96-16744. Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 1997

[Federal Register Volume 61, Number 128 (Tuesday, July 2, 1996)]
[Proposed Rules]
[Pages 34614-34662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16744]

[[Page 34613]]

_______________________________________________________________________

Part IV

Department of Health and Human Services

_______________________________________________________________________

Health Care Financing Administration

_______________________________________________________________________

42 CFR Parts 410 and 415

Medicare Program; Revisions to Payment Policies Under the Physician Fee
Schedule for Calendar Year 1997; Proposed Rule

Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 /
Proposed Rules

[[Page 34614]]

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 405, 410, and 415

[BPD-852-P]
RIN 0938-AH40

Medicare Program; Revisions to Payment Policies Under the
Physician Fee Schedule for Calendar Year 1997

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

ACTION: Proposed rule.

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

SUMMARY: This proposed rule discusses several policy changes affecting
Medicare payment for physician services including payment for
diagnostic services and transportation in connection with furnishing
diagnostic tests. The proposed rule also discusses comprehensive
locality changes and changes in the procedure status codes for a
variety of services.

DATES: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on
September 3, 1996.

ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: BPD-852-P, P.O. Box 26688,
Baltimore, MD 21207-0488.
If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:

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

Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code BPD-852-P. Comments received timely will be available for
public inspection as they are received, generally beginning
approximately 3 weeks after publication of a document, in Room 309-G of
the Department's offices at 200 Independence Avenue, SW., Washington,
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.
(phone: (202) 690-7890).
For comments that relate to information collection requirements,
mail a copy of the comments to: Allison Herron Eydt, HCFA Desk Officer,
Office of Information and Regulatory Affairs, Room 10235, New Executive
Office Building, Washington, DC 20530.
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FOR FURTHER INFORMATION CONTACT: Shana Olshan, (410) 786-5714.

SUPPLEMENTARY INFORMATION: To assist readers in referencing sections
contained in this preamble, we are providing the following table of
contents. Some of the issues discussed in this preamble affect the
payment policies but do not require changes to the regulations in the
Code of Federal Regulations.

Table of Contents

I. Background
A. Legislative History
B. Published Changes to the Fee Schedule
II. Specific Proposals for Calendar Year 1997
A. Payment Area (Locality) and Corresponding Geographic Practice
Cost Index Changes
1. Background
2. Locality Study
3. Nonselected Options
4. Proposal
a. Proposed Variant of Option 1 (Option 1i, 5-Percent Threshold)
b. Proposed Option 1i, 5-Percent Threshold, with Subcounty
Payment Area Restructuring
c. Effects of Proposed Option 1i, 5-Percent Threshold, with
Subcounty FSA Restructuring
B. Special Rules for the Payment of Diagnostic Tests, Including
Diagnostic Radiologic Procedures
1. Background
2. Proposal
3. Chiropractor Exception
4. Non-Physician Practitioners
C. Transportation in Connection with Furnishing Diagnostic Tests
D. Bundled Services
1. Hot or Cold Packs
2. Dermatology Procedures
a. Bundling of Repair Codes into Excision Codes
b. Skin Lesion Destruction Codes
E. Change in Coverage Status for Screening and Obsolete
Procedures
1. Vital Capacity Testing
2. Certain Cardiovascular Procedures
F. Payments for Supervising Physicians in Teaching Settings
1. Definition of Approved Graduate Medical Education Programs
2. Evaluation and Management Services Furnished in Certain
Settings
G. Change in Global Periods for Four Percutaneous Biliary
Procedures
III. Collection of Information Requirements
IV. Response to Comments
V. Regulatory Impact Analysis
A. Regulatory Flexibility Act
B. Payment Area (Locality) and Corresponding Geographic Practice
Cost Index Changes
C. Special Rules for the Payment of Diagnostic Tests, Including
Diagnostic Radiologic Procedures
D. Transportation in Connection with Furnishing Diagnostic Tests
E. Bundled Services
1. Hot or Cold Packs
2. Dermatology Procedures
a. Bundling of Repair Codes into Excision Codes
b. Skin Lesion Destruction Codes
F. Change in Coverage Status for Screening and Obsolete
Procedures
1. Vital Capacity Testing
2. Certain Cardiovascular Procedures
G. Payments for Supervising Physicians in Teaching Settings
H. Change in Global Periods for Four Percutaneous Biliary
Procedures
I. Rural Hospital Impact Statement

Addendum A--1996 Geographic Adjustment Factors (GAFs) by Medicare
Payment Locality/Locality Part for January 1, 1996 Localities and
Proposed Option, Fee Schedule Areas (FSAs), in Descending Order of
Difference
Addendum B--Medicare Fee Schedule Areas (Localities) and 1996
Geographic

[[Page 34615]]

Adjustment Factors (GAFs), Current and Proposed Option by State and
County/County Part
In addition, because of the many organizations and terms to which
we refer by acronym in this final rule, we are listing these acronyms
and their corresponding terms in alphabetical order below:

AMA American Medical Association
CFR Code of Federal Regulations
CPT [Physicians'] Current Procedural
Terminology [4th Edition, 1996,
copyrighted by the American Medical
Association]
CY Calendar year
EKG Electrocardiogram
FSA Fee Schedule Area
FY Fiscal year
GAF Geographic adjustment factor
GPCI Geographic practice cost index
HCFA Health Care Financing Administration
HCPAC Health Care Professional Advisory
Council
HCPCS HCFA Common Procedure Coding System
HHS [Department of] Health and Human
Services
MEI Medicare Economic Index
MSA Metropolitan Statistical Area
OBRA Omnibus Budget Reconciliation Act
OMB Office of Management and Budget
PMSA Primary Metropolitan Statistical Area
RVU Relative Value Unit
TC Technical Component

I. Background

A. Legislative History

The Medicare program was established in 1965 by the addition of
title XVIII to the Social Security Act (the Act). Since January 1,
1992, Medicare pays for physician services under section 1848 of the
Act, ``Payment for Physicians' Services.'' This section contains three
major elements: (1) A fee schedule for the payment of physician
services; (2) a Medicare volume performance standard for the rates of
increase in Medicare expenditures for physician services; and (3)
limits on the amounts that nonparticipating physicians can charge
beneficiaries. The Act requires that payments under the fee schedule be
based on national uniform relative value units (RVUs) based on the
resources used in furnishing a service. Section 1848(c) of the Act
requires that national RVUs be established for physician work, practice
expense, and malpractice expense.
Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments
in RVUs because of changes resulting from a review of those RVUs may
not cause total physician fee schedule payments to differ by more than
$20 million from what they would have been had the adjustments not been
made. If this tolerance is exceeded, we must make adjustments to the
conversion factors to preserve budget neutrality.

B. Published Changes to the Fee Schedule

We published a final rule on November 25, 1991 (56 FR 59502) to
implement section 1848 of the Act by establishing a fee schedule for
physician services furnished on or after January 1, 1992. In the
November 1991 final rule (56 FR 59511), we stated our intention to
update RVUs for new and revised codes in the American Medical
Association's (AMA's) Physicians' Current Procedural Terminology (CPT)
through an ``interim RVU'' process every year. The updates to the RVUs
and fee schedule policies follow:
November 25, 1992, as a final notice with comment period
on new and revised RVUs only (57 FR 55914).
December 2, 1993, as a final rule with comment period (58
FR 63626) to revise the refinement process used to establish physician
work RVUs and to revise payment policies for specific physician
services and supplies. (We solicited comments on new and revised RVUs
only.)
December 8, 1994, as a final rule with comment period (59
FR 63410) to revise the geographic adjustment factor (GAF) values, fee
schedule payment areas, and payment policies for specific physician
services. The final rule also discussed the process for periodic review
and adjustment of RVUs not less frequently than every 5 years as
required by section 1848(c)(2)(B)(i) of the Act.
December 8, 1995, as a final rule with comment period (60
FR 63124) to revise various policies affecting payment for physician
services including Medicare payment for physician services in teaching
settings, the RVUs for certain existing procedure codes, and to
establish interim RVUs for new and revised procedure codes. The rule
also included the final revised 1996 geographic practice cost indices.
This proposed rule would affect the regulations set forth at 42 CFR
part 405, which encompasses regulations on Federal health insurance for
the aged and disabled; part 410, which consists of regulations on
supplementary medical insurance benefits and part 415, which contains
regulations on services of physicians in provider settings, supervising
physicians in teaching settings, and residents in certain settings.

II. Specific Proposals for Calendar Year 1997

A. Payment Area (Locality) and Corresponding Geographic Practice Cost
Index Changes

1. Background
From the inception of Medicare in 1966 until 1992, Medicare
payments for physicians' services were made under the reasonable charge
system. Under the reasonable charge system, Medicare payment localities
for physicians' services were set by local Medicare carriers based on
their knowledge of local physician charging patterns. As such, payment
areas have had no consistent geographic basis. In general, localities
tended to be geographic or political subdivisions such as States,
counties, or cities, or designations such as urban and rural. Most of
the localities changed little between 1966 and 1992. There were about
240 localities, including 16 States with statewide localities, under
the reasonable charge system.
Section 1848 of the Act replaced the reasonable charge system of
paying for physician services under section 1842(b) of the Act, with
the physician fee schedule effective January 1, 1992. Section
1848(j)(2) of the Act defines a physician fee schedule payment area as
the locality existing under section 1842(b) of the Act for purposes of
computing payment amounts for physician services. Section 1848 did not,
however, delete section 1842 of the Act, which gives the Secretary the
authority to set localities. We believe the Congress enacted section
1848(j)(2) to allow us to retain existing localities to facilitate the
statutory transition to the physician fee schedule, but not to preclude
us from making locality changes if warranted. All locality changes are
now made by HCFA through the rulemaking process. Medicare carriers are
not allowed to set or revise physician fee schedule payment localities.
In the June 5, 1991 proposed rule for the physician fee schedule
(56 FR 25832), we acknowledged the lack of consistency among localities
and the significant demographic and economic changes that had occurred
since localities were originally established. We also stated that we
planned no large-scale locality changes until we evaluated the various
studies on localities being done within HCFA and by outside groups such
as the Physician Payment Review Commission and until after the
statutory transition from the reasonable charge system to the fee
schedule was completed in 1996. We

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stated that until we decide on ultimate large-scale changes, the only
locality changes we would consider would be requests for converting
individual States with multiple localities to a single statewide
locality if ``* * * overwhelming support from the physician community
for the changes can be demonstrated.'' This position was repeated in
the November 1991 final rule on the physician fee schedule (56 FR
59514). This willingness to consider applications from physicians in a
State for conversion to a statewide locality, if overwhelming support
on the part of winning and losing physicians has been demonstrated,
reflects our belief that statewide localities generally are preferable
to the present Medicare localities because they simplify program
administration and encourage physicians to practice in rural areas by
reducing urban/rural payment differentials.
We received inquiries from a number of State medical societies
concerning conversions to a statewide payment area. Under the law,
payments vary among physician fee schedule areas only to the extent
that resource costs vary as measured by the Geographic Practice Cost
Index (GPCI). The GPCI is an index developed to measure resource cost
differences among areas in the three components of the physician fee
schedule--physician work, practice expenses, and malpractice expenses.
Area geographic adjustment factors (GAFs) are weighted composites of
the area GPCIs and are useful in comparing overall resource cost and
payment level differences among areas. (A comprehensive explanation of
the GPCIs and GAFs can be found in the June 24, 1994 proposed rule (59
FR 32756)).
We explained to the States inquiring about conversions to a
statewide payment area that these conversions involve taking a weighted
average of the existing locality GPCIs to form a new statewide GPCI.
This means that there may be ``losing'' (usually urban) areas, as well
as ``winning'' (usually rural) areas within a State if a conversion is
made. We further informed the States that a simple resolution passed by
the State medical society is not sufficient proof of overwhelming
support among both rural and urban physicians for the change. To assist
States in deciding whether to convert to a statewide payment area, we
published an informational list of projected statewide GPCIs in the
June 1991 proposed rule (56 FR 25972). A slightly revised list of
projected statewide GPCIs was published in the December 1993 final rule
(58 FR 63638). The revisions were made to ensure that any change to a
statewide payment area would be done on a budget-neutral basis. That
is, that the same amount of payments would be made within a State after
the conversion to a statewide payment area as would have been made had
the conversion not been made. A comprehensive revision of all GPCIs was
made in 1995. A list of revised projected statewide GPCIs was published
at Addendum E of the June 1994 proposed rule (59 FR 32789).
In most cases, States have been unable to generate the support of
the losing physicians for the change. However, three States--Minnesota,
Nebraska, and Oklahoma--were converted to statewide payment areas in
1992. (These conversions were announced in the November 1991 final rule
(56 FR 59514).) Two additional States--North Carolina and Ohio--were
converted to statewide payment areas in 1994. (These conversions were
announced in the December 1993 final rule (58 FR 63638).) Iowa was
converted to a statewide payment area in 1995. (This conversion was
announced in the December 1994 final rule (59 FR 63416).) There are
currently 210 payment areas under the physician fee schedule: 22 States
with single payment areas; the District of Columbia (with surrounding
Maryland and Virginia suburbs), Puerto Rico, and the Virgin Islands are
3 more single payment areas; and 28 multiple-locality States containing
185 payment areas. Table 1 summarizes existing physician fee schedule
payment areas.

Table 1.--1996 Medicare Physician Fee Schedule Payment Localities by
State and Other
------------------------------------------------------------------------
State Localities
------------------------------------------------------------------------
Single locality States:
Alaska.................................................... 1
Arkansas.................................................. 1
Colorado.................................................. 1
Delaware.................................................. 1
Hawaii/Guam............................................... 1
Iowa...................................................... 1
Minnesota................................................. 1
Montana................................................... 1
Nebraska.................................................. 1
New Hampshire............................................. 1
New Mexico................................................ 1
North Carolina............................................ 1
North Dakota.............................................. 1
Ohio...................................................... 1
Oklahoma.................................................. 1
Rhode Island.............................................. 1
South Carolina............................................ 1
South Dakota.............................................. 1
Tennessee................................................. 1
Utah...................................................... 1
Vermont................................................... 1
Wyoming................................................... 1
------------------------------------------------------------------------
22 States............................................... 22
Other:
Wash. D.C................................................. 1
Puerto Rico............................................... 1
Virgin Islands............................................ 1
------------------------------------------------------------------------
3 Other................................................. 3
Multiple locality States:
Alabama..................................................... 6
Arizona..................................................... 6
California.................................................. 28
Connecticut................................................. 4
Florida..................................................... 4
Georgia..................................................... 4
Idaho....................................................... 2
Illinois.................................................... 16
Indiana..................................................... 3
Kansas...................................................... 3
Kentucky.................................................... 3
Louisiana................................................... 8
Maine....................................................... 3
*Maryland................................................... 3
Massachusetts............................................... 2
Michigan.................................................... 2
Mississippi................................................. 2
Missouri.................................................... 7
Nevada...................................................... 4
New Jersey.................................................. 3
New York.................................................... 8
Oregon...................................................... 5
Pennsylvania................................................ 4
Texas....................................................... 32
*Virginia................................................... 4
Washington.................................................. 3
West Virginia............................................... 5
Wisconsin................................................... 11
------------------------------------------------------------------------
28 States............................................... 185
------------------------------------------------------------------------
Total 1996 Physician Fee Schedule Payment Localities=210.
*The Maryland and Virginia localities do not include the parts of
Maryland (Prince Georges and Montgomery Counties) and Virginia
(Fairfax and Arlington Counties and the city of Alexandria) included
in the Washington, D.C. locality.

2. Locality Study
There are numerous possibilities for realigning payment localities.
After considerable internal discussion, we narrowed the possibilities
to four general options. A major goal in selecting these options is to
continue to reduce the number of areas, leading to greater simplicity,
understandability, ease of administration, reduction in urban/rural
payment differences, reduction in payment differences among adjacent
areas, and stability of payment updates resulting from the periodic
GPCI revisions. Larger payment areas would mean larger data samples
thereby leading to less volatile changes in the statutory periodic GPCI
revisions. We contracted with Health Economics

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Research, Inc. to conduct an analysis of these options. The four
general fee schedule area (FSA) options are briefly summarized as
follows:
Option 1: Use current localities as building blocks. The
22 States currently with single localities would remain statewide FSAs.
Statewide FSAs would be created in the 28 remaining States, except for
current localities whose GAF exceeds the State GAF by a specified
percentage threshold (for example, 5 percent).
Option 2: Use metropolitan areas (Metropolitan Statistical
Areas (MSAs), Primary Metropolitan Statistical Areas (PMSAs), and New
England County Metropolitan Areas) as building blocks. The 22 States
currently with single localities would remain statewide FSAs. Statewide
FSAs would be created in the 28 remaining States, except for
metropolitan areas whose GAF exceeds the State GAF by a specified
percentage threshold.
Option 3: Use metropolitan areas as building blocks. The
22 States currently with single localities would remain statewide FSAs.
Each of the 28 remaining States would be divided into 2 to 5 FSAs based
on metropolitan area population size: greater than 3 million; 1 to 3
million; .25 to 1 million; less than .25 million; nonmetropolitan.
Option 4: Use metropolitan areas as building blocks.
Designate five nationwide FSAs based on metropolitan area population
size: greater than 3 million; 1 to 3 million; .25 to 1 million; less
than .25 million; nonmetropolitan.
We also asked Health Economics Research, Inc. for any suggestions
for variations on these options that might improve them. We
specifically requested that it recommend restructuring FSAs in the 11
States that have subcounty localities. These subcounty configurations,
usually cities or zip codes, create unnecessary complexity and
administrative burden.
Health Economics Research, Inc. issued its final report to us on
November 1, 1995. The report consists of three volumes and can be
obtained by requesting the following titles from the National Technical
Information Service by calling 1-800-553-NTIS, or (703) 487-4650 in
Springfield, Virginia:
``Assessment and Redesign of Medicare Fee Schedule Areas
(Localities),'' Volume I: Text, NTIS PB96-118815.
``Assessment and Redesign of Medicare Fee Schedule Areas
(Localities),'' Volume II: Appendix Tables, NTIS PB96-118823.
``Assessment and Redesign of Medicare Fee Schedule Areas
(Localities),'' Volume III: Maps. NTIS PB96-118187.
3. Nonselected Options
While we began with four basic options, numerous variations are
possible merely depending on which threshold GAF difference is
selected. For example, Option 1 is based on the difference between the
existing FSA GAF and the State GAF. Many variants on this option are
available merely depending upon what threshold GAF difference between
the FSAs and the State is selected, for example, 1 percent, 3 percent,
5 percent, 10 percent. Likewise, Option 2 produces many variations
depending on the selected threshold GAF difference between the
metropolitan area GAF and the State GAF. The major goal of revising
FSAs is to simplify the payment areas and reduce payment differences
among geographic areas while maintaining accuracy in tracking input
price differences among areas. All options involve a certain trade-off
between simplicity and understandability and accuracy of tracking of
input prices. Many of the variations will produce a similar number of
FSAs, but some do so at the expense of producing undesirable payment
differences at boundaries or inaccuracies in tracking input prices.
After careful examination of all options and their variants, we
believe that a variant of Option 1 is clearly the best choice. Before
discussing, in depth, our reasons for selecting this option, the
following is a brief discussion of why we eliminated Options 2, 3, and
4, in order of the least promising option. A more detailed discussion
of these options with tables and maps can be found in the Health
Economics Research, Inc. report.
Option 4 is the least promising approach to constructing FSAs.
While it has the smallest number of FSAs, five nationwide, it is
unacceptably inaccurate in tracking input price differences and creates
too many large and inappropriate GAF differences across FSA boundaries.
Grouping all metropolitan areas of the same size into a single
category, regardless of geographic location, would substantially
underpay some areas while overpaying others.
For example, the following large metropolitan areas would be
substantially underpaid under Option 4 (Option 4 GAF/actual GAF is
indicated in parenthesis): San Francisco (1.024/1.141); New York City
(1.102/1.176); Nassau-Suffolk, New York (1.024/1.199); and Miami
(1.024/1.116). Conversely, the following large cites would be overpaid
under Option 4: Houston (1.102/1.030); Chicago (1.102/1.061); and
Philadelphia (1.102/1.066). In addition to these inaccuracies, Option 4
creates some severe boundary problems. For example, the Houston-
Galveston, Texas difference under Option 4 is 1.102 versus 0.937, a
nearly 20 percentage point difference, versus an actual area GAF cost
difference of 1.030 versus 1.001. Other examples may be found in the
tables and maps in the Health Economics Research, Inc. report. In
short, State-specific and metropolitan-area-specific factors, which
Option 4 ignores, appear to be important influences on input prices.
These factors are not captured by nationwide average inputs based on
population size. While New York and Houston are in the same
metropolitan area size classification of greater than 3 million, they
have less in common with each other in terms of practice costs than
they do with neighboring metropolitan areas of smaller size.
Option 3, we believe, is also unpromising. It creates the largest
number of FSAs of any option and is geographically more complex than
either Option 1 or Option 2. This option suffers from inadequate
tracking of input price variations and inappropriate differences across
boundaries, which are caused, as in Option 4, by grouping metropolitan
areas by population class. Under this option, within a State, a
metropolitan area's costliness is assumed to be dependent only on its
population. This is not always an accurate assumption. A small
metropolitan area that is a component of a major metropolitan region
(for example, a PMSA) may have much higher input prices than a small
freestanding metropolitan area surrounded by nonmetropolitan counties.
Grouping these types of metropolitan areas together can lead to
inaccurate GAFs and inappropriate differences at FSA boundaries. For
example, Houston is the only Texas metropolitan area in the highest
population category of 3 million or more, and has a GAF under Option 3
of 1.030. The contiguous Galveston PMSA is in the smallest population
class of under 250,000. Its actual GAF is 1.001, but under Option 3 it
is averaged with other small Texas metropolitan areas and is assigned a
GAF of 0.926. Option 3, thus, underpays Galveston and creates a much
larger GAF difference at the Houston-Galveston boundary than is
warranted by the actual difference in input prices. Expensive Miami and
Fort Lauderdale (with GAFs of 1.116 and 1.100) are grouped with lower-
price Orlando and Tampa-St. Petersburg (with

[[Page 34618]]

GAFs of 1.008 and 0.992) under this option.
Option 2 is more promising than Options 3 and 4, but less promising
than Option 1. While producing similar types and numbers of FSAs in
some instances, depending on the threshold used, Option 1 has some
advantages over Option 2. First, Option 1 is less disruptive because it
uses existing localities as building blocks. Second, the urban payment
localities in Option 1 tend to be smaller and more focused on high-cost
urban counties and track input price variations better than the larger
metropolitan area definitions used in Option 2. The metropolitan areas
(MSAs, PMSAs, and New England County Metropolitan Statistical Areas)
used as building blocks in this option are based on commuting patterns
and are generally much larger than the current urban localities used in
Option 1. Examples are the Washington, D.C. locality versus the
Washington, D.C. PMSA; the Dallas locality versus the Dallas PMSA; the
Chicago locality versus the Chicago PMSA; and the Houston locality
versus the Houston PMSA. Input prices in the suburban counties in these
PMSAs may be significantly lower than in the urban core and more
similar to prices in other parts of the State. This may be especially
true of some rural counties on the fringes of metropolitan areas that
are categorized as part of the metropolitan area based on commuting
patterns. For example, the Washington, D.C. PMSA includes portions of
rural West Virginia. Under Option 2, this FSA would have a GAF of
1.090, compared to the actual GAF of Washington, D.C. of 1.122, and the
actual GAF of the West Virginia counties included in the Washington,
D.C. PMSA of 0.950. Input prices in the parts of rural West Virginia
included in the Washington, D.C. PMSA have little in common with input
prices in the Washington, D.C. urban core. Also, Option 2 presents
significant problems in handling metropolitan areas that cross State
boundaries.
4. Proposal

a. Proposed Variant of Option 1 (Option 1i, 5-Percent Threshold)

Under standard Option 1, the 22 States with a single FSA would
remain statewide FSAs. Option 1 then presumes for the remaining 28
States that FSAs should be statewide for each State unless a sub-State
payment locality has sufficiently higher input prices (as measured by
its GAF) than the average input prices of its State (as measured by the
State GAF) to meet a threshold difference. If the percentage difference
between the locality's GAF and the State GAF exceeds a specified
threshold, that locality would remain a distinct FSA. Otherwise, the
locality would be merged into a residual FSA for that State. If no sub-
State locality had sufficiently higher prices than the State average to
meet the threshold difference, the State would become a single
statewide locality. For example, Alabama currently has six localities.
The GAFs range from a high of 0.957 for Locality 05, Birmingham, to a
low of 0.902 for Locality 06, rest of Alabama. The State GAF is 0.932.
Using a threshold of 5 percent, Alabama becomes a statewide locality as
the Birmingham GAF exceeds the State GAF by only 2.68 percent. Using a
threshold of 2.5 percent, Birmingham would remain a distinct FSA, while
the other five localities would become one residual FSA as none of the
other current localities exceed the State GAF by 2.5 percent.
Option 1 has several advantages over Options 2, 3, and 4. By using
the current localities as building blocks, it is the most conservative
of the options, is likely to be the least disruptive to physicians, and
imposes the least administrative burden on HCFA and the Medicare
carriers. GAFs for the largest, highest priced cities and metropolitan
areas will not change under this option. Neither will the GAFs of
current single locality States change. Many smaller cities and rural
areas are combined into residual State areas, eliminating GAF
differences among these areas and, thereby, increasing payments in
rural areas and substantially reducing the number of localities. Since
these areas usually have the smallest price input differences,
combining them reduces the number of FSAs at the smallest loss in
accuracy of input price tracking. In summation, Option 1 tends to
divide States with large variation in input prices among localities
into multiple FSAs, albeit significantly fewer than now exist in these
States, while combining localities in States with little price
variation into a single statewide locality.
However, the standard version of Option 1 has two shortcomings.
First, some mid-sized metropolitan areas in large States such as
California and Texas do not remain distinct FSAs despite their
considerably higher input prices than in the rural and small city areas
of their States with which they would be combined into a single
residual area. Second, some large metropolitan areas in small States,
such as Baltimore, Maryland, do not remain distinct FSAs. This is
because the State GAF to which all locality GAFs are compared contains
the high cost area GAFs. This makes it difficult for the mid-sized
areas in large States to exceed the State GAF, even though their own
GAFs may substantially exceed the GAF of all other localities in the
residual area to which they would be assigned under Option 1. In large
States with a wide range of GAFs, the mid-sized cities and metropolitan
areas tend to be combined with the residual rest-of-State area. Their
GAFs are sharply reduced, lessening the accuracy of input price
tracking and creating large boundary differences in GAFs between large
and mid-sized cities and at rural State boundaries that are not
reflective of true input price differences.
For example, with the current payment localities, the contiguous
California counties of Los Angeles and Ventura have 1996 GAFs of 1.103
and 1.079, respectively, a 2.4 percentage point difference. Under
Option 1, with a 2.5-percent threshold, Ventura becomes part of the
residual State area. Its GAF is reduced to 1.012, while Los Angeles's
GAF remains at 1.103, a difference of 9.1 percentage points. Other
examples of this large boundary effect, all assuming a 2.5-percent
threshold, are: San Francisco versus Marin, California (1.153/1.063
currently versus 1.153/1.012 under Option 1); Dallas versus Fort Worth,
Texas (1.006/0.977 currently versus 1.006/0.934 under Option 1). In the
case of Baltimore, its GAF of 1.032 is primarily responsible for
bringing the State GAF up to 1.016. Under Option 1, with a 2.5-percent
threshold, it becomes part of a single statewide locality (excluding
Maryland counties in the Washington, D.C. locality) with a GAF of
1.016, when in reality it is much more expensive than the rest of the
State, which has a combined GAF excluding Baltimore of 0.964.
These problems are addressed in our proposed option, Option 1i, 5-
percent threshold, a variant of Option 1. In this variant, the GAF of a
locality is compared to the average GAF of lower-price localities in
the State, rather than to the statewide average. (Like standard Option
1, the 22 States currently having single statewide localities remain
statewide localities.) If this difference exceeds a percentage
threshold, 5 percent in our proposal, the locality remains a distinct
FSA. Otherwise, it becomes part of a statewide or rest-of-State
residual FSA. Specifically, a State's localities are ranked from the
highest to the lowest GAF. The GAF of the highest-price locality is
compared to the weighted average GAF of all lower-price localities. If
the percentage difference exceeds a specified threshold,

[[Page 34619]]

the highest-price locality remains a distinct FSA. If not, the State
becomes a single statewide locality. If the highest-price locality
remains a distinct FSA, the process is repeated (iterated, hence the
designation Option 1i) for the second-highest-price locality. Its GAF
is compared to the statewide average GAF excluding the two highest-
price localities. If this difference exceeds the threshold, the second-
highest-price locality remains a distinct FSA. The logic is repeated
(iterated), moving down the ranking of localities by costliness, until
the highest-price locality does not exceed the threshold and does not
remain a distinct FSA. No further comparisons are made, and the
remaining localities become a residual rest-of-State FSA. The GAF of a
locality always is compared only to the average GAF of all lower-price
localities. This ensures that the statewide or residual State FSA has
relatively homogeneous input prices.
Option 1i, thus, has all of the advantages of Option 1, while
addressing the problems inherent in Option 1: unwarranted boundary
differences and large higher-price areas not being separate FSAs in
small States. In comparison to Option 1, Option 1i breaks out more
payment areas in large States containing a wide range of GAFs by
defining more mid-sized cities/areas as distinct FSAs; it more
consistently defines homogeneous residual State FSAs; and reduces
unwarranted boundary differences.
As with Option 1 and Option 2, numerous variants of Option 1i are
possible depending on the GAF threshold difference selected. We are
proposing Option 1i with a 5-percent threshold. We believe that this
option would attain the goal of simplifying the payment areas and
reducing payment differences among areas while maintaining accuracy in
tracking input prices.
A summary measure of an FSA option's accuracy in tracking input
prices is the average percentage difference between the county GAF and
the GAF of the payment locality to which that county is assigned. These
differences are weighted by total physician services RVUs in each
county so that inaccuracies in areas where more services are provided
are emphasized. A summary measure of payment differences among adjacent
geographic areas in an FSA option is the average difference of the GAFs
between unique pairs of contiguous counties, weighted by the sum of the
RVUs of the two counties. Table 2 shows these summary measures of input
price accuracy and small area payment differences for proposed Option
1i, 5-percent threshold, compared to the current localities, statewide
localities, and the extremes of a national fee schedule (the same
payment everywhere for a specific service) and separate FSAs for all
3,223 counties.

Table 2.--Payment Accuracy and Small Area Payment Difference
----------------------------------------------------------------------------------------------------------------
Average Average
county/FSA county
Fee schedule area Number of input price boundary
FSAs difference* difference*
(percent) (percent)
----------------------------------------------------------------------------------------------------------------
National................................................................. 1 6.86 0.00
States................................................................... **53 4.06 0.73
Option 1i, 5% Threshold.................................................. 87 2.09 1.78
1996 Localities.......................................................... 210 1.67 2.30
Counties................................................................. 3223 0.00 3.18
----------------------------------------------------------------------------------------------------------------
* Weighted by total physician services RVUs.
** Includes Washington D.C., Puerto Rico, and the Virgin Islands.

Note: Input price accuracy is measured by the average absolute difference (weighted by total county RVUs)
between the county GAF and the FSA GAF. Boundary differences are measured by the average absolute difference
in county GAFs between all unique, contiguous county pairs, weighted by the sum of total RVUs of the
contiguous counties.

At one extreme is a single national FSA with no geographic
adjustments. Lack of a GAF obviously does not track input prices at
all, resulting in an average payment error of 6.86 percent, but also
avoids any payment boundary differences. At the other extreme is an FSA
for each of the 3,223 counties, which perfectly tracks county input
prices, but has the largest number of, and largest average difference
across, payment boundaries. These two extremes highlight the tradeoff
between tracking input price variations and avoiding differences among
nearby areas.
The current payment localities result in an average payment error
of 1.67 percent, with an average difference across boundaries of 2.30
percent. Our proposed Option 1i, 5-percent threshold, by itself,
without the subcounty payment restructuring discussed below, would
significantly reduce the number of payment areas from 210 to 87. It
would reduce the average county boundary difference from 2.30 percent
to 1.78 percent while increasing the average county input price error
by only 0.42 percentage points from 1.67 percent to 2.09 percent.

b. Proposed Option 1i, 5-Percent Threshold, with Subcounty Payment Area
Restructuring

We further propose to refine payment areas by combining with
proposed Option 1i, 5-percent threshold, an additional restructuring of
localities in the 11 States that currently have subcounty localities.
Three of these States--California, Mississippi, and Pennsylvania--
define subcounty localities by zip code. Eight States--Arizona,
Connecticut, Kentucky, Massachusetts, Missouri, Nevada, New York, and
Oregon employ city/town limits to define localities. The use of
subcounty localities creates unnecessary complexity and administrative
burden. One of the most compelling reasons to eliminate subcounty
payment areas from payment localities is to reduce the administrative
work required to maintain zip-code-to-locality crosswalks. Many States
employ a zip-code-to-locality crosswalk when processing claims, but the
continuous creation, deactivation, and redefinition of U.S. Postal
Codes poses a significant obstacle in the maintenance of accurate
locality definitions. Town boundaries can also be ambiguous. Since
county boundaries are unambiguous and rarely change, aggregating
subcounty parts to the county level would minimize the administrative
burden of maintaining crosswalks.

[[Page 34620]]

Another reason to eliminate subcounty localities is simplicity. By
aggregating subcounty areas to the county level, a uniform fee schedule
system with no area smaller than a county can be introduced nationwide.
Furthermore, since the input price data for GPCIs, and ultimately GAF
values, are not available at a subcounty level, the subcounty areas
provide no additional accuracy in measuring practice input price
variations. More often, subcounty localities unnecessarily complicate
the calculation of GAF values by requiring laborious tracking by zip
code of the subcounty parts. The obvious method for eliminating
subcounty localities is to expand a current locality's city/town or zip
code boundaries to the surrounding county borders. In exploring this
option, we defined ``County Equivalent Localities'' based on the
following criteria:
For a current locality that includes multiple cities/towns
in noncontiguous counties, all counties with any areas in the current
locality are incorporated into the new County Equivalent Locality
definition.
Counties currently divided between two localities are
assigned to the locality where the largest portion of physician fee
schedule services (RVUs) are provided.
The County Equivalent Option may be applied to the 11 subcounty
locality States independent of our proposed basic Option 1i, indeed
independent of any other changes in payment localities. When adopted
with our basic Option 1i, 5-percent threshold, changes are made
automatically or easily in 8 of the 11 States:
Five States--Arizona, Connecticut, Kentucky, Mississippi,
and Nevada become statewide payment areas.
California currently has eight subcounty areas, all of
which are in Los Angeles County. These areas have the same GAF and
payment level and can be aggregated into a single FSA. (These eight
localities were kept separate from 1992 to 1995 to facilitate the
statutory fee schedule transition period.)
In New York, existing subcounty areas are included in the
residual rest-of-State area.
In Oregon, the current town-based ``Portland'' locality,
which includes parts of Clackamas, Multnomah, and Washington counties,
can be redefined to encompass the boundaries of these three counties.
Because of their unique circumstances, we believe the remaining
three subcounty FSA States of Massachusetts, Missouri, and Pennsylvania
require simple fundamental payment area reconfigurations.
Massachusetts--Massachusetts currently has two noncontiguous
payment areas: ``Urban'' and ``Suburban.'' Under Option 1i, 5-Percent
Threshold, Massachusetts would become a single statewide locality. The
shortcoming of both the current localities and Option 1i, 5-Percent
Threshold, is that the high cost Boston area, comprised of parts of
Suffolk, Norfolk, and Middlesex counties, is not separated from lower-
cost central and western Massachusetts. The problem is caused by the
composition of the current ``Urban Massachusetts'' locality, which
groups the Worcester, Springfield, and Pittsfield areas with the
substantially higher-cost Boston area. We, therefore, propose to change
Massachusetts to two new localities: 01--Boston Metropolitan Area
(comprised of Suffolk, Norfolk, and Middlesex counties) and 02--rest of
Massachusetts.
Missouri--Missouri currently has seven noncontiguous payment areas:
Northern Kansas City; Kansas City; St. Louis/large East Cities; St
Joseph; Rural Northwest counties; small East Cities; and rest of
Missouri. Under our proposed Option 1i, 5-Percent Threshold, Missouri
would become a statewide payment area. This result would fail to
recognize the significant price differences between the Kansas City and
St. Louis metropolitan areas and the rest of the State and would result
in significant payment area input price difference tracking
inaccuracies. To correct this problem, we propose to change Missouri to
three payment areas: 01--Kansas City Metropolitan Area (Platte, Clay,
and Jackson counties); 02--St Louis Metropolitan Area (St Louis City,
St. Louis, Jefferson, and St Charles counties); and 03--rest of
Missouri (all other counties).
Pennsylvania--Pennsylvania currently has four noncontiguous payment
localities: 01--Philadelphia/Pittsburgh medical schools; 02--large
Pennsylvania Cities; 03--smaller Pennsylvania Cities; and 04--rest of
Pennsylvania. Under proposed Option 1i, 5-Percent Threshold, areas 03
and 04 are combined into a residual rest-of-State area. The problem is
that the high cost Philadelphia area is split into two areas, parts of
01 and 02, and is not clearly distinguished from the lower-cost
Pittsburgh area and the rest of area 02. The five counties comprising
the Philadelphia MSA are the most costly in Pennsylvania and clearly
belong together in a ``Philadelphia Metropolitan Area'' locality.
Allegheny County, which contains Pittsburgh and, therefore, part of
which is grouped with part of Philadelphia in locality 01, is much less
expensive than the Philadelphia area and does not belong in the same
locality, either cost-wise or geographically. Thus, we propose that
Pennsylvania be divided into two localities: 01--Philadelphia
Metropolitan Area (Montgomery, Philadelphia, Delaware, Bucks, and
Chester counties); and 02--rest of Pennsylvania (all other counties).

c. Effects of Proposed Option 1i, 5-Percent Threshold, with Subcounty
FSA Restructuring

We believe that our proposed restructuring of Medicare payment
areas meets the major goal of simplifying payment areas and reducing
payment differences among adjacent geographic areas while maintaining
accuracy in tracking input prices among areas. It significantly reduces
the number of FSAs from 210 to 89, and increases the number of
statewide payment areas from 22 to 34, thereby simplifying program
administration. It also provides a more rational and understandable
basis for localities, reduces urban/rural payment differences, and
maintains separate payment areas for relatively high-priced large and
mid-sized cities in large States. It decreases the number of payment
areas by almost 60 percent, while at the same time reducing average
county boundary payment differences, yet reduces average county input
price accuracy by only 0.42 percent.
The GPCIs, and, therefore, the GAFs, for the proposed new payment
areas would be budget neutral within each State. That is, an adjustment
would be made to them later in the year (to incorporate the most recent
data into the adjustments) to yield the same total physician fee
schedule payments within that State that would have been made had the
payment areas not been changed. We are anticipating the adjustments to
be minor. While some current individual payment areas will experience
slight increases in payments and some areas will experience slight
decreases in payments under our proposed FSA changes, the effects on
the overwhelming majority of areas will be minimal. Of the total
current areas in the 28 States currently having multiple FSAs, 82
percent change less than 3 percent, 93 percent change less than 4
percent, and 96 percent change less than 5 percent. Forty-three percent
of the areas will experience increases in payments, 33 percent will
experience decreases, and 24 percent will experience no change.
Addendum A, ``1996 Geographic Adjustment Factors (GAFs) by Medicare
Payment Locality/

[[Page 34621]]

Locality Part for January 1, 1996 Localities and Proposed Option, Fee
Schedule Areas (FSAs) in Descending Order of Difference'' shows the
effects for each of the current localities in multiple FSA States (as
previously mentioned, the 22 States currently having a single statewide
locality remain statewide localities) of our proposed locality
reconfiguration by comparing existing GAFs to the GAFs for the new
localities. Because our proposal eliminates subcounty areas, we are
also publishing Addendum B, ``Medicare Fee Schedule Areas (Localities)
and 1996 Geographic Adjustment Factors (GAFs), Current and Proposed
Option by State and County/County Part'' that shows, alphabetically by
State and county, the current locality and GAF and the proposed
locality and GAF for each county.
As can be seen from Addendum A, only four areas will lose more than
4 percent under our proposal: Pennsylvania area 01, Philadelphia/
Pittsburgh Medical Schools; Pennsylvania area 02, large Pennsylvania
Cities; Missouri area 01, St. Louis/large Eastern Cities; and
Massachusetts area 01, Urban Massachusetts. These are unique situations
and require explanation. As the asterisks on these areas indicate,
these losing areas are only part of an existing locality and are in
States in which we are recommending fundamental restructuring of FSAs
because of existing subcounty FSAs and the current combining of areas
with widely different input prices into a single area. In actuality,
only part of the existing area will lose. As Addendum A shows, the
remaining part of the area will win under our proposal. For example,
the largest projected loser, Pennsylvania area 01, is in reality only
the part of Pittsburgh that is currently included in area 01. The
Philadelphia portion of Pennsylvania area 01 is a projected winner
under our proposal. As mentioned earlier, while Pittsburgh is in
Allegheny County, which has considerably lower input prices than the
Philadelphia area, part of Pittsburgh is included with part of
Philadelphia in area 01. This has the effect of overpaying the
Pittsburgh part of area 01 and underpaying the Philadelphia part of
area 01. Our proposal remedies this situation by grouping Philadelphia
with similar priced counties in the Philadelphia MSA, while grouping
Pittsburgh with similar priced areas in the rest of Pennsylvania. This
also explains why Pennsylvania area 02 shows up as both one of the four
largest losers and as the largest winner. Under our proposal, the part
of area 02 comprised of larger cities outside of the Philadelphia MSA
is no longer included with the higher priced counties in the
Philadelphia MSA, but is included in the residual Pennsylvania FSA.
This lowers their GAFs, while increasing the GAFs of the higher priced
counties in the Philadelphia MSA that now become part of the
Philadelphia FSA.
The same logic holds true for Massachusetts and Missouri. The
losing parts of current Massachusetts locality 01 are the Worcester,
Springfield, and Pittsfield areas which, while having substantially
lower costs than Boston, are currently included in the same locality.
The winning part of Massachusetts locality 01 is the higher-cost Boston
metropolitan area. In Missouri, the losing parts of locality 01, St.
Louis/large East Cities, are the lower-cost Columbia, Springfield, and
Jefferson City areas that are currently included with higher-cost St.
Louis. The winning part of this locality is the St. Louis metropolitan
area. These four largest losing areas then result from our correcting
the current anomalous situation created by including low-cost and high-
cost areas in a single locality by reconfiguring the localities to more
accurately reflect input price variations.
We welcome comments on our proposed payment area changes. Our
proposal is based on the application of statistical criteria to
aggregate localities within a State that are not significantly
different as indicated by current GAFs. We would welcome alternative
rationale and criteria for exceptions to this statistically based
methodology. While we are open to considering exceptions to this
statistically based realignment, commenters suggesting variations on
our proposal should submit an analysis of why their variation is
preferable. For example, commenters suggesting that their particular
area, which would become part of a residual rest-of-state area under
our proposal, should be retained as a separate payment area should
submit data to show that their area costs exceed the costs of the other
areas in the residual payment area by the 5-percent threshold.
As mentioned earlier, the great majority of existing FSAs would
experience only very minor changes in payment levels under the proposed
new payment area configuration. We are concerned, however, about the
few areas estimated to experience the largest reductions in payments.
To lessen the impact on these areas, we propose phasing in the effect
of the proposed new payment areas over a 2-year period in States
containing a locality that is estimated to experience a decrease in
payments that exceeds a certain threshold. We selected a 2-year period
because when we implement the GPCI revisions required by law every 3
years, the law provides for a 2-year transition period. Revising
localities requires calculating GPCIs to correspond to the revised
localities.
A transition period, however, adds another element to the changes
to the physician fee schedule. For example, the law requires that the
conversion factor be updated each year. In addition, we annually add
new RVUs for new and revised services. In 1997, we will implement the
comprehensive changes in work RVUs required by law. In 1998, the law
requires us to implement new resource-based practice expense RVUs. In
1998 and 1999, we will implement new GPCIs as required by law. A
transition period for our locality changes would add one more payment
change to these other changes. Since most payment areas would
experience very minor changes, we believe that transitioning these
areas would unnecessarily add another change.
Since the purpose of the proposed phase-in is to limit the effect
on the areas estimated to experience the largest decrease in payments
because of our proposed payment area revisions, we propose that no area
be allowed to lose more than 4 percent in the first year. We selected
the 4-percent threshold because that is about one-half of the largest
estimated area payment decrease. The proposed payment area changes
would be fully effective in 1997 in all States not containing an area
whose payments are estimated to decrease by more than 4 percent under
our proposal. Under this phase-in, only two States, Pennsylvania and
Missouri, would be transitioned as they are the only States with areas
that would experience a decrease of more than 4 percent. In these
States, areas estimated to lose more than 4 percent would be assigned
1997 GPCIs whose values would limit the loss to 4 percent. Since the
proposed new payment area changes would be budget-neutral within a
State, all areas within a State would be subject to the 2-year phase-in
if the State contained an area whose payment level is estimated to
decrease by more than 4 percent. This means that areas estimated to
receive increases in payments in these States would receive only part
of the increase in 1997 as transitional 1997 GPCIs would be calculated
to maintain budget neutrality within the State. In 1998, all areas in
these transitioned States would be totally incorporated into their new
localities and be assigned the fully implemented new locality GPCIs. We
have designed this transition approach

[[Page 34622]]

to cushion the effect of the change for the localities that would be
experiencing the greatest losses. We invite comments on this transition
proposal and are open to suggestions about alternative transition
approaches.
Our proposal would leave 16 States with multiple payment areas. We
believe our proposal justifies multiple areas in these States because
of input price differences within these States. However, as stated
earlier in the background discussion on this issue, we are generally in
favor of statewide payment areas as they simplify program
administration and encourage physicians to practice in rural areas by
eliminating urban/rural payment differentials within the State.
Therefore, to continue to be responsive to the physician community,
even if our proposed payment area reconfiguration is adopted, we will
continue to consider converting any of the remaining multiple payment
area States into a single statewide payment area if overwhelming
support among physicians in both winning and losing areas can be
demonstrated. This proposed policy change does not require a change to
the regulations set forth in Sec. 414.4 (``Fee schedule areas'').

B. Special Rules for the Payment of Diagnostic Tests, Including
Diagnostic Radiologic Procedures

1. Background
The payment for diagnostic procedures, including diagnostic
radiologic procedures, under the Medicare program is made under two
statutory benefits. Section 1861(s)(1) of the Act describes physician
services as part of the medical and other health services benefit. This
paragraph describes the professional component of a diagnostic test,
which is the interpretation of the test. Under the physician fee
schedule and the Medicare carrier payment systems, these services are
coded with the CPT modifier ``26.''
Payment for taking a test is made under section 1861(s)(3) of the
Act. We have termed the taking of a test the technical component of the
test, and it is indicated under the physician fee schedule with the
``TC'' modifier.
Section 2070.1 of the Medicare Carriers Manual provides that for a
diagnostic test to be covered, the service must be related to a
patient's illness or injury (or symptom or complaint) and ordered by a
physician. This instruction was intended to relate a diagnostic test to
a patient's illness or injury, symptom, or complaint. The results of
the test were to be used to treat the patient or refer him or her for
treatment. It has come to our attention from various sources, including
carrier medical directors, that, in some cases, the intent of this
instruction has been frustrated. We have heard of instances in which a
physician is employed for the sole purpose of ordering tests. This
physician has no relationship to the beneficiary, and it is highly
likely that tests by this physician would not be medically necessary.
We believe this practice generates unnecessary diagnostic tests and
places Medicare beneficiaries at needless risk both medically and
financially. We propose to further clarify this long-standing manual
instruction requirement that tests be ordered by a physician by
specifying that the physician ordering the test must be the physician
treating the patient. This proposed policy would link the ordering of
the diagnostic test to the physician who will use the test results to
treat the patient.
2. Proposal
We propose that for diagnostic tests, including diagnostic
radiologic procedures, to be covered, they must be ordered by the
physician who treats the beneficiary. The physician who treats the
beneficiary is the physician responsible for the treatment of the
patient and who orders the test or radiologic procedure to use the
results in the management of the beneficiary's specific medical
problem(s). (Physicians can order tests while they are consulting for
another physician.) We believe this requirement is fundamental for
coverage and payment of diagnostic tests and, therefore, are including
it in the regulations at Sec. 410.32 (``Diagnostic X-ray tests,
diagnostic laboratory tests, and other diagnostic tests: Conditions'').
3. Chiropractor Exception
A physician who orders the x-ray that is used by a chiropractor to
demonstrate the subluxation of the spine in a beneficiary who is
receiving manual manipulation treatments would be exempted from this
rule. Because no payment can be made for a diagnostic test ordered by a
chiropractor under Sec. 410.22(b)(2), we propose to allow payment for
the x-ray when ordered by a physician who will not be treating the
patient for subluxation of the spine. Otherwise, beneficiaries would
always have to pay out-of-pocket for these x-rays, which would
frustrate their use of the chiropractic benefit.
4. Non-Physician Practitioners
Certain non-physician practitioners who provide services that would
be physician services if furnished by a physician under a specific
enumerated benefit in the statute would be considered as the physician
treating the beneficiary for the purpose of this section. Non-physician
practitioners who meet this definition are physician assistants
(section 1861(s)(2)(K)(i) of the Act); and nurse practitioners and
clinical nurse specialists (sections 1861(s)(2)(K)(ii) and
1861(s)(2)(K)(iii) of the Act), operating within the scope of their
State licenses.

C. Transportation in Connection with Furnishing Diagnostic Tests

Section 1861(s)(3) of the Act establishes coverage for diagnostic
x-rays furnished in a place of residence used as the patient's home if
the performance of the tests meets health and safety conditions
established by the Secretary. This provision is the basis for payment
of x-ray services furnished by approved portable suppliers to
beneficiaries in their homes and in nursing facilities.
Although the Congress did not explicitly so state, we determined
that, because of the increased costs in transporting the x-ray
equipment to the beneficiary, the Congress intended that we pay an
additional amount for transportation expenses. Therefore, we
established HCFA Common Procedure Coding System (HCPCS) codes R0070 and
R0075 (for single-patient and multiple-patient trips, respectively) to
pay approved portable x-ray suppliers a transportation ``component''
when they furnish the services listed in section 2070.4.C of the
Medicare Carriers Manual.
We later added the taking of an electrocardiogram (EKG) tracing to
the list of services approved suppliers of portable x-ray services may
furnish (section 2070.4.F of the Medicare Carriers Manual) and
established HCPCS code R0076 to pay for the transportation of EKG
equipment. In the December 1995 final rule (60 FR 63149), we published
our revised policy of precluding separate payment for the
transportation of diagnostic equipment except under certain
circumstances. These circumstances include standard EKG procedures
furnished by an approved supplier of portable x-ray services or by an
independent physiological laboratory (section 2070.1.G of the Medicare
Carriers Manual) under HCPCS code R0076 in connection with the
provision of CPT codes 93000 (Electrocardiogram, complete) or 93005
(Electrocardiogram, tracing).
After further review of this policy, we have decided that the
exceptions are inconsistent with the law and legislative

[[Page 34623]]

history regarding the payment for transportation of EKG equipment.
Section 1861(s)(3) discusses only the coverage of x-rays furnished in a
beneficiary's place of residence. Because there is no mention in the
statute about the coverage of EKGs furnished in a beneficiary's place
of residence, we are returning to our original interpretation of the
law.
We propose allowing separate payment only for the transportation of
x-ray equipment furnished by approved suppliers of portable x-ray
services. As a result, we would not allow separate payment for the
transportation of EKG equipment furnished by any supplier. Therefore,
we propose to eliminate HCPCS code R0076. Payment for CPT codes 93000
and 93005 will not change, nor will the coverage of these services
change. This proposed policy change is not explicitly addressed in our
regulations.

D. Bundled Services

1. Hot or Cold Packs
The application of hot or cold packs to one or more areas is billed
using CPT code 97010. These modalities (that is, physical agents
applied to produce therapeutic change to biologic tissue) are primarily
used in conjunction with therapeutic procedures to provide analgesia,
relieve muscle spasm, or reduce inflammation and edema. Generally, hot
packs are used for subacute or chronic conditions, while cold packs are
used for acute and chronic conditions.
The results of a comprehensive analysis of Medicare claims data
indicate that CPT code 97010 is being used extensively with a wide
variety of services such as office visits and physical medicine and
rehabilitative services. Therefore, we are proposing to bundle payment
for CPT code 97010 into the payment for all other services including,
but not limited to, those with which it historically has been billed
with the greatest frequency (such as office visits and physical
therapy).
We believe that our proposal to bundle payment and, thus, to
preclude separate payment for the application of hot and cold packs is
justified for three reasons:
As a therapy, hot and cold packs are easily self-
administered. Generally, we do not cover procedures that are basically
self-administered; hot and cold packs, by their nature, do not require
the level of professional involvement as do the other physical medicine
and rehabilitation modalities.
Although we acknowledge that professional judgment is
involved in the use of hot and cold packs, much less judgment is
demanded for them than for other modalities. These packs are commonly
used in the home, and, thus, require a minimal level of professional
attention.
The application of hot and cold packs is usually a
precursor to other interventions and, as such, is appropriately used in
combination with other procedures. Our data analysis supports this
conclusion because the majority of claims for CPT code 97010 occurred
in conjunction with claims for other services performed on the same
day.
We propose to change the status indicator for CPT code 97010 to
``B'' to indicate that the service is covered under Medicare but
payment for it is bundled into the payment for other services. Separate
payment for CPT code 97010 would not be permitted under this proposed
change. This change would be implemented in a budget neutral manner
across all other procedures. Because the RVUs for this procedure would
be redistributed across all physician fee schedule services, there
would be no measurable impact. This proposed policy change is not
explicitly addressed in our regulations.
2. Dermatology Procedures
a. Bundling of Repair Codes into Excision Codes
Currently, the RVUs for the dermatology excision codes (CPT codes
11400 through 11446 and 11600 through 11646) include services described
by the simple repair codes (CPT codes 12001 through 12018). The
dermatologist can bill separately for the intermediate or complex
repair (closure) codes (CPT codes 12031 through 12057 and 13100 through
13152, respectively) in addition to the excision codes. We do not allow
separate billing for closure for any other surgical procedure. The
closure is included in the comprehensive procedure. We believe that
applying the same standard to dermatologists is appropriate.
Therefore, we propose to cease paying separately for the repair
codes when billed in conjunction with the excision codes. We are
proposing to bundle the RVUs for the intermediate and complex repair
codes (CPT codes 12031 through 12057 and CPT codes 13100 through 13152,
respectively) into both the benign and malignant skin lesion excision
codes (CPT codes 11400 through 11446 and 11600 through 11646,
respectively). Under our proposal, we would redistribute the RVUs for
the repair codes across CPT codes 11400 through 11446 and 11600 through
11646. We would base the number of RVUs for redistribution on the
frequency with which the repair codes are billed with the excision
codes.
We are not proposing to assign these repair codes a ``B'' status
indicator because we acknowledge that these codes are not used
exclusively with excision services. Instead, we would implement this
proposed policy change through our correct coding initiative. This
proposed change would standardize our policy for payment for wound
closure. This proposed policy change is not explicitly addressed in our
regulations.
b. Skin Lesion Destruction Codes
There are several CPT codes that describe the destruction of
various benign or premalignant lesions. Within this group of codes, the
reporting methods vary. Sometimes the code describes the destruction of
a single lesion but requires reporting multiple codes for the
destruction of several lesions; other times it describes destruction of
as many as 15 lesions. Thus, it is sometimes not clear how many codes
to report. The codes are specific to particular areas of the body or
particular types of lesions. Because these categories are not mutually
exclusive, the coding system provides the opportunity to report the
destruction of a given lesion in more than one way. Finally, this
complicated coding structure has produced anomalies in work relative
values. We propose to simplify the reporting of and payment for the
destruction of benign or premalignant skin lesions.
We propose to assign a ``G'' status indicator to CPT codes 11050
through 11052, 11200 and 11201, 17000 through 17105, 17110, and 17200
and 17201 to indicate that these CPT codes are not valid for Medicare
purposes and that there is another code to use for the reporting of and
payment for these services.
To report the destruction of benign and premalignant skin lesions,
we propose to create two HCPCS codes. The first code would describe the
destruction of up to and including 15 lesions. The second code would
describe destruction of each additional 10 lesions. To assign RVUs to
these codes, we propose to take a weighted average of the RVUs assigned
to CPT codes 11050 through 11052, 11200 and 11201, 17000 through 17105,
17110, and 17200 and 17201 based on the billing frequencies and the
code descriptors. This proposed policy change is not explicitly
addressed in our regulations.

[[Page 34624]]

E. Change in Coverage Status for Screening and Obsolete Procedures

1. Vital Capacity Testing
CPT code 94150 (Vital capacity, total) is a screening measure. It
is typically performed on patients who are asymptomatic. Because these
tests are performed on patients who do not have symptoms of breathing
problems, they represent preventive services that are, by statute, not
covered by Medicare. Some Medicare carriers do not cover this code at
present. However, we inadvertently failed to identify CPT code 94150 as
noncovered by Medicare on a national basis. Therefore, we propose
changing the status indicator for CPT code 94150 from ``A'' to ``N'' to
represent its noncovered status. This policy change is not specifically
addressed in our regulations. It would be reflected in the Medicare
physician fee schedule database and in Addendum B (Relative Value Units
and Related Information) of the physician fee schedule final rule,
which will be published later this year.
2. Certain Cardiovascular Procedures
In the absence of a national Medicare policy on the following CPT
codes, we currently allow our Medicare carriers discretion in deciding
whether to allow coverage for these procedures:

------------------------------------------------------------------------
CPT code Descriptor
------------------------------------------------------------------------
93201 Phonocardiogram with or without ECG lead; with
supervision during recording with interpretation
and report (when equipment is supplied by the
physician).
93202 Phonocardiogram * * *; tracing only, without
interpretation and report (eg, when equipment is
supplied by the hospital, clinic).
93204 Phonocardiogram * * *; interpretation and report.
93205 Phonocardiogram with ECG lead, with indirect
carotid artery and/or jugular vein tracing, and/
or apex cardiogram; with interpretation and
report).
93208 Phonocardiogram * * *; tracing only, without
interpretation and report.
93209 Phonocardiogram * * *; interpretation and report
only.
93210 Phonocardiogram intracardiac.
93220 Vectorcardiogram (VCG), with or without ECG; with
interpretation and report.
93221 Vectorcardiogram * * *; tracing only, without
interpretation and report.
93222 Vectorcardiogram * * *; interpretation and report
only.
------------------------------------------------------------------------

As a result of our request for comments on the 5-year review of
physician work RVUs in the December 1994 final rule (59 FR 63453), the
American College of Cardiology commented that these 10
phonocardiography and vectorcardiography diagnostic tests are outmoded
and of little clinical value. Our review of Medicare claims data for
these tests supports this contention because the volume of claims for
these tests has declined significantly in recent years. Only 17,925
claims were submitted in calendar year 1994 for all 10 tests.
Based on the American College of Cardiology's recommendation, our
review of our recent claims history, and our consultation with other
medical specialty groups, we propose to discontinue coverage for these
10 diagnostic tests. The status indicators for these 10 procedures
would be changed from ``A'' to ``N'' to reflect their noncovered
status. This proposed policy change is not explicitly addressed in our
regulations.

F. Payments for Supervising Physicians in Teaching Settings

1. Definition of Approved Graduate Medical Education Programs
Since publication of the December 1995 final rule, we have received
questions about the difference in the definition of an approved
residency program for purposes of the teaching physician rules under
Sec. 415.152 (``Definitions'') and the definition used in the direct
medical education rules under Sec. 413.86(b) (``Direct graduate medical
education payments''). To be consistent, we propose to modify
Sec. 415.152 to match the definition of an approved graduate medical
education program in Sec. 413.86(b). We would add a reference to
programs that are recognized as an ``approved medical residency
program'' under Sec. 413.86(b). By making this change, the regulations
text would reflect a common definition of approved graduate medical
education programs for Medicare Part A and Part B. This is a technical
change and would have no effect on the implementation of our revised
policy regarding the payment for supervising physicians in teaching
settings that is effective July 1, 1996.
2. Evaluation and Management Services Furnished in Certain Settings
In the December 1995 final rule (60 FR 63135), we revised our
policy regarding the payment for supervising physicians in teaching
settings. We eliminated the attending physician criteria but clarified
the physician presence requirement for services billed to the Medicare
carrier. As part of our revised policy, we created a limited exception
for residency programs that are fundamentally incompatible with a
physical presence requirement. The exception to the physician presence
requirement is for certain evaluation and management services (CPT
codes 99201, 99202, 99203, 99211, 99212, and 99213) furnished in
certain ambulatory care centers within the context of certain types of
residency training programs. The exception is set forth in Sec. 415.174
(``Exception: Evaluation and management services furnished in certain
centers'').
As the exception currently reads, one of the criteria is that ``The
range of services furnished by residents in the center includes * * *
Comprehensive care not limited by organ system, diagnosis, or gender.''
(Sec. 415.174(a)(4)(iii)). It has come to our attention that many
obstetric and gynecological residency programs have been restructured
over the years to have a greater primary care focus. Some of these
programs that otherwise qualify for an exception might be denied
payment if the gender limitation were strictly applied.
Contrary to suggestions in correspondence we received after
publication of the final rule, it was not our intention to prevent
obstetric and gynecological residency programs or other residency
programs focusing on women's health care from qualifying for the
exception solely because of the patient's gender. Thus, we propose to
make a technical change to the regulations text to delete the reference
to gender in Sec. 415.174(a)(4)(iii) and change the text to
``Comprehensive care not limited by organ system or diagnosis.'' Of
course, such programs must satisfy the otherwise applicable criteria to
qualify for an exception.

[[Page 34625]]

G. Change in Global Periods for Four Percutaneous Biliary Procedures

The Society of Cardiovascular and Interventional Radiology advised
us that a 90-day global period is inappropriate for four percutaneous
biliary procedures. The four procedures are CPT codes 47490
(percutaneous cholecystectomy), 47510 (introduction of percutaneous
transhepatic catheter for biliary drainage), 47511 (introduction of
percutaneous transhepatic stent for internal and external biliary
drainage), and 47630 (biliary duct stone extraction, percutaneous via
T-tube tract, basket, or snare (for example, Burhenne technique)). The
Society believes that these four procedures should have a ``0-day''
global period. We agree with the Society's arguments that a 90-day
global period is contrary to the widespread practice conventions of
percutaneous biliary intervention and is inconsistent with other
similar interventions in the biliary tract and urinary tract.
We believe that the global periods for these four codes should be
changed. Therefore, we are proposing to change the global periods for
these services from 90 days to 0 days. To make this change, we would
reduce the work RVUs assigned to these procedures to reflect the lack
of postsurgical work in the shortened global period. We propose to
reduce the work RVUs for CPT codes 47490, 47510, 47511, and 47630 by 17
percent if we change the global periods. The 17 percent figure was
taken from the original data developed by the Harvard School of Public
Health Resource-Based Relative Value Study as the measure of the
postsurgical work associated with these codes. This proposed policy
change is not explicitly addressed in our regulations.

III. Collection of Information Requirements

This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

IV. 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 comments in the preamble to that
document.

V. Regulatory Impact Analysis

A. Regulatory Flexibility Act

Consistent with the Regulatory Flexibility Act (5 U.S.C. 601
through 612), we prepare a regulatory flexibility analysis unless the
Secretary certifies that a rule would not have a significant economic
impact on a substantial number of small entities. For purposes of the
Regulatory Flexibility Act, all physicians are considered to be small
entities.
We anticipate that virtually all of the approximately 500,000
physicians who furnish covered services to Medicare beneficiaries would
be affected by one or more provisions of this rule. In addition,
physicians who are paid by private insurers for non-Medicare services
would be affected to the extent that they are paid by private insurers
that choose to use the proposed RVUs.
This proposed rule is expected to have varying effects on the
distribution of Medicare physician payments and services. With few
exceptions, we expect that the impact would be limited. Although the
proposed rule would not have a significant economic impact on a
substantial number of small entities, we are preparing a voluntary
regulatory flexibility analysis.
Section 1848(c)(2)(B) of the Act requires that adjustments in a
year may not cause the amount of expenditures for the year to differ by
more than $20 million from the amount of expenditures that would have
been made if these adjustments had not been made. If this threshold is
exceeded, we would make adjustments to the conversion factors to
preserve budget neutrality. The proposals discussed in sections B
through H below would have no impact on total Medicare expenditures
because the effects of these changes would be neutralized in the
calculation of the conversion factors for 1997.

B. Payment Area (Locality) and Corresponding Geographic Practice Cost
Index Changes

As mentioned earlier, our proposal would reduce existing urban/
rural payment differences. Overall, urban areas would experience an
average decrease in payments of -0.14 percent, while rural areas will
experience an increase in payments of 1 percent. We analyzed the
effects of these changes on physicians by specialty. The changes are
quite small and follow the expected pattern. We estimate that overall,
physicians in family practice and general practice will experience
modest increases of about 0.3 percent in payments, while most medical
and surgical specialties will experience negligible decreases of about
-0.1 to -0.2 percent. This pattern results from the tendency of
specialists to be disproportionately concentrated in urban areas, which
are estimated to experience a slight decrease in payments under our
proposal.
The impact on beneficiaries is likewise minor. We examined the
impact by beneficiary age, gender, race, and income level. Roughly 20
percent of beneficiaries reside in areas in which payments decrease by
less than 5 percent, roughly 50 percent live in areas that experience
no change in payments, roughly 25 percent live in areas where payments
will increase by less than 5 percent, and about 2 percent live in areas
where payments would rise by 5 to 10 percent.
The distribution of beneficiaries by age and gender and of
Caucasian beneficiaries are nearly identical to this overall
distribution. Minority beneficiaries are more heavily concentrated in
areas that experience no change in payments; a lower proportion of
minority beneficiaries live in both areas experiencing a loss and areas
experiencing a gain than do Caucasian beneficiaries. For example, 14.4
percent of minority beneficiaries live in an area experiencing a loss
compared to 21 percent of all beneficiaries who live in these areas.
Beneficiaries living below poverty level are less likely than all
beneficiaries to be living in an area experiencing a payment decrease
under our proposal, 16 percent compared to 21 percent. It does not
appear that vulnerable Medicare groups--minorities, the very old, or
the poor--would suffer decreases in access resulting from our proposal.

C. Special Rules for the Payment of Diagnostic Tests, Including
Diagnostic Radiologic Procedures

Our proposal would require that, to be covered under Medicare,
diagnostic tests, including diagnostic radiologic procedures, must be
ordered by the physician who treats a beneficiary or furnishes a
consultation to the physician who treats the beneficiary. We would
allow an exception for x-rays that demonstrate subluxation of the spine
that are ordered for a chiropractor. Under Sec. 410.22(b)(2), no
payment can be made to a chiropractor who orders diagnostic tests. We
propose to allow payment for these x-rays when ordered by a physician
who will not be treating the patient for subluxation of the spine.

[[Page 34626]]

Non-physician practitioners functioning within the specific benefit
would be considered the physician treating the beneficiary for the
purpose of the proposal. Putting this requirement in regulations
(Sec. 410.31 ``Diagnostic x-ray tests, diagnostic laboratory tests, and
other diagnostic tests: Conditions'') would codify our current manual
instruction. This proposed policy may result in some program savings
due to the denial of payment for tests that may not be medically
necessary because they were ordered by a physician who was not treating
the beneficiary. However, we do not have sufficient data to furnish any
reliable estimates of savings.

D. Transportation in Connection with Furnishing Diagnostic Tests

We propose to eliminate payment for the transportation of EKG
equipment (HCPCS code R0076) by all billers. In 1994, the last year for
which we have complete data, we allowed 260,686 services and paid
$9,192,434. Therefore, were it not for our budget-neutrality
adjustment, we estimate that this proposal would result in
approximately a $9.2 million reduction in Medicare payments.

E. Bundled Services

1. Hot or Cold Packs
We propose to change the status indicator for CPT code 97010
(Application of a modality to one or more areas; hot or cold packs) to
``B'' to indicate that the service is covered under Medicare but
payment for it is bundled into payment for other services. Separate
payment for CPT code 97010 will not be permitted under this proposed
change. The annual expenditures for CPT code 97010 under our current
policy are approximately $41.2 million. Because the RVUs for this
procedure will be redistributed across all physician fee schedule
services in a budget neutral manner, there will be no measurable impact
from this proposal.
2. Dermatology Procedures
a. Bundling of Repair Codes into Excision Codes We propose to cease
paying separately for CPT codes 12031 through 12057 and 13100 through
13152 (intermediate and complex repair codes, respectively) if these
codes are billed in conjunction with CPT codes 11400 through 11446 and
11600 through 11646 (dermatology excision codes for benign and
malignant lesions, respectively). Because we would redistribute the
RVUs for the repair codes across the excision codes, there would be
little budgetary effect from this proposal.
b. Skin Lesion Destruction Codes
We propose to change the way Medicare pays for the destruction of
benign or premalignant skin lesions. Currently there are several CPT
codes that describe a variety of ways of reporting the destruction of
skin lesions. We propose to assign a ``G'' status code to CPT codes
11050 through 11052, 11200 and 11201, 17000 through 17105, 17110, and
17200 and 17201 and create two HCPCS codes to report the destruction of
skin lesions. Because we will use a weighted average of the current
RVUs assigned to the CPT codes that describe the destruction of benign
or premalignant skin lesions in valuing the two proposed codes, this
proposal would have no significant impact on Medicare expenditures.

F. Change of Coverage Status for Screening and Obsolete Procedures

1. Vital Capacity Testing
We propose changing the coverage status for vital capacity tests
(CPT code 94150) from ``active'' to ``noncovered.'' These vital
capacity tests are screening services. With limited exceptions, section
1862(a)(1)(A) of the Act precludes Medicare coverage for screening
procedures. This code is infrequently billed; in 1994 only 101,150
services were paid for CPT code 94150 for a total Medicare expenditure
of $1,077,600. We do not believe that the change in coverage status
would have a significant impact on Medicare expenditures. We would also
budget neutralize the $1 million across all fee schedule services.
2. Certain Cardiovascular Procedures
We propose changing the coverage status for certain cardiovascular
procedures (CPT codes 93201, 93202, 93204, 93205, 93208, 93209, 93210,
93220, 93221, and 93222) to noncovered. Because there has been a
decline in the billing of these services in recent years and in 1994,
we only allowed a total of 17,925 services with $690,326 in allowed
charges for all 10 diagnostic tests, we do not believe that the change
in coverage status would have a significant impact on Medicare
expenditures.

G. Payments for Supervising Physicians in Teaching Settings

This proposed rule would make a technical change to Sec. 415.152
(``Definitions'') to make the definition of an approved graduate
medical education program consistent with the definition in
Sec. 413.86(b) (``Direct graduate medical education payments'').
Because this is only a technical change to standardize almost identical
definitions, it would have no budgetary impact on Medicare
expenditures.
We propose a technical change to remove the word ``gender'' from
Sec. 415.174(a)(4)(iii) (``Exception: Evaluation and management
services furnished in certain centers''). We did not include the
reference to gender with the intention of excluding obstetric and
gynecological or other women's care residency programs solely because
of patient gender. This technical change would make clear that the
exception criteria would not be applied in such a manner. Because this
technical change merely clarifies our intent with respect to a policy
that has not yet been implemented, there would be no budgetary effect.

H. Change in Global Period for Four Percutaneous Biliary Procedures

To implement our proposal to change the global periods for four
percutaneous biliary procedures (CPT codes 47490, 47510, 47511, and
47630) from 90 days to 0 days, we are proposing to reduce the work RVUs
for these procedures by 17 percent. These work RVUs will be
redistributed across all services; therefore, there is no significant
impact.

I. Rural Hospital Impact Statement

Section 1102(b) of the Act requires the Secretary to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the
Regulatory Flexibility Act. For purposes of section 1102(b) of the Act,
we define a small rural hospital as a hospital that is located outside
of a Metropolitan Statistical Area and has fewer than 50 beds.
This proposed rule would have little direct effect on payments to
rural hospitals since this rule would change only payments made to
physicians and certain other practitioners under Part B of the Medicare
program and would

[[Page 34627]]

make no change in payments to hospitals under Part A. We do not believe
the changes would have a major, indirect effect on rural hospitals.
Therefore, we are not preparing an analysis for section 1102(b) of
the Act since we have determined, and the Secretary certifies, that
this rule would not have a significant impact on the operations of a
substantial number of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
proposed rule was reviewed by OMB.

List of Subjects

42 CFR Part 410

Health facilities, Health professions, Kidney diseases,
Laboratories, Medicare, Rural areas, X-rays.

42 CFR Part 415

Health facilities, Health professions, Medicare, and Reporting and
recordkeeping requirements.
42 CFR chapter IV would be amended as set forth below:

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

A. Part 410 is amended as set forth below:
1. The authority citation for part 410 continues to read as
follows:

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

2. In Sec. 410.32 paragraphs (a) and (b) are redesignated as
paragraphs (b) and (c), respectively, and a new paragraph (a) is added
to read as follows:

Sec. 410.32 Diagnostic x-ray tests, diagnostic laboratory tests, and
other diagnostic tests: Conditions.

(a) Ordering diagnostic tests. All diagnostic x-ray tests,
diagnostic laboratory tests, and other diagnostic tests must be ordered
by the physician who treats the beneficiary, that is, the physician who
is actively furnishing a consultation or treating a beneficiary for a
specific medical problem(s) and uses the results in the management of
the beneficiary's specific medical problem(s). Physicians who order the
x-ray used by a chiropractor to demonstrate the subluxation of the
spine in a beneficiary who is receiving manual manipulation treatments
are exempted from this requirement. Non-physician practitioners
(physician assistants, nurse practitioners, and clinical nurse
specialists) who provide services that would be physician services if
furnished by a physician and who are operating within the scope of
their statutory benefit are considered the physician treating the
beneficiary for the purpose of this section.
* * * * *

PART 415--SERVICES FURNISHED BY PHYSICIANS IN PROVIDERS,
SUPERVISING PHYSICIANS IN TEACHING SETTINGS, AND RESIDENTS IN
CERTAIN SETTINGS

B. Part 415 is amended as set forth below:
1. The authority citation for part 415 continues to read as
follows:

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

2. In Sec. 415.152 the introductory text is republished, and the
definition of ``approved graduate medical education (GME) program'' is
revised to read as follows:

Sec. 415.152 Definitions.

As used in this subpart--
Approved graduate medical education (GME) program means one of the
following:
(1) A residency program approved by the Accreditation Council for
Graduate Medical Education of the American Medical Association, by the
Committee on Hospitals of the Bureau of Professional Education of the
American Osteopathic Association, by the Council on Dental Education of
the American Dental Association, or by the Council on Podiatric
Medicine Education of the American Podiatric Medical Association.
(2) A program otherwise recognized as an ``approved medical
residency program'' under Sec. 413.86(b) of this chapter.
* * * * *

Sec. 415.174 [Amended]

3. In Sec. 415.174, in paragraph (a)(4)(iii), the phrase ``system,
diagnosis, or gender'' is removed, and the phrase ``system or
diagnosis'' is added in its place.
(Catalog of Federal Domestic Assistance Program No. 93.774,
Medicare--Supplementary Medical Insurance Program)

Dated: June 21, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
Dated: June 21, 1996.
Donna E. Shalala,
Secretary.

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[FR Doc. 96-16744 Filed 6-27-96; 9:43 am]
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Visit the Official Version

Document Information

Published:: 07/02/1996
Department:: Health Care Finance Administration
Entry Type:: Proposed Rule
Action:: Proposed rule.
Document Number:: 96-16744
Dates:: Comments will be considered if we receive them at the
Pages:: 34614-34662 (49 pages)
Docket Numbers:: BPD-852-P
RINs:: 0938-AH40: Medicare Program: Revisions to Payment Policies and Five-Year Review of and Adjustments to Relative Value Units Under the Physician Fee Schedule for Calendar Year 1997 (BPD-852-FC)
RIN Links:: https://www.federalregister.gov/regulations/0938-AH40/medicare-program-revisions-to-payment-policies-and-five-year-review-of-and-adjustments-to-relative-v
PDF File:: 96-16744.pdf
CFR: (6): 42 CFR 415.174(a)(4)(iii); 42 CFR 413.86(b); 42 CFR 415.152; 42 CFR 410.32; 42 CFR 415.152; More ...