should submit a description of the methodology used to estimate these costs.

In the calculation of the manufacturer's average sales price, a manufacturer should exclude the following sales as defined for the Medicaid best price calculation under section 1827(c)(1)(C)(i) of the Act:

1. Sales to the Indian Health Service, the Department of Veterans Affairs, a state home as defined for the purposes of the Medicaid best price calculation, the Department of Defense, the Public Health Service and entities described in section 340(B)(a)(4) of the Public Health Act;

2. Sales under the Federal Supply Schedule of the General Services Administration;

3. Sales under a State pharmaceutical assistance program; and

4. Any depot sales and single award contract sales as defined for the purposes of the Medicaid best price calculation.

A manufacturer should also exclude sales at a nominal charge. Sales at a nominal charge are defined as sales below 10 percent of the average calculated as described above. In other words, after following the methodology described above, sales below 10 percent of the resulting average should be excluded and the average recalculated. The result of this final calculation is the manufacturer's average sales price for the purpose of the exceptions process.

Note that we would base any changes to the percentage indicated in Table 1 or the 85 percent general rule only on data that we could make available to the public.

Section 303(b)(2) of MPDIMA also specifies that we may adjust the percentage effective January 1, 2004, based on data and information that a manufacturer submitted by October 15, 2003. We accepted data from the manufacturer of two biologicals: imiglucerase and alglucerase. The data and information submitted by the manufacturer indicated that the manufacturer's average sales price was 94 percent of the average wholesale price. Based on this data, we will pay for these two biologicals when furnished in 2004 at 94 percent of the average wholesale price determined as of April 1, 2003.

B. Payment for Inhalation Drugs

Section 305(a) of MPDIMA specifies that inhalation drugs furnished through durable medical equipment covered under 1861(n) of the Act will be paid in accordance with section 1842(o)(4) of the Act, as added by section 303(b)(2) of MPDIMA. The methodology for determining the payment for a drug under section 303(b)(2) of MPDIMA is described above in section II.A.2 of this rule.

C. Pharmacy Supplying Fee for Certain Drugs and Biologicals

Section 303(e)(2) of MPDIMA provides that the Secretary shall pay a pharmacy supplying fee, less applicable deductible and coinsurance, for immunosuppressive drugs described in section 1861(s)(2)(J) and oral anti-cancer and anti-nausea drugs described in subparagraph (Q) and (T) of the same section as determined appropriate by the Secretary. We believe that the payment of this fee should be bundled into the current payment for these drugs and the 2004 payment amounts specified in section 303(b) of MPDIMA. We do not have data indicating that the 85% figure is insufficient to cover the cost of supplying these drugs. However, for 2005, we will re-examine this issue in light of the average sales price (ASP) data that will be submitted by manufacturers.

D. Physician Fee Schedule Provisions Related to the Administration of Drugs

As indicated above, sections 303 and 304 of MPDIMA amend section 1848 of the Act for physician fee schedule payments made beginning January 1, 2004. We are describing our implementation of the parts of sections 303 and 304 which have a January 1, 2004, effective date.

1. Provisions Related to Budget Neutrality

Section 303(a)(1) of MPDIMA amends section 1848(c) of the Act to require changes to the practice expense and physician work relative value units (RVUs) used to determine payment for drug administration services. In general, section 1848(c)(2)(B)(ii)(II) provides that the Secretary shall review and may make adjustments to the RVUs if the changes do not cause the amount of expenditures to increase or decrease by more than $20 million. Section 303(a) of MPDIMA amends section 1848(c)(2)(B) of the Act to add a new clause (iv) that exempts from this limitation, any additional expenditures in 2004 attributable to:

(1) The increase in practice expense RVUs for drug administration services resulting from the use of a practice expense survey meeting specific criteria described in the statute;

(2) The increase in practice expense RVUs resulting from using survey data on the compensation of clinical oncology nurses; and

(3) New physician work RVUs that we are adding to the drug administration services consistent with the new statutory provisions.

In addition, section 303(a)(1) of MPDIMA also modifies section 1848(c)(2)(B) of the Act to provide an exemption from the budget neutrality requirements in 2005 or 2006 for further increases in practice expense RVUs for drug administration services that may result from using additional survey data from physician specialties meeting specific criteria that we will discuss in more detail later in this document. Furthermore, any increase in spending associated with any coding or policy changes resulting from the Secretary's review of existing drug administration codes is also exempted from budget neutrality requirements of section 1848 (c)(2)(B) by section 303 of MPDIMA. Section 303(a)(3) also requires the Secretary to review the policy in effect for the administration of more than one drug administered by the push technique. This change is also exempt from budget neutrality.

In general, we have met the budget neutrality requirements in the statute by either applying an adjustment to the physician fee schedule CF or to the RVUs themselves. However, section 303(a) of MPDIMA specifically amends the statute to exempt the additional expenditures that result from changes to the RVUs for drug administration services from the budget neutrality requirements. Therefore, we will make no changes to the physician fee schedule CF or physician work RVUs to account for physician work RVUs being added to drug administration services. We will add the additional expenditures as a result of these provisions to the expenditure base in applying our practice expense methodology.

2. Adjustments in Practice Expense Relative Value Units for Certain Drug Administration Services Beginning with 2004

Section 303(a)(1)(B) of MPDIMA amends section 1848(c)(2) of the Act by adding new subparagraph (H), “Adjustments in Practice Expense Relative Value Units for Certain Drug Administration Services beginning in 2004”. Subparagraph (H)(i) requires the Secretary to determine the practice expense RVUs for 2004 using practice expense surveys submitted to the Secretary as of January 1, 2003, by a physician specialty organization in accordance with section 212 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 if the survey: (1) Covers practice expenses for oncology drug administration services; and (2) meets criteria established by the Secretary for acceptance of such surveys.

Section 212 of the BBRA directed the Secretary to establish a process under which we would accept and use, to the maximum extent practicable and consistent with sound data practices, data collected or developed by entities and organizations. In an interim final rule with comment published in the Federal Register on May 3, 2000 (65 FR 25664), we established the criteria under which we would accept supplemental data for use in computing the practice expense RVUs. We subsequently modified those criteria in the November 1, 2000, physician fee schedule final rule (65 FR 65383) and the December 31, 2002, final rule (67 FR 79971).

The American Society of Clinical Oncology (ASCO) provided us with a supplemental survey prior to January 1, 2003, that includes expenses associated with the administration of chemotherapy drugs. While the survey meets the criteria we established, we initially decided not to use the information because of concerns about the data (for more information, see the December 31, 2003, final rule (67 FR 79973)). In a proposed rule published in the Federal Register on August 20, 2003 (68 FR 50437), we described subsequent discussions held with ASCO that resolved our concerns about the data.

Consistent with section 1848(c)(2)(H)(i) of the Act, we are using the ASCO survey to determine the practice expense RVUs for physician fee schedule services furnished on or after January 1, 2004, because it: (1) Was submitted prior to January 1, 2003; (2) includes expenses for drug administration services; and (3) meets criteria we have established for use of surveys.

Section 303(j) of MPDIMA applies the amendments made by section 303 for payments for drugs or biologicals and drug administrative services to physicians in the specialties of hematology, hematology/oncology and medical oncology. Section 304 indicates that: “Notwithstanding section 303(j), the amendments made by section 303 shall also apply to payments for drugs or biologicals and drug administration services furnished by physicians in specialties other than the specialties of hematology, hematology/oncology and medical oncology.”

Because the section 303 (a)(1) provisions apply to hematology, hematology/oncology and medical oncology, we will use the supplemental survey submitted by ASCO for CMS specialty codes 82 (hematology), 83 (hematology/oncology) and 90 (medical oncology).

The Conference Report indicates that section 304 requires the Secretary to disregard the (section 303) exemption and apply the adjustments in section 303 to these other specialties. The Conference report further indicates the intent in drafting the provisions in this fashion: “The intent in drafting the two sections in this manner is to segregate the savings achieved from adjustments to payments to oncologists from savings derived from other physician specialties. The specialties to which the provisions apply are the specialties as used by the carriers in administering Medicare.”

The purpose of the separation is only to display the budget scoring effects separately for oncologists from other physician specialties. There is no substantive policy effect at all from the enactment of the amendments in this manner. The combined effect of the amendments made by both section 303(j) and section 304 is that the substantive changes in both payments for drugs and biologicals as well as drug administration services apply to physicians of all specialties.

When we use supplemental survey data, we have generally blended the supplemental survey data with prior survey data from the American Medical Association's Socioeconomic Monitoring Survey (SMS). However, section 1848(c)(2)(H)(i) of the Act indicates that the Secretary should use survey data that meets the specific criteria specified in the statute. We are using the ASCO survey data and are not blending it with the prior SMS data.

Because we are not blending the ASCO survey with the SMS data, we are adopting a consistent policy in 2004 for survey data received in 1999 from the Society for Thoracic Surgery (STS). That is, we will use the STS supplemental survey data without blending it with the SMS data. However, we have not made a final decision and will continue to consider the issue of whether to blend supplemental survey with prior SMS data or to use specialty submitted supplemental surveys without blending. At this time, we are not using the ASCO and STS cases as precedent for our consideration of future survey data. While some may argue that the inclusion of newer, more specific survey data will improve the precision of the data underlying the calculation of the practice expense resource based RVUs, and lead to more stability in the practice expense methodology, it can also be argued that a specialty society would only undertake a survey (arguing that existing SMS data were not sufficiently representative of the specialty's practice expenses) if it believed that higher practice expense payments for that specialty could be achieved by submitting additional data. We do not believe that it would be prudent for the program to commit to the use of supplemental survey data without blending it with the SMS data for any and all future supplementary surveys. We will continue to consider this issue in 2004 when we make proposals for the 2005 physician fee schedule. At this time, we suggest that supplemental survey data should be used without blending only under certain conditions that would be specified in a future rule. (Note that this issue does not affect specialties that are not included in the SMS sample, and for which we have no other previous survey data. In such cases there would obviously be no SMS survey data to blend.)

We invite comments on this issue and on appropriate criteria for determining when to employ specialty submitted supplemental surveys without blending.

Table 2 shows the revised practice expense per hour for each cost pool for the specialties of cardiac and thoracic surgery and oncology, hematology/oncology and hematology.

3. Pricing of Clinical Oncology Nurses in the Practice Expense Methodology

Section 1848(c)(2)(H)(ii) of the Act (as added by section 303(a)(1) of MPDIMA) specifies that if a survey meets the criteria described above (that is, the survey that is submitted prior to January 1, 2003, meets criteria established by the Secretary, etc.) and includes data on wages, salaries and compensation of clinical oncology nurses, the Secretary will use the data in the methodology for determining the practice expense RVUs. The ASCO survey meets the criteria specified in the statute and also includes data on oncology nursing compensation. For this reason, we are using information from the survey to determine the wage rate per minute for oncology certified nurses (OCN). The OCN is included as a practice expense input for the nonchemotherapy infusion codes (90780 through 90781) and the chemotherapy administration codes (96400 through 96549). Using information from the ASCO survey, we determined a wage rate of 0.79 per minute (increase from the 0.56 per minute we are currently using) for the OCN. We used this revised wage rate to determine the practice expense RVUs for the drug administration services shown in Addendum B.

4. Work Relative Value Units for Certain Drug Administration Services

For services furnished on or after January 1, 2004, section 1848(c)(2)(H)(iii) of the Act (as added by section 303(a)(1) of MPDIMA) requires the Secretary to establish work RVUs for drug administration services equal to the work RVUs for a level 1 office medical visit for an established patient (CPT code 99211). Section 1848(c)(2)(H)(iv) of the Act defines drug administration services as those classified as of October 1, 2003, within any of the following groups: therapeutic or diagnostic infusions (excluding chemotherapy); chemotherapy administration services; and therapeutic, prophylactic, or diagnostic injections for which there are no work RVUs assigned and for which national RVUs have been assigned.

CPT code 99211 is a level 1 established patient office visit with physician work RVUs of 0.17. Consistent with the statute we are adding physician work RVUs of 0.17 to the following drug administration services: CPT codes 90780 through 90781, 90782 through 90788, 96400, 96408 through 96425, 96520, and 96530.

Currently, section 15010 of the Medicare Carriers Manual (MCM) does not allow payment for CPT codes 90782, 90783, 90784 and 90788 unless these are the only physician fee schedule services provided on that day. We do pay separately for cancer chemotherapy injections (CPT codes 96400-96549) in addition to an office visit (CPT codes 99211-99215) furnished on the same day by the same physician. CPT code 99211 does not require a face-to-face encounter between the physician and the patient like other office visit services (CPT codes 99212-99215) and can be used be physicians supervising a nurse performing chemotherapy administration. Currently, physicians typically bill for CPT code 99211 approximately 34 percent of the time that they are also providing a drug administration service. We believe that adding physician work to the drug administration services will subsume the supervision that physicians billing for a 99211 on the same day are typically providing. Therefore, we will no longer allow for 99211 to be billed on the same day as a chemotherapy administration service.

Although less common than CPT 99211, physicians also bill for other office visit (CPT codes 99212-99215) provided on the same day as chemotherapy administration. We will continue to allow other office visits to be billed on the same day as a drug administration service with modifier 25 indicating that a separately identifiable evaluation and management service was provided. This policy will make our practice with chemotherapy administration consistent with all other physician fee schedule services where we require use of modifier 25 if a separately identifiable evaluation and management service is provided on the day as a procedure. Section 15400(D) of the Medicare Carrier Manual (MCM) describes Medicare payment policy with respect to chemotherapy administration and “incident to” services provided on the same day. We will be revising section 15400 of the MCM (in addition to section 15010 that describes “bundled services”) to reflect that CPT code 99211 and a chemotherapy administration service cannot be billed for the same patient on a single day.

5. Adjustments in the Practice Expense Relative Value Units for Certain Drug Administration Services Beginning with 2005

Section 303(a)(1) of MPDIMA also modifies section 1848(c)(2)(B) of the Act to provide an exemption from the budget neutrality requirements in 2005 or 2006 for further increases in practice expense RVUs for drug administration services that may result from using additional survey data from physician specialties meeting specific criteria. Section 1848(c)(2)(I) of the Act specifies that the exemption from budget neutrality will apply for any survey (other than the ASCO survey that meets the exemption requirement specified by another provision of the statute) submitted by a specialty group where 40 percent or more of its payments for Part B services are attributable to the administration of drugs in 2002 as determined by the Secretary. The statute indicates that the survey must include expenses for the administration of drugs and must be received by the Secretary prior to March 1, 2004, to determine the 2005 practice expense RVUs and prior to March 1, 2005, to determine the 2006 practice expense RVUs.

We have reviewed Medicare allowed charge data for 2002. Based on the 2002 data, we found that the specialties of gynecology/oncology (specialty code 98) rheumatology (specialty code 66) and urology (specialty code 30) received more than 40 percent of total Part B revenues from drugs. We will apply the exemption from budget neutrality specified in section 1848(c)(2)(I) of the Act for additional expenditures that result from the increases in drug administration practice expense RVUs in 2005 or 2006 resulting from use of a survey that is submitted timely by any of these specialties and otherwise meets criteria we have established for use of supplemental surveys. Hematology (specialty 82), hematology/oncology (specialty 83) and medical oncology (specialty 90) also receive more than 40 percent of their Medicare revenues from drugs. However, we are already using the ASCO survey for these specialties and the increase in payment for drug administration is exempt from budget neutrality by another provision of the statute.

6. Provisions for Appropriate Reporting and Billing for Physicians' Services Associated with the Administration of Covered Outpatient Drugs

Section 1848(c)(2)(J) of the Act requires the Secretary to promptly evaluate existing drug administration codes for physicians' services to ensure accurate reporting and billing for such services, taking into account levels of complexity of the administration and resource consumption. The statute further specifies that the Secretary will use existing processes for the consideration of coding changes and, to the extent changes are made, will use the processes to establish relative values for these services. The Secretary is also required to consult with physician specialties affected by the provisions that change Medicare payments for drugs.

We expect to review this issue in the context of all the payment changes being made by the statute to Medicare payment for drug administration in order to assure accurate reporting and billing for such services taking into account levels of complexity of the administration and resource consumption. The existing processes we plan to use include review by our Physician's Regulatory Issues Team (PRIT) and consultation with the AMA's CPT Editorial Committee and physician specialties affected by changes in payment for drugs and drug administration. The PRIT, an internal CMS group that is working to eliminate unnecessary regulations, is reviewing the issue of coding for drug administration services including section 15400 of the Medicare Carriers Manual (MCM) that currently governs Medicare policy with respect to use of CPT codes in the 96400 through 96549 series for chemotherapy administration.

7. Treatment of Other Services Currently in the Nonphysician Work Pool

The nonphysician work pool is a special interim methodology that we use to determine practice expense RVUs for many services that do not have physician work RVUs. The drug administration codes listed above are currently valued using the nonphysician work pool methodology. Because we are now assigning work RVUs to these drug administration codes, they will no longer be included in the nonphysician work pool. Practice expense RVUs for these services will be computed using the standard practice expense methodology that applies to all other physicians' services.

Section 303(a)(2) of MPDIMA requires the Secretary to make adjustments to the nonphysician work pool methodology for the determination of practice expense RVUs under the physician fee schedule so that the practice expense RVUs for services determined under such methodology are not affected relative to the practice expense RVUs of services not determined under such methodology as a result of the amendments made by section 303(a)(2) of MPDIMA. If we made no other changes, removing drug administration codes from the nonphysician work pool would result in a reduction to the practice expense RVUs for services remaining in the nonphysician work pool. Consistent with section 303(a)(1) of MPDIMA, we are making two changes to the nonphysician work pool methodology so that the practice expense RVUs for nonphysician work pool services are not affected relative to other services.

First, we are changing the practice expense per hour assigned to the nonphysician work pool. In place of the “all physician” average, we are using a weighted average practice expense per hour of the specialties that perform the services affected by its calculations. Specifically, we will use the following revised data in the practice expense methodology for services remaining in the nonphysician work pool:

Second, we are adjusting the clinical staff times used in the creation of the pool. By definition, nonphysician work pool services do not involve the physician and have no physician time. To create the nonphysician work pool, we have used clinical staff time per procedure in the computation. We will now use the total staff time rather than the previously utilized maximum staff time for developing the 2004 physician fee schedule. Consistent with section 303(a)(2) of MPDIMA, the change to the practice expense per hour and staff time will result in no reduction to the practice expense RVUs for the services remaining in the nonphysician work pool once drug administration services are removed. By using the maximum staff time, we are assuming that clinical staff are working concurrently. However, it is possible that clinical staff are working sequentially and it would be appropriate to use the total staff time for each service. We are proposing to use the total staff in place of the maximum staff for developing the 2004 physician fee schedule since each are equally likely to address staff time arrangements for non-physician work pool services and the latter approach will assist in meeting the statutory directive that payment for non-physician work pool services not be affected by the changes we are making to drug administration services.

8. Payment for Multiple Chemotherapy Agents Furnished on a Single Day Through the Push Technique

Section 303(a)(3) of MPDIMA requires the Secretary to review the policy as in effect October 1, 2003, for section 1848 of the Act for the administration of more than one drug or biological to an individual on a single day through the push technique. Subsequent to that review, the Secretary will modify the payment policy as determined to be appropriate. Section 303(a)(3)(C) of MPDIMA indicates that any change in policy resulting from this review will be treated as additional expenditures attributable to section 1848(c)(2)(H). (This section relates to the additional expenditures that result from use of survey data that includes expenses for drug administration and clinical oncology nurses and requires that we establish work RVUs equal to a level 1 office visit for drug administration services. Currently, a level 1 office has 0.17 work RVUs)

In the November 25, 1991, Federal Register (56 FR 59541), we specified that Medicare will allow CPT code 96408 (Chemotherapy administration, intravenous; push technique) to be reported only once per day even if the physician administers multiple drugs and this policy is contained in Section 15400 of MCM. In the August 20, 2003, proposed rule (68 FR 50439) concerning payment reform for part B drugs under Medicare, we had proposed revising this policy to allow for CPT code 96408 to be reported once per day for each drug administered. This revision was supported by commenters.

Upon review of this issue and in acknowledgement that there are additional resources involved in administering each subsequent drug which should be considered in a resource-based payment system, we are changing our policy and will allow for CPT code 96408 to be reported once per day for each drug administered. The effective date for this change is for services furnished on or after January 1, 2004. We will modify section 15400 of the manual consistent with this change. In addition, as previously mentioned, the PRIT will be reviewing the issue of use of the chemotherapy administration codes in the 96400 CPT code series and Medicare's manual provisions on their use.

9. Transitional Adjustment to Medicare Payment for Certain Drug Administration Services

Section 303(a)(4) of MPDIMA provides for a transitional adjustment to Medicare payment for drug administration services to reflect implementation of the amendments made by section 303 of MPDIMA affecting Medicare's payments for drugs. Specifically, section 303(a)(4) of MPDIMA requires Medicare to increase the physician fee schedule amounts otherwise determined by 32 percent for 2004 and 3 percent for 2005. Thus, we will determine the payment for CPT codes 90780 through 90781, 90782 through 90788, 96400, 96408 through 96425, 96520, and 96530 based on the work, practice expense and malpractice RVUs shown in Addendum B and the 2004 CF of $37.3374. Consistent with section 303(a)(4) of MPDIMA, we will increase the physician fee schedule amount by an additional 32 percent for 2004. (The physician fee schedule amounts applicable in 2005 will be increased by 3 percent.)

C. Geographic Practice Cost Indices (GPCIs)

The Act requires that payments vary among physician fee schedule areas according to the extent that resource costs vary as measured by the Geographic Practice Cost Indices (GPCIs) for each of the three fee schedule components: work, practice expense, and malpractice.

Section 412 of MPDIMA amended section 1848(e)(1) of the Act and establishes a floor of 1.0 for the work geographic index for any locality to be used for purposes of payment for services furnished on or after January 1, 2004, and before January 1, 2007. In addition, section 602 of MPDIMA further amended section 1848(e)(1) of the Act for purposes of payment for services furnished in Alaska under the physician fee schedule on or after January 1, 2004, and before January 1, 2006, and sets the practice expense, malpractice and work indices at 1.67 if the index would otherwise be less than 1.67.

Based on these changes to the Act, we are revising the addenda published in the November 7, 2003, final rule concerning the transitional 2004 and full 2005 GPCIs (Addendum D and Addendum E, respectively). No locality will have a work GPCI of less than 1.00 and the work, practice expense and malpractice GPCIs for Alaska are set at 1.67. Addendum D in the November 7, 2003, final rule listed 58 localities having work GPCIs of less than 1.00. Of these, the range was from 0.881 for Puerto Rico to 0.998 for “Rest of New York” and New Orleans, Louisiana. Addendum D and E that are included in this final rule will replace the addenda previously published November 7, 2003.

D. Adjustments to the Work, Practice Expense and Malpractice Relative Value Units

In the August 15, 2003, proposed rule (68 FR 49058), we proposed to adjust the work, practice expense and malpractice RVUs to match the rebased MEI weights. In the November 7, 2003, final rule (68 FR 63245), we responded to public comments and applied adjustments of −0.57 percent (0.9943) to the physician work RVUs, −0.77 percent (0.9923) to the practice expense RVUs and 19.86 percent (1.1986) to the malpractice RVUs. These adjustments were intended to make the aggregate work, practice expense and malpractice RVUs used to determine payments in 2004 consistent with their respective weights in the rebased MEI.

However, the changes required by MPDIMA change the 2004 work, practice expense and malpractice RVUs. Provisions that require changes to the work and practice expense RVUs and exempt them from budget neutrality will increase the number of work and practice expense RVUs.

As we indicated in the November 7, 2003, final rule, we believe Medicare payment policy will be improved by adjusting the work, practice expense and malpractice RVUs to match the revised MEI weights. By matching the aggregate pools of RVUs to the rebased MEI weights, Medicare's payments for physician work, practice expense and malpractice will more closely match the proportion of expenses incurred by physicians in these categories. Therefore, we are revising the adjustments applied to the RVUs in the November 7, 2003, final rule consistent with our goal of making the work, practice expense and malpractice RVUs match the rebased MEI weights. The revised adjustments are −0.15 percent (0.9985) for physician work, −1.320 percent (0.9868) for practice expense, and 20.61 percent (1.2061) for malpractice. We have incorporated these adjustments into the RVUs shown in Addenda B and C of this final rule.

E. Anesthesia and Physician Fee Schedule Conversion Factors for 2004

The physician fee schedule update is determined under a methodology specified by statute. In the November 7, 2003, final rule (68 FR 63251), we used the formula specified in section 1848(d)(4) of the Act to determine a 4.5 percent reduction to the physician fee schedule CF. However, section 601 of MPDIMA amended section 1848(d) of the Act to specify that the update to the single CF for 2004 and 2005 will not be less than 1.5 percent. Because the statutory formula will yield a 4.5 percent reduction to the physician fee schedule CF and the amendments to the statute indicate that the update for 2004 cannot be less than 1.5 percent, we will increase the physician fee schedule CF by 1.5 percent for 2004.

The specific calculations to determine the physician fee schedule and anesthesia CFs for 2004 are explained below.

• Physician Fee Schedule Conversion Factor

Under section 1848(d)(1)(A) of the Act, the physician fee schedule CF is equal to the CF for the previous year multiplied by the update determined under section 1848(d)(4) of the Act.

We illustrate the calculation for the 2004 physician fee schedule CF in table 4:

• Anesthesia Fee Schedule Conversion Factor

As described in the November 7, 2003, final rule (68 FR 63252), anesthesia services do not have RVUs like other physician fee schedule services. For this reason, we are accounting for the adjustments to match the revised MEI weights and changes to anesthesia work and practice expenses through a 1.09 percent 1.0109 adjustment to the anesthesia fee schedule CF. The 1.09 percent increase reflects a 0.15 percent reduction on the work portion (79 percent), a 2.0 percent reduction on the practice expense portion (13.7 percent) and a 20.61 percent increase on the malpractice portion (7.2 percent) of the anesthesia conversion factor. (The adjustment to the practice expense portion is comprised of 1.3 percent for the MEI weights and 0.7 percent for the revisions in the practice expense methodology). To determine the anesthesia fee schedule CF for 2004, we used the following figures:

F. Publication of Addenda

The addenda included in this final rule concerning RVUs and Related Information Used in Determining Medicare Payments for 2004 (Addenda A, B and C) and GPCIs by Medicare Carrier and Locality (Addenda D and E) replace the addenda published November 7, 2003 (68 FR 63261). The revised addenda reflect changes required by MPDIMA as well as corrections to minor errors contained in the addenda published November 7, 2003.

III. Private Contracting With Medicare Beneficiaries

Section 4507 of the Balanced Budget Act of 1997 added section 1802(b) to the Act. This section provides that physicians and certain nonphysician practitioners may opt out of Medicare and enter into private contracts with Medicare beneficiaries. Under these contracts, no limits apply to what physicians or nonphysician practitioners can charge beneficiaries. Physicians opting out of Medicare file an affidavit with the Medicare carrier in which they agree to opt out of Medicare for a period of 2 years and to meet certain other criteria. In general, the statute requires that during that two-year period, physicians and nonphysician practitioners who have filed affidavits opting out of Medicare have private contracts with all Medicare beneficiaries to whom they furnish Medicare covered services. These contracts may not be entered into at a time when a beneficiary needs emergency or urgent care services.

Moreover, the statute requires that the private contract be in writing and be signed by the Medicare beneficiary before any item or service is provided in accordance with the contract and that:

• The beneficiary agrees not to submit a claim (or to request that the physician or practitioner submit a claim) with Medicare for Medicare covered services.
• The beneficiary agrees to be responsible, whether through insurance or otherwise, for services furnished under a private contract.
• The beneficiary acknowledges that no limits (including the limits under section 1848(g) of the Social Security Act) apply to amounts that are charged under the private contract.
• The beneficiary acknowledges that no payment will be made under a Medigap plan, and other insurers may elect not to make payment for services furnished under the private contract.
• The beneficiary acknowledges that Medicare may make payment for covered services if the service was received from a physician or non-physician practitioner with whom the beneficiary has not signed a private contract.

Prior to enactment of MPDIMA, section 1802(b)(5)(B) of the Act limited the types of physicians who could choose to opt out of Medicare to doctors of medicine and doctors of osteopathy. Section 603 of MPDIMA amends section 1802(b)(5)(B) of the Act to include dentists, podiatrists, and optometrists, in certain circumstances, in the definition of physicians who may opt out of Medicare. We are making conforming changes to our regulations to reflect this change in the statute.

IV. Waiver of Proposed Rulemaking and Delay in Effective Date

We ordinarily publish a notice of proposed rulemaking in the Federal Register and invite public comment on a proposed rule. The notice of proposed rulemaking includes a reference to the legal authority under which the rule is proposed, and the terms and substance of the proposed rule or a description of the subjects and issues involved. This procedure can be waived, however, if an agency finds good cause that notice-and-comment procedure is impracticable, unnecessary, or contrary to the public interest and incorporates a statement of the finding and its reasons in the rule issued. In addition, the Administrative Procedure Act (APA) normally requires a 30-day delay in the effective date of a final rule. Furthermore, the Congressional Review Act (CRA) generally requires an agency to delay the effective date of a major rule by 60-days in order to allow for congressional review of the agency action.

Section 1871 of the Act provides for publication of a notice of proposed rulemaking and opportunity for public comment before CMS issues a final rule. However, section 1871(b)(2)(B) provides an exception when a law establishes a specific deadline for implementation of a provision and the deadline is less than 150 days after the law's date of enactment. MPDIMA was enacted by Congress on November 25, 2003, and signed into law by the President on December 8, 2003. The provisions of this rule that amend the physician fee schedule and drug payment rate are required to be implemented January 1, 2004. Therefore, these provisions are subject to waiver of proposed rulemaking and public comment in accordance with section 1871(b)(2)(B) of the Act.

Even if section 1871(b)(2)(B) of the Act were not directly applicable here, we would find good cause to waive the requirement for publication of an notice of proposed rulemaking and public comment on the grounds that it is impracticable, unnecessary, and contrary to the public interest. This final rule, with the exception of implementation of billing for a level 1 office visit and pharmacy supplying fee and the technical correction of minor errors in the November rule, merely sets out the non-discretionary provisions of MPDIMA with respect to payment under the physician fee schedule and drug AWP methodology. Because the rule is generally ministerial, we believe that pursuing notice and comment is unnecessary. Moreover, because such process would prevent congressionally-mandated revisions, updates, and increases in payment under the physician fee schedule for 2004, we find that pursuing such process would be both impracticable and contrary to the public interest.

For these same reasons, we are waiving the 30-day delay in effective date contained in 5 U.S.C. section 553(d).

With respect to the requirement of a 60-day delay in the effective date of any final rule pursuant to the CRA, see 5 U.S.C. section 801, the CRA provides that the 60-day delayed effective date shall not apply to any rule “which an agency for good cause finds . . . that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest” (5 U.S.C. section 808(2)). For the reasons set forth above, we believe that additional notice-and-comment rulemaking on this subject would be impracticable, unnecessary, or contrary to the public interest. Therefore, we do not believe that the CRA requires a 60-day delay in the effective date of this final rule.

V. Response to Comments

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 major comments in the preamble to that document.

VI. Collection of Information Requirements

Under the Paperwork Reduction Act (PRA) of 1995, we are required to provide 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 of 1995 requires that we solicit comment on the following issues:

The need for the information collection and its usefulness in carrying out the proper functions of our agency.

• The accuracy of our estimate of the information collection burden.
• The quality, utility, and clarity of the information to be collected.
• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.

Therefore, we are soliciting public comments on each of these issues for the information collection requirement discussed below.

The following information collection requirement and associated burden are subject to the PRA.

§ 414.707 Basis of payment

Under paragraph (a)(7) of this section, a manufacturer requesting a drug payment exception to the default 85 percent used in the general rule or the percentage specified in Table 1 will have to submit data and information including the manufacturer's average sales price for the drug. The burden associated with this requirement is the time involved in providing us the information for the submission due before January 1, 2004, and the optional supplemental submission due by January 16, 2004. We believe that it would take an average of one hour to submit the request and the necessary data and information. Given the universe of approximately 450 Medicare drug codes and assuming an average of 10 manufacturers per drug code, the maximum aggregate burden associated with this activity would be 4500 hours.

We are soliciting public comment on this requirement in conjunction with a request for emergency approval of this information collection so that manufacturers may submit their requests during the statutorily prescribed timeframe. These requirements were submitted to OMB for review and are approved by OMB under OMB control number 0938-0913.

If you comment on any of these information collection and record keeping requirements, please mail copies directly to the following: Centers for Medicare & Medicaid Services, Office of Strategic Operations and Regulatory Affairs, Regulations Development and Issuances Group, Attn: Julie Brown, CMS-1372-FC, Room C5-16-03, 7500 Security Boulevard, Baltimore, MD 21244-1850; and Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10235, New Executive Office Building, Washington, DC 20503, Attn: Brenda Aguilar, CMS Desk Officer.

Comments submitted to OMB may also be emailed to the following address: email: baguilar@omb.eop.gov; or faxed to OMB at (202) 395-6974.

VII. Regulatory Impact Analysis

We have examined the impact of this rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132. Executive Order 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 must be prepared for final rules with economically significant effects (that is, a final rule that would have an annual effect on the economy of $100 million or more in any 1 year, or would adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities). We estimate that the combined effect of the physician fee schedule update and GPCI provisions included in this final rule will increase Medicare spending by $1.0 billion in FY 2004. We have simulated the effect of both the drug payment and physician fee schedule changes that we are adopting in this final rule. We are making several changes to the physician fee schedule RVUs in this final rule. In general, section 1848(c)(2)(B)(ii)(II) of the Act requires that changes to RVUs cannot increase or decrease expenditures more than $20 million from the amount of expenditures that would have resulted with such adjustments. However, section 303(a)(1) of the MPDIMA specifically exempts the changes we are making to the RVUs in this final rule from the budget neutrality requirements of section 1848(c)(2)(B)(ii)(II) of the Act. Thus, the changes that we are making to the physician fee schedule RVUs will increase aggregate spending for Medicare physician fee schedule services. Because the changes in this final rule will increase Medicare spending by more than $1.0 billion in FY 2004, we are considering this final rule to be economically significant. Therefore, this final rule is a major rule and we have prepared a regulatory impact analysis. The table 6 below shows our estimates of the fiscal year 2004 impact of specific MPDIMA provisions we are implementing in this final rule (rounded to the nearest $0.1 billion).

The RFA requires that we analyze regulatory options for small businesses and other entities. We prepare a Regulatory Flexibility Analysis unless we certify that a rule would not have a significant economic impact on a substantial number of small entities. The analysis must include a justification concerning the reason action is being taken, the kinds and number of small entities the rule affects, and an explanation of any meaningful options that achieve the objectives and less significant adverse economic impact on the small entities.

Section 1102(b) of the Act requires us to prepare a regulatory impact analysis for any proposed rule that 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 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside a Metropolitan Statistical Area and has fewer than 100 beds.

For purposes of the RFA, physicians, non-physician practitioners, and suppliers are considered small businesses if they generate revenues of $6 million or less. Approximately 95 percent of physicians (except mental health specialists) are considered to be small entities. There are about 875,000 physicians, other practitioners and medical suppliers that receive Medicare payment under the physician fee schedule. There are in excess of 20,000 physicians and other practitioners that receive Medicare payment for drugs. These physicians are concentrated in the specialties of oncology, urology and rheumatology. Of the physicians in these specialties, approximately 40 percent are in oncology and 45 percent in urology.

For purposes of the RFA, approximately 98 percent of suppliers of DME and prosthetic devices are considered small businesses according to the Small Business Administration's (SBA) size standards. We estimate that 106,000 entities bill Medicare for DME, prosthetics, orthotics, surgical dressings, and other equipment and supplies each year. Total Medicare expenditures for DME are approximately $7.7 billion per year, of which approximately $1.4 billion are for DME drugs.

The analysis and discussion provided in this section as well as elsewhere in this final rule complies with the RFA requirements. Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule that may result in expenditure in any 1 year by State, local, or tribal governments, in the aggregate, or by the private sector, of $110 million. This final rule would not impose unfunded mandates on State, local, or tribal governments, or on the private sector of more than $110 million.

We have examined this final rule in accordance with Executive Order 13132 and have determined that this regulation would not have any significant impact on the rights, roles, or responsibilities of State, local, or tribal governments.

We have prepared the following analysis, which together with the rest of this preamble meets all 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 we propose to use to minimize the burden on small entities. This final rule changes Medicare payment rates for drugs and their administration as well as other physician fee schedule services. We are providing information for each of the policy changes in the relevant sections of this final rule. We are unaware of any relevant Federal rules that duplicate, overlap or conflict with this final rule. The relevant sections of this final rule contain a description of significant alternatives if applicable.

A. Application of Market-Based Systems of Medicare Payment for Part B Drugs

As described in more detail earlier in this final rule, effective January 1, 2004, with some exceptions, section 303(b) of MPDIMA specifies that drugs not paid on a cost or prospective payment basis will be paid at 85 percent of the average wholesale price determined as of April 1, 2003. Section 303(a) directs the Secretary to make changes to the physician fee schedule that will increase Medicare spending for physicians' services. Section 303 applies only to oncology payments while section 304 indicates that identical provisions to those in section 303 apply to other physicians. We have estimated that section 303 of MPDIMA would have no cost in FY 2004 and that section 304 would save $0.1 billion in FY 2004.

B. Payment for Inhalation Drugs

Section 305(a) of MPDIMA specifies that inhalation drugs furnished through durable medical equipment covered under 1861(n) of the Act will be paid at 80 percent of the average wholesale price determined as of April 1, 2003. We estimated savings associated with implementing section 305(a) of the MPDIMA is $0.1 billion in FY 2004.

C. Pharmacy Supplying Fee for Certain Drugs and Biologicals

Section 303(e)(2) provides for payment of a pharmacy supplying fee, less applicable deductible and coinsurance, for immunosuppressive drugs described in subparagraph (J) of section 1861(s)(2) and oral anti-cancer and anti-nausea drugs described in subparagraphs (Q) and (T) of such section. The payment of this fee is bundled into the current payment for these drugs and the 2004 payment amounts specified in section 303(b). This provision has no impact on Medicare expenditures in 2004.

D. Physician Fee Schedule Provisions Related to the Administration of Drugs

As indicated above, we are making changes to the work and practice expense RVUs under the provisions of section 1848(c)(2) of the Act as amended by section 303 of MPDIMA. In general, under section 1848(c)(2) of the Act, adjustments to RVUs may not cause the amount of expenditures to differ by more than $20 million from the amount of expenditures that would have resulted without such adjustments. However, section 303(a)(1) of the MPDIMA specifically exempts the changes we are making to the RVUs in this final rule from the budget neutrality requirements of section 1848(c)(2)(B)(ii)(II). As described above, consistent with section 303(a)(1), we are making several changes to the physician fee schedule work and practice expense RVUs.

Table 6A shows the specialty level impact on payment of changes being made for CY 2004. The payment impacts reflect averages for each specialty based on Medicare utilization. The payment impact for an individual physician would be different from the average, based on the mix of services the physician provides. The average change in total revenues would be less than the impact displayed here since physicians furnish services to both Medicare and non-Medicare patients and specialties may receive substantial Medicare revenues for services that are not paid under the physician fee schedule. For instance, oncologists receive approximately 20 percent of their Medicare revenues from physician fee schedule services and approximately 77 percent of their Medicare revenues from drugs. Table 6A shows only the payment impact on physician fee schedule services. Table 11 below shows the combined impact of the physician fee schedule and drug payment changes for selected specialties and suppliers that receive a high percentage of their Medicare revenues from drugs.

We modeled the impact of all changes to the relative value units and illustrated their effect in table 6A. The column labeled “Impact 11/7/2003 Final Rule Pre-MEI Weight Adjustments” shows the combined effect of all of the relative value unit changes contained in the August 15, 2003, proposed rule and the November 7, 2003, final rule other than the adjustments to make the aggregate work, practice expense and malpractice RVUs match the MEI weights. (For a description of the impact of the provisions of the August 15, 2003, proposed rule see 68 FR 49060-49065. For a description of the impact of additional impacts resulting from the November 7, 2003, final rule, see 68 FR 63252-63253). As described below, we have revised the MEI weight adjustments and will illustrate their impact once we show the effect of all other provisions that change RVUs.

The column labeled “Section 303 and 304 Changes without Transition Payments” shows the impact of changes made in this final rule implementing section 303 and 304 of MPDIMA other than section 303(a)(4) that requires a “transitional adjustment” that increases payments for specific drug administration services by an additional 32 percent in 2004. This column shows the effect of increases in payments for drug administration services resulting from the higher work and practice expense RVUs required by section 303 and 304 of MPDIMA as well allowing oncologists to bill for multiple drug administrations by the “push” technique on a single day. In addition, because there will be no same day billing of a level 1 office visit and a drug administration service, the impacts shown include the effect of fewer office visit billings by the minority of oncologists who billed for such services. Taken together, these provisions will increase payments to oncologists by an estimated 27 percent. We estimate that payments to other physicians that provide drug administration services (rheumatology, infectious disease, obstetrics/gynecology) will increase by 1 to 2 percent. The revision to the practice expense per hour for cardiac and thoracic surgeons will increase their payments by an estimated 1 percent. All of the other increases shown in the table are a result of changes that we are making to the non-physician work pool. These changes will increase payments to physicians, practitioners and suppliers (Allergy/Immunology, Radiation Oncology, Radiology, Audiology, Diagnostic Testing Facility and Portable X-Ray suppliers) that provide services affected by the non-physician work pool calculations by approximately 1 percent. There will be little or no change in payments for all other specialties from the changes we are making in this interim final rule because the changes to the RVUs resulting from MPDIMA are exempt from the budget neutrality requirements of section 1848(c)(2)(ii)(II) of the Act.

The column labeled “Transition Payments” shows the impact on payment from the 32 percent increase in payment for drug administration services required by section 303(a)(4) of MPDIMA. This provision will have an effect on only those specialties that provide drug administration services and is estimated to increase payments to oncologists by an additional 14 percent. We estimate that payments to other physicians that provide drug administration services (infectious disease, obstetrics/gynecology rheumatology and urology) will increase by 1 to 2 percent.

We also modeled the effect of adjusting the RVUs to match the new MEI weights. Because we are increasing the malpractice RVUs by more than 20 percent, adjusting the RVUs to match the new MEI weights will result in an increase in payment for those specialties that perform services with high malpractice RVUs. Payments to anesthesiology, cardiac surgery, emergency medicine, neurosurgery, orthopedic surgery, thoracic surgery and vascular surgery will increase by approximately 1 percent. There will be a small impact on payment to all other physicians, practitioners and suppliers from the adjustments that reduce physician work and practice expense RVUs to match the new MEI weights. The total change in payment from provisions of the November 7, 2003, final rule and this final rule are shown in the total column.

In general, the statutory methodology for updating the physician fee schedule conversion factor is specified in section 1848(d)(4) of the Act. However, section 1848(d)(5) specifies that the update to the conversion factor for 2004 and 2005 shall not be less than 1.5 percent. Application of the statutory methodology of section 1848(d)(4) of the Act would reduce the physician fee schedule conversion factor by 4.5 percent. However, because section 1848(d)(5) of the Act indicates that the update can be no less than 1.5 percent, we are increasing the 2004 physician fee schedule conversion factor by 1.5 percent. In table 7, we are showing the estimated change in average payments by specialty based on provisions of this final rule and the estimated physician fee schedule update.

In the November 7, 2003, final rule, we showed the impact of all RVUs changes and a 4.5 percent reduction in the physician fee schedule conversion factor. In the table below, we are showing the effect of MPDIMA on payment for physician fee schedule services relative to the changes that would have occurred in 2004 under current law had MPDIMA not been enacted. That is, because the physician fee schedule conversion factor would have been reduced by 4.5 percent to $35.1339 and MPDIMA requires that it be increased by 1.5 percent to $37.3374, MPDIMA provisions affecting the update increased average physician fee schedule rates by 6.3 percent ($37.3374/$35.339 − 1 = 1.063 or 6.3 percent). Furthermore, MPDIMA required changes to relative value units that also resulted in further average increases in Medicare payment for physician fee schedule services. The following table also includes the impact of the GPCI provision that does not allow a work GPCI to be less than 1.0 and another one that increases the Alaska GPCI to 1.67. However, the impact on any specific physician, practitioner or supplier will be different than the average depending upon on whether the individual is located in Alaska or an area that would have had a GPCI that is less than 1.0.

The column labeled “Impact 11/7/2003” final rule shows the impacts from table 27 of the November 7, 2003, final rule (68 FR 63256). The next column shows the impacts from table 7 and an estimate of the increase in payments due to the GPCI provisions. The percentage difference between these columns isolates the impact of the MPDIMA provisions we are adopting in this final rule and are shown in the last column.

Table 9 shows the impact on payments for selected high volume procedures of all of the changes previously discussed. This table shows the combined impact of the change in the work, practice expense and malpractice RVUs and the estimated physician fee schedule update on total payment for the procedure. There are separate columns that show the change in the facility rates and the non-facility rates. For an explanation of facility and non-facility practice expense refer to § 414.22(b)(5)(i). The figures in tables 9 and 10 show the impact of the RVU changes and the physician fee schedule update but do not include the impact of the GPCI changes.

The next table shows the change in payments from 2003 to 2004 for selected high volume drug administration services. This table shows the impact of the increases in the physician work and practice expense RVUs, the 1.5 percent increase in the physician fee schedule conversion factor and the additional 32 percent “transition adjustment” required by section 303(a)(4) of MPDIMA in 2004.

Table 11 shows the combined impact of changes we are making to Medicare drug and physician fee schedule payments on selected specialties/medical suppliers that receive a significant portion of their total Medicare revenues from drugs. These figures do not include the impact of the legislated increases in the GPCI. The table shows the amount and proportion of total Medicare revenues received from drugs and physician fee schedule services (DME fee schedule services for DME/Other Medical Suppliers). We note that these impacts and percentages represent averages for each specialty or supplier. The percentages and impacts for any individual physician or DME supplier are dependent on the mix of drugs and physician fee schedule services they provide to Medicare beneficiaries. These tables are intended to illustrate the combined payment impact in a single year across all of the services that these specialties or suppliers perform using the most recent data available to us. The first two columns of table 11 list the specialty and its combined Medicare revenues from all sources. The next three columns show estimated total Medicare drug revenues, the proportion of total revenues represented by drugs and the percent change in Medicare drug payments estimated in the first year. The revenue reduction shown includes the effect of limiting decreases in drug payments to 15 percent, the maximum reduction allowed in 2004 consistent with section 1842(o)(4)(D) of the Act (as added by section 303(b) of MPDIMA). The following three columns show analogous information for physician fee schedule services. The last column shows the combined percentage change across all Medicare revenues. For example, as indicated in the table, approximately 77 percent of total Medicare revenues for oncologists are attributed to drugs. As indicated in the next column, we estimate that Medicare revenues from drugs will decline by approximately 12 percent for oncologists as a result of policies adopted in this interim final rule or about $510 million. We are increasing oncology physician fee schedule payments by 47 percent in this interim final rule or about $510 million. We estimated that the one-year decrease in drug payments and increase in physician fee schedule payments resulting from this final rule will produce virtually no net change in total Medicare payments for oncologists.

For DME/Other Medical Suppliers, 42 and 58 percent of Medicare revenues respectively are received from drugs and DME fee schedule services. These suppliers will receive an approximate reduction of 13 percent in their Medicare drug revenues the first year. The total reduction in payment in one year across all of the services they provide will be approximately 6 percent.

In general, the other physician specialties receive a smaller share of their total Medicare revenues from drugs than oncologists. However, they are also less affected by the payment increases for drug administration services. Taken together, we estimate a net change in revenues from the drug and drug administration payment changes for urology (−4 percent), rheumatology (−2 percent), obstetrics/gynecology (+1 percent) and infectious disease (+4 percent).

C. Geographic Practice Cost Indices (GPCIs) Changes

Section 412 of MPDIMA amended section 1848(e)(1) of the Act and establishes a floor of 1.0 for the work geographic index for any locality to be used for purposes of payment for services furnished on or after January 1, 2004, and before January 1, 2007. In addition, section 602 of MPDIMA further amended 1848 (e)(1) of the Act for purposes of payment for services furnished in Alaska under the physician fee schedule on or after January 1, 2004, and before January 1, 2006, and sets the practice expense, malpractice and work indices at 1.67 if such index would otherwise be less than 1.67. The impact of the MPDIMA provisions on the work GPCI is illustrated in Table 12.

An impact of these legislative changes to the GPCI can also be demonstrated by a comparison of area geographic adjustment factors (GAFs). The GAFs are a weighted composite of each area's work, practice expense, and malpractice expense GPCIs using the national GPCI cost share weights. While we do not actually use the GAFs in computing the fee schedule payment for a specific service, they are useful in comparing overall area costs and payments. The actual effect on payment for any specific service will deviate from the GAF to the extent that the service's proportions of work, practice expenses, and malpractice expense RVUs differ from those of the GAF. Table 13 shows the effects of the legislative revisions to the GPCIs on area GAFs for 2004. As directed by the legislation no locality will have a work GPCI of less than 1.00 and the work, practice expense and malpractice GPCIs for Alaska are set at 1.67. Tables 12 and 13 are sorted by decreasing percent change in work GPCI and GAF respectively.

We estimate the cost of the provisions affecting the GPCI will increase Medicare spending by 0.2 billion in FY 2004.

E. Alternatives Considered

For the most part, this interim final implements prescriptive provisions of MPDIMA and the statute does not permit us to exercise our discretion. Nevertheless, the preamble identifies ancillary policies and rationale for our decisions.

For instance, the statutory provisions requiring changes to Medicare's payments for drugs were prescriptive. We did not consider any alternatives because of the clear direction in the statute to determine Medicare prices for drugs in 2004. Similarly, the provisions of the statute with respect to the GPCI were also prescriptive and did not allow for us to consider any alternatives. While we considered using the formula contained in section 1848(d)(4) of the Act to update the physician fee schedule conversion factor, its application would result in a reduction of 4.5 percent and would be inconsistent with the MPDIMA provision requiring an update to the physician fee schedule conversion factor for 2004 of not less than 1.5 percent. With respect to the provisions of this final rule that require changes to Medicare payments for the administration of drugs, we generally did not find that the statute permitted discretion. Nevertheless, earlier in the preamble of this final rule, we provided detailed descriptions of the statutory provisions and its requirements and, where possible, of the alternatives we considered.

F. Impact on Beneficiaries

Although changes in physicians' payments were large when the physician fee schedule was implemented in 1992, we detected no problems with beneficiary access to care. We do not believe that there would be any problem with access to care as a result of the changes in this rule. For the most part, we are increasing payments for physicians fee schedule services that otherwise would be reduced. We don't believe the drug payment changes will have an impact on beneficiary access to services but we will continue to monitor this issue.

We estimate that beneficiary liability will increase in CY 2004 by $1.0 billion for the physician fee schedule provisions relative to current law. Payment changes we are making in this final rule for drug administration will increase beneficiary liability. However, we estimate that the provisions that change Medicare's drug payments to oncologists (section 303 of MPDIMA), other physicians (section 304 of MPDIMA) and inhalation drugs (section 305 of MPDIMA) will offset the additional beneficiary liability for drug administration. We estimate that the net effect of changes to payment for drugs and drug administration will result in savings to beneficiaries of approximately $100 million in CY 2004.

In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 405

• Administrative practice and procedure
• Health facilities
• Health professions
• Kidney diseases
• Medical devices
• Medicare
• Reporting and recordkeeping requirements
• Rural areas
• X-rays

42 CFR Part 414

• Administrative practice and procedure
• Health facilities
• Health professions
• Kidney diseases
• Medicare
• Reporting and recordkeeping requirements
• Rural areas
• X-rays

(Catalog of Federal Domestic Assistance Program No. 93.774, Medicare—Supplementary Medical Insurance Program.)

For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services amends 42 CFR chapter IV as follows:

PART 405—FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

1. The authority citation for part 405 continues to read as follows:

Authority:Secs. 1102, 1802, and 1871 of the Social Security Act (42 U.S.C. 1302, 1395a, and 1395hh).

2. Section 405.400 is amended by revising the definition of “physician” to read as follows:

3. Section 405.517 is amended by—

A. Redesignating the text of paragraph (a) as paragraph (a)(1) and adding a heading;

B. Adding a new paragraph (a)(2).

PART 414—PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES

4. The authority citation for part 414 continues to read as follows:

Authority:Secs. 1102, 1871, and 1881(b)(1) of the Social Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(1)).

5. The list in § 414.1 is amended by adding a new entry in numerical order as follows:

6. A new subpart I is added to read as follows:

(7) In the case of blood and blood products (other than blood clotting factors), the payment limits shall be determined in the same manner as such payment limit was determined on October 1, 2003.

(b) Mandatory assignment. Effective with services furnished on or after February 1, 2001, payment for any drug covered under Part B of Medicare may be made on an assignment-related basis only. All billers must accept the program allowed charge as payment in full and may not bill nor collect from the beneficiary any amount other than the unmet Part B deductible and Part B coinsurance amounts, if applicable. Violations of this requirement may subject the supplier to sanctions, as provided by the statute (See § 402 of this chapter).

Note:

These addenda will not appear in the Code of Federal Regulations.

Addendum A—Explanation and Use of Addenda B

The addenda on the following pages provide various data pertaining to the Medicare fee schedule for physicians' services furnished in 2004. Addendum B contains the RVUs for work, non-facility practice expense, facility practice expense, and malpractice expense, and other information for all services included in the physician fee schedule.

In previous years, we have listed many services in Addendum B that are not paid under the physician fee schedule. To avoid publishing as many pages of codes for these services, we are not including clinical laboratory codes and most alpha-numeric codes (Healthcare Common Procedure Coding System (HCPCS) codes not included in CPT) in Addendum B.

Addendum B—2004 Relative Value Units and Related Information Used in Determining Medicare Payments for 2004

This addendum contains the following information for each CPT code and alphanumeric HCPCS code, except for alphanumeric codes beginning with B (enteral and parenteral therapy), E (durable medical equipment), K (temporary codes for nonphysicians' services or items), or L (orthotics), and codes for anesthesiology.

1. CPT/HCPCS code. This is the CPT or alphanumeric HCPCS number for the service. Alphanumeric HCPCS codes are included at the end of this addendum.

2. Modifier. A modifier is shown if there is a technical component (modifier TC) and a professional component (PC) (modifier −26) for the service. If there is a PC and a TC for the service, Addendum B contains three entries for the code: One for the global values (both professional and technical); one for modifier −26 (PC); and one for modifier TC. The global service is not designated by a modifier, and physicians must bill using the code without a modifier if the physician furnishes both the PC and the TC of the service.

Modifier −53 is shown for a discontinued procedure. There will be RVUs for the code (CPT code 45378) with this modifier.

3. Status indicator. This indicator shows whether the CPT/HCPCS code is in the physician fee schedule and whether it is separately payable if the service is covered.

A = Active code. These codes are separately payable under the fee schedule if covered. There will be RVUs for codes with this status. The presence of an “A” indicator does not mean that Medicare has made a national decision regarding the coverage of the service. Carriers remain responsible for coverage decisions in the absence of a national Medicare policy.

B = Bundled code. Payment for covered services is always bundled into payment for other services not specified. If RVUs are shown, they are not used for Medicare payment. If these services are covered, payment for them is subsumed by the payment for the services to which they are incident. (An example is a telephone call from a hospital nurse regarding care of a patient.)

C = Carrier-priced code. Carriers will establish RVUs and payment amounts for these services, generally on a case-by-case basis following review of documentation, such as an operative report.

D = Deleted code. These codes are deleted effective with the beginning of the calendar year.

E = Excluded from physician fee schedule by regulation. These codes are for items or services that we chose to exclude from the physician fee schedule payment by regulation. No RVUs are shown, and no payment may be made under the physician fee schedule for these codes. Payment for them, if they are covered, continues under reasonable charge or other payment procedures.

F = Deleted/discontinued codes. Code not subject to a 90-day grace period.

G = Code not valid for Medicare purposes. Medicare does not recognize codes assigned this status. Medicare uses another code for reporting of, and payment for, these services.

H = Deleted modifier. Either the TC or PC component shown for the code has been deleted, and the deleted component is shown in the data base with the H status indicator. (Code subject to a 90-day grace period.)

I = Not valid for Medicare purposes. Medicare uses another code for the reporting of, and the payment for these services. (Code NOT subject to a 90-day grace period.)

N = Noncovered service. These codes are noncovered services. Medicare payment may not be made for these codes. If RVUs are shown, they are not used for Medicare payment.

P = Bundled or excluded code. There are no RVUs for these services. No separate payment should be made for them under the physician fee schedule.

• If the item or service is covered as incident to a physician's service and is furnished on the same day as a physician's service, payment for it is bundled into the payment for the physician's service to which it is incident (an example is an elastic bandage furnished by a physician incident to a physician's service).
• If the item or service is covered as other than incident to a physician's service, it is excluded from the physician fee schedule (for example, colostomy supplies) and is paid under the other payment provisions of the Act.

R = Restricted coverage. Special coverage instructions apply. If the service is covered and no RVUs are shown, it is carrier-priced.

T = Injections. There are RVUs for these services, but they are only paid if there are no other services payable under the physician fee schedule billed on the same date by the same provider. If any other services payable under the physician fee schedule are billed on the same date by the same provider, these services are bundled into the service(s) for which payment is made.

X = Exclusion by law. These codes represent an item or service that is not within the definition of “physicians' services” for physician fee schedule payment purposes. No RVUs are shown for these codes, and no payment may be made under the physician fee schedule. (Examples are ambulance services and clinical diagnostic laboratory services.)

4. Description of code. This is an abbreviated version of the narrative description of the code.

5. Physician work RVUs. These are the RVUs for the physician work for this service in 2003. Codes that are not used for Medicare payment are identified with a “+.”

6. Non-facility practice expense RVUs. These are the fully implemented resource-based practice expense RVUs for non-facility settings.

7. Facility practice expense RVUs. These are the fully implemented resource-based practice expense RVUs for facility settings.

8. Malpractice expense RVUs. These are the RVUs for the malpractice expense for the service for 2004.

9. Non-facility total. This is the sum of the work, fully implemented non-facility practice expense, and malpractice expense RVUs.

10. Facility total. This is the sum of the work, fully implemented facility practice expense, and malpractice expense RVUs.

11. Global period. This indicator shows the number of days in the global period for the code (0, 10, or 90 days). An explanation of the alpha codes follows:

MMM = The code describes a service furnished in uncomplicated maternity cases including antepartum care, delivery, and postpartum care. The usual global surgical concept does not apply. See the 1999 Physicians' Current Procedural Terminology for specific definitions.

XXX = The global concept does not apply.

YYY = The global period is to be set by the carrier (for example, unlisted surgery codes).

ZZZ = Code related to another service that is always included in the global period of the other service. (Note: Physician work and practice expense are associated with intra service time and in some instances the post service time.)