Proposed Rule2025-13271
Medicare and Medicaid Programs; CY 2026 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; and Medicare Prescription Drug Inflation Rebate Program
Primary source
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Published
July 16, 2025
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This major proposed rule addresses: changes to the physician fee schedule (PFS); other changes to Medicare Part B payment policies to ensure that payment systems are updated to reflect changes in medical practice, relative value of services, and changes in the statute; codification of establishment of new policies for: the Medicare Prescription Drug Inflation Rebate Program under the Inflation Reduction Act of 2022; the Ambulatory Specialty Model; updates to the Medicare Diabetes Prevention Program expanded model; updates to drugs and biological products paid under Part B; Medicare Shared Savings Program requirements; updates to the Quality Payment Program; updates to policies for Rural Health Clinics and Federally Qualified Health Centers update to the Ambulance Fee Schedule regulations; codification of the Inflation Reduction Act and Consolidated Appropriations Act, 2023 provisions; updates to the Medicare Promoting Interoperability Program.
Full Text
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<title>Federal Register, Volume 90 Issue 134 (Wednesday, July 16, 2025)</title>
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[Federal Register Volume 90, Number 134 (Wednesday, July 16, 2025)]
[Proposed Rules]
[Pages 32352-33261]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-13271]
[[Page 32351]]
Vol. 90
Wednesday,
No. 134
July 16, 2025
Part III
Book 2 of 2 Books
Pages 32351-33262
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 405, 410, et al.
Medicare and Medicaid Programs; CY 2026 Payment Policies Under the
Physician Fee Schedule and Other Changes to Part B Payment and Coverage
Policies; Medicare Shared Savings Program Requirements; and Medicare
Prescription Drug Inflation Rebate Program; Proposed Rule
Federal Register / Vol. 90 , No. 134 / Wednesday, July 16, 2025 /
Proposed Rules
[[Page 32352]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 405, 410, 414, 424, 425, 427, 428, 495, and 512
[CMS-1832-P]
RIN 0938-AV50
Medicare and Medicaid Programs; CY 2026 Payment Policies Under
the Physician Fee Schedule and Other Changes to Part B Payment and
Coverage Policies; Medicare Shared Savings Program Requirements; and
Medicare Prescription Drug Inflation Rebate Program
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
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SUMMARY: This major proposed rule addresses: changes to the physician
fee schedule (PFS); other changes to Medicare Part B payment policies
to ensure that payment systems are updated to reflect changes in
medical practice, relative value of services, and changes in the
statute; codification of establishment of new policies for: the
Medicare Prescription Drug Inflation Rebate Program under the Inflation
Reduction Act of 2022; the Ambulatory Specialty Model; updates to the
Medicare Diabetes Prevention Program expanded model; updates to drugs
and biological products paid under Part B; Medicare Shared Savings
Program requirements; updates to the Quality Payment Program; updates
to policies for Rural Health Clinics and Federally Qualified Health
Centers update to the Ambulance Fee Schedule regulations; codification
of the Inflation Reduction Act and Consolidated Appropriations Act,
2023 provisions; updates to the Medicare Promoting Interoperability
Program.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on September 12,
2025.
ADDRESSES: In commenting, please refer to file code CMS-1832-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1832-P, P.O. Box 8016,
Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1832-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
FOR FURTHER INFORMATION CONTACT:
<a href="/cdn-cgi/l/email-protection#d29fb7b6bbb1b3a0b782baaba1bbb1bbb3bc94b7b781b1bab7b6a7beb792b1bfa1fcbabaa1fcb5bda4"><span class="__cf_email__" data-cfemail="6f220a0b060c0e1d0a3f07161c060c060e01290a0a3c0c070a0b1a030a2f0c021c4107071c41080019">[email protected]</span></a>, for any issues not identified
below. Please indicate the specific issue in the subject line of the
email. For all questions related to reporting a service on a claim,
please contact your Medicare Administrative Contractor.
Michael Soracoe, Morgan Kitzmiller, or
<a href="/cdn-cgi/l/email-protection#e7aa82838e84869582b78f9e948e848e8689a18282b4848f8283928b82a7848a94c98f8f94c9808891"><span class="__cf_email__" data-cfemail="4e032b2a272d2f3c2b1e26373d272d272f20082b2b1d2d262b2a3b222b0e2d233d6026263d60292138">[email protected]</span></a>, for issues related to
practice expense, work RVUs, conversion factor, and PFS specialty-
specific impacts.
Hannah Ahn, or <a href="/cdn-cgi/l/email-protection#1f527a7b767c7e6d7a4f77666c767c767e71597a7a4c7c777a7b6a737a5f7c726c3177776c31787069"><span class="__cf_email__" data-cfemail="3b765e5f52585a495e6b5342485258525a557d5e5e6858535e5f4e575e7b58564815535348155c544d">[email protected]</span></a>, for issues
related to potentially misvalued services under the PFS.
Julie Rauch, or <a href="/cdn-cgi/l/email-protection#044961606d67657661546c7d776d676d656a42616157676c6160716861446769772a6c6c772a636b72"><span class="__cf_email__" data-cfemail="672a02030e04061502370f1e140e040e060921020234040f0203120b0227040a14490f0f1449000811">[email protected]</span></a>, for
issues related to Malpractice RVUs.
Morgan Kitzmiller, Terry Simananda, or
<a href="/cdn-cgi/l/email-protection#4c012928252f2d3e291c24353f252f252d220a29291f2f2429283920290c2f213f6224243f622b233a"><span class="__cf_email__" data-cfemail="501d3534393331223500382923393339313e1635350333383534253c3510333d237e3838237e373f26">[email protected]</span></a> for issues related to
Geographic Practice Cost Indices.
Mikayla Murphy, or <a href="/cdn-cgi/l/email-protection#460b23222f25273423162e3f352f252f272800232315252e2322332a2306252b35682e2e3568212930"><span class="__cf_email__" data-cfemail="440921202d27253621142c3d372d272d252a02212117272c2120312821042729376a2c2c376a232b32">[email protected]</span></a>, for
issues related to direct supervision using two-way audio/video
communication technology, telehealth, and other services involving
communications technology.
Erick Carrera, or <a href="/cdn-cgi/l/email-protection#612c0405080200130431091812080208000f2704043202090405140d0421020c124f0909124f060e17"><span class="__cf_email__" data-cfemail="024f67666b61637067526a7b716b616b636c44676751616a6766776e6742616f712c6a6a712c656d74">[email protected]</span></a>, for
issues related to office/outpatient evaluation and management visit
inherent complexity add-on and Digital Mental Health Treatment
services.
Maya Peterson, Terry Simananda, or
<a href="/cdn-cgi/l/email-protection#19547c7d707a786b7c4971606a707a7078775f7c7c4a7a717c7d6c757c597a746a3771716a377e766f"><span class="__cf_email__" data-cfemail="83cee6e7eae0e2f1e6d3ebfaf0eae0eae2edc5e6e6d0e0ebe6e7f6efe6c3e0eef0adebebf0ade4ecf5">[email protected]</span></a>, for issues related to payment
for advanced primary care management services.
Sarah Leipnik, or <a href="/cdn-cgi/l/email-protection#95d8f0f1fcf6f4e7f0c5fdece6fcf6fcf4fbd3f0f0c6f6fdf0f1e0f9f0d5f6f8e6bbfdfde6bbf2fae3"><span class="__cf_email__" data-cfemail="2f624a4b464c4e5d4a7f47565c464c464e41694a4a7c4c474a4b5a434a6f4c425c0147475c01484059">[email protected]</span></a>, for
issues related to global surgery payment accuracy.
Pamela West, or <a href="/cdn-cgi/l/email-protection#b3fed6d7dad0d2c1d6e3dbcac0dad0dad2ddf5d6d6e0d0dbd6d7c6dfd6f3d0dec09ddbdbc09dd4dcc5"><span class="__cf_email__" data-cfemail="763b13121f15170413261e0f051f151f171830131325151e1312031a1336151b05581e1e0558111900">[email protected]</span></a>, for
issues related to outpatient therapy services and KX modifier
thresholds.
Michelle Cruse, Erick Carrera, Zehra Hussain, or Hannah Ahn
<a href="/cdn-cgi/l/email-protection#763b13121f15170413261e0f051f151f171830131325151e1312031a1336151b05581e1e0558111900"><span class="__cf_email__" data-cfemail="87cae2e3eee4e6f5e2d7effef4eee4eee6e9c1e2e2d4e4efe2e3f2ebe2c7e4eaf4a9efeff4a9e0e8f1">[email protected]</span></a>, for issues related to dental
services inextricably linked to other covered medical services.
Zehra Hussain, or <a href="/cdn-cgi/l/email-protection#105d7574797371627540786963797379717e5675754373787574657c7550737d633e7878633e777f66"><span class="__cf_email__" data-cfemail="347951505d57554651645c4d475d575d555a72515167575c5150415851745759471a5c5c471a535b42">[email protected]</span></a>, for
issues related to payment of skin substitutes.
Laura Kennedy, (410) 786-3377, Rebecca Ray, (667) 414-0879, and Jae
Ryu, (667) 414-0765 for issues related to Drugs and Biological Products
Paid Under Medicare Part B. <a href="/cdn-cgi/l/email-protection#c885adaca1aba9baad98a0b1bba1aba1a9a68eadad9baba0adacbda4ad88aba5bbe6a0a0bbe6afa7be"><span class="__cf_email__" data-cfemail="e8a58d8c818b899a8db880919b818b818986ae8d8dbb8b808d8c9d848da88b859bc680809bc68f879e">[email protected]</span></a>,
for issues related to complex drug administration.
Allison Cipro, (667) 414-0758, for issues related to Medicare
Diabetes Prevention Program.
Sabrina Ahmed, (410) 786-7499, or <a href="/cdn-cgi/l/email-protection#db88b3baa9bebf88baadb2b5bca88ba9b4bca9bab69bb8b6a8f5b3b3a8f5bcb4ad"><span class="__cf_email__" data-cfemail="5f0c373e2d3a3b0c3e293631382c0f2d30382d3e321f3c322c7137372c71383029">[email protected]</span></a>,
for issues related to the Medicare Shared Savings Program (Shared
Savings Program) quality performance standard and other quality
reporting requirements.
Janae James, (410) 786-0801, or <a href="/cdn-cgi/l/email-protection#81d2e9e0f3e4e5d2e0f7e8efe6f2d1f3eee6f3e0ecc1e2ecf2afe9e9f2afe6eef7"><span class="__cf_email__" data-cfemail="cb98a3aab9aeaf98aabda2a5acb89bb9a4acb9aaa68ba8a6b8e5a3a3b8e5aca4bd">[email protected]</span></a>,
for issues related to Shared Savings Program beneficiary assignment and
benchmarking methodology and shared losses mitigation.
Kari Vandegrift, (410) 786-4008, or
<a href="/cdn-cgi/l/email-protection#bae9d2dbc8dfdee9dbccd3d4ddc9eac8d5ddc8dbd7fad9d7c994d2d2c994ddd5cc"><span class="__cf_email__" data-cfemail="da89b2bba8bfbe89bbacb3b4bda98aa8b5bda8bbb79ab9b7a9f4b2b2a9f4bdb5ac">[email protected]</span></a>, for issues related to Shared Savings
Program participation options, and ACO participant and SNF affiliate
change of ownership requirements.
Elisabeth Daniel, (667) 290-8793, for issues related to the
Medicare Prescription Drug Inflation Rebate Program.
Benjamin Picillo or Genevieve Kehoe,
<a href="/cdn-cgi/l/email-protection#67260a05120b061308151e341702040e060b131e2a0803020b27040a14490f0f1449000811"><span class="__cf_email__" data-cfemail="47062a25322b263328353e143722242e262b333e0a2823222b07242a34692f2f3469202831">[email protected]</span></a>, or 1-844-711-2664 (Option 4) for
issues related to the Ambulatory Specialty Model.
Amy Gruber, (410) 786-1542, for issues related to Ambulance
Extender provisions.
Kati Moore, (410) 786-5471, for inquiries related to the Merit-
based Incentive Payment System (MIPS) track of the Quality Payment
Program (QPP).
Trevey Davis, (667) 290-8527, for inquiries related to the Advanced
Alternative Payment Models (APMs) track of QPP.
Jessica Warren, (410) 786-7519, and Lisa Marie Gomez, (410) 786-
1175, for inquiries related to the Medicare Promoting Interoperability
Program.
Lisa Parker, (410) 786-4949, or <a href="/cdn-cgi/l/email-protection#490f18010a6419191a092a243a6721213a672e263f"><span class="__cf_email__" data-cfemail="4f091e070c621f1f1c0f2c223c6127273c61282039">[email protected]</span></a>, for issues
related to FQHC payments.
Michele Franklin, (410) 786-9226, or <a href="/cdn-cgi/l/email-protection#5b0913181b38362875333328753c342d"><span class="__cf_email__" data-cfemail="6a3822292a09071944020219440d051c">[email protected]</span></a>, for issues
related to RHC payments.
[[Page 32353]]
SUPPLEMENTARY INFORMATION:
Addenda Available Only Through the Internet on the CMS Website: The
PFS Addenda along with other supporting documents and tables referenced
in this proposed rule are available on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/index.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/index.html</a>. Click on the link on the left side of the
screen titled, ``PFS Federal Regulations Notices'' for a chronological
list of PFS Federal Register and other related documents. For the CY
2026 PFS proposed rule, refer to item CMS-1832-P. Readers with
questions related to accessing any of the Addenda or other supporting
documents referenced in this proposed rule and posted on the CMS
website identified above should contact
<a href="/cdn-cgi/l/email-protection#2c614948454f4d5e497c44555f454f454d426a49497f4f4449485940496c4f415f0244445f024b435a"><span class="__cf_email__" data-cfemail="aae7cfcec3c9cbd8cffac2d3d9c3c9c3cbc4eccfcff9c9c2cfcedfc6cfeac9c7d984c2c2d984cdc5dc">[email protected]</span></a>.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
plain language summary of this rule may be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.
CPT (Current Procedural Terminology) Copyright Notice: Throughout
this proposed rule, we use CPT codes and descriptions to refer to a
variety of services. We note that CPT codes and descriptions are
copyright 2020 American Medical Association. All Rights Reserved. CPT
is a registered trademark of the American Medical Association (AMA).
Applicable Federal Acquisition Regulations (FAR) and Defense Federal
Acquisition Regulations (DFAR) apply.
Deregulation Request for Information (RFI):
On January 31, 2025, President Trump issued Executive Order (EO)
14192 ``Unleashing Prosperity Through Deregulation,'' which states the
Administration policy to significantly reduce the private expenditures
required to comply with Federal regulations to secure America's
economic prosperity and national security and the highest possible
quality of life for each citizen. We would like public input on
approaches and opportunities to streamline regulations and reduce
administrative burdens on providers, suppliers, beneficiaries, and
other stakeholders participating in the Medicare program. CMS has made
available a Request for Information (RFI) at: <a href="https://www.federalregister.gov/documents/2025/04/11/2025-06316/request-for-information-deregulation">https://www.federalregister.gov/documents/2025/04/11/2025-06316/request-for-information-deregulation</a>. Please submit all comments in response to
this request for information through the provided weblink.
I. Executive Summary
A. Purpose
This major annual rule proposes to revise payment policies under
the Medicare PFS and makes other policy changes, including proposals to
implement certain provisions of the Full-Year Continuing Appropriations
and Extensions Act, 2025 (Pub. L. 119-4, March 15, 2025), Further
Continuing Appropriations and Other Extensions Act of 2024 (Pub. L.
118-22, November 16, 2023), Consolidated Appropriations Act, 2023 (Pub.
L. 117-328, September 29, 2022), Inflation Reduction Act of 2022 (IRA)
(Pub. L. 117-169, August 16, 2022), Consolidated Appropriations Act,
2022 (Pub. L. 117-103, March 15, 2022), Consolidated Appropriations
Act, 2021 (CAA, 2021) (Pub. L. 116-260, December 27, 2020), Bipartisan
Budget Act of 2018 (BBA of 2018) (Pub. L. 115-123, February 9, 2018)
and the Substance Use-Disorder Prevention that Promotes Opioid Recovery
and Treatment for Patients and Communities Act (SUPPORT Act) (Pub. L.
115-271, October 24, 2018), related to Medicare Part B payment. In
addition, this proposed rule includes proposals regarding other
Medicare payment policies described in sections III. and IV.
This rulemaking proposes to update policies for the Medicare
Prescription Drug Inflation Rebate Program codified or finalized at
parts 427 and 428 consistent with sections 1847A(i) and 1860D-14B of
the Social Security Act (the Act). With respect to the Medicare Part B
Drug Inflation Rebate Program, this rulemaking proposes to describe the
identification of payment amount benchmark quarter in certain instances
and the calculation for the Part B rebate amount in such instances.
With respect to the Medicare Part D Drug Inflation Rebate Program, this
rulemaking proposes to clarify the calculation of a Part D rebate
amount, and proposes a methodology for removal of units for a Part D
rebatable drug for which a manufacturer provides a discount under the
340B Program, as well as the establishment of a 340B data repository
for Part D claims.
This rulemaking proposes to modify policies for the Shared Savings
Program, which is a voluntary program that started in 2012. The program
allows healthcare providers to form or participate in Accountable Care
Organizations (ACOs), to be held accountable for the quality and total
cost of care for an assigned population of Medicare fee-for-service
(FFS) beneficiaries.
B. Summary of the Key Provisions
Section 1848 of the Act requires us to establish payments under the
PFS, based on national uniform relative value units (RVUs) that account
for the relative resources used in furnishing a service. The statute
requires that RVUs be established for three categories of resources:
work, practice expense (PE), and malpractice (MP) expense. In addition,
the statute requires that each year we establish, by regulation, the
payment amounts for physicians' services paid under the PFS, including
geographic adjustments to reflect the variations in the costs of
furnishing services in different geographic areas.
In this major proposed rule, we are proposing to establish RVUs for
CY 2026 for the PFS to ensure that our payment systems are updated to
reflect changes in medical practice and the relative value of services,
as well as changes in the statute. This proposed rule also includes
discussions and provisions regarding several other Medicare Part B
payment policies, and other policies regarding programs administered by
CMS.
Specifically, this proposed rule addresses:
<bullet> Background (section II.A.)
<bullet> Determination of PE RVUs (section II.B.)
<bullet> Potentially Misvalued Services Under the PFS (section
II.C.)
<bullet> Payment for Medicare Telehealth Services Under Section
1834(m) of the Act (section II.D.)
<bullet> Valuation of Specific Codes (section II.E.)
<bullet> Evaluation and Management (E/M) Visits (section II.F.)
<bullet> Enhanced Care Management (section II.G.)
<bullet> Outpatient Therapy Services and KX Modifier Thresholds
(section II.H.)
<bullet> Advancing Access to Behavioral Health Services (section
II.I.)
<bullet> Provisions on Medicare Parts A and B Payment for Dental
Services Inextricably Linked to Specific Covered Services (section
II.J.)
<bullet> Payment for Skin Substitutes (section II.K.)
<bullet> Strategies for Improving Global Surgery Payment Accuracy
(section II.L.)
<bullet> Determination of Malpractice Relative Value Units (RVUs)
(section II.M.)
<bullet> Geographic Practice Cost Indices (GPCIs) (section II.N.)
<bullet> Drugs and Biological Products Paid Under Medicare Part B
(section III.A.)
<bullet> Rural Health Clinics (RHCs) and Federally Qualified Health
Centers (FQHCs) (section III.B.)
[[Page 32354]]
<bullet> Ambulatory Specialty Model (ASM) (section III.C.)
<bullet> Medicare Diabetes Prevention Program (MDPP) (section
III.D.)
<bullet> Medicare Prescription Drug Inflation Rebate Program
(section III.E.)
<bullet> Medicare Shared Savings Program (section III.F.)
<bullet> Changes to the Regulations Associated with the Ambulance
Fee Schedule (section III.G.)
<bullet> Updates to the Quality Payment Program and Medicare
Promoting Interoperability Program (section IV.)
<bullet> Collection of Information Requirements (section V.)
<bullet> Responses to Comments (section VI.)
<bullet> Regulatory Impact Analysis (section VII.)
C. Summary of Costs and Benefits
Based on our estimates, the Office of Information and Regulatory
Affairs in the Office of Management and Budget has determined that this
proposed rule is economically significant under section 3(f)(1) of
Executive Order 12866. As required by section 1848(d)(1)(A) of the Act,
beginning in 2026, there will be two separate conversion factors (CFs):
one for items and services furnished by a qualifying APM participant as
defined in section 1833(z)(2) of the Act (referred to as the qualifying
APM conversion factor) and another for other items and services
(referred to as the nonqualifying APM conversion factor), equal to the
respective conversion factor for the previous year (or, for CY 2026,
equal to the single conversion factor for CY 2025) multiplied by the
update established under section 1848(d)(20) of the Act for such
respective conversion factor for such year. Under these proposals, the
2026 qualifying APM conversion factor represents a projected increase
of $0.39 (1.2 percent) from the current conversion factor of $32.3465.
Similarly, the 2026 nonqualifying APM conversion factor represents a
projected increase of $0.23 (0.7 percent) from the current conversion
factor of $32.3465.
For a detailed discussion of the economic impacts, see section
VII., Regulatory Impact Analysis, of this proposed rule.
II. Provisions of the Proposed Rule for the PFS
A. Background
In accordance with section 1848 of the Social Security Act (the
Act), CMS has paid for physicians' services under the Medicare
physician fee schedule (PFS) since January 1, 1992. The PFS relies on
national relative values that are established for work, practice
expense (PE), and malpractice (MP), which are adjusted for geographic
cost variations. These values are multiplied by a conversion factor
(CF) to convert the relative value units (RVUs) into payment rates. The
concepts and methodology underlying the PFS were enacted as part of the
Omnibus Budget Reconciliation Act of 1989 (OBRA '89) (Pub. L. 101-239,
December 19, 1989), and the Omnibus Budget Reconciliation Act of 1990
(OBRA '90) (Pub. L. 101-508, November 5, 1990). The final rule
published in the November 25, 1991 Federal Register (56 FR 59502) set
forth the first fee schedule used for Medicare payment for physicians'
services.
We note that throughout this proposed rule, unless otherwise noted,
the term ``practitioner'' is used to describe both physicians and
nonphysician practitioners (NPPs) who are permitted to bill Medicare
under the PFS for the services they furnish to Medicare beneficiaries.
B. Determination of PE RVUs
1. Overview
Practice expense (PE) is the portion of the resources used in
furnishing a service that reflects the general categories of physician
and practitioner expenses, such as office rent and personnel wages, but
excluding malpractice (MP) expenses, as specified in section
1848(c)(1)(B) of the Act. As required by section 1848(c)(2)(C)(ii) of
the Act, we use a resource-based system for determining PE RVUs for
each physicians' service. We develop PE RVUs by considering the direct
and indirect practice resources involved in furnishing each service.
Direct expense categories include clinical labor, medical supplies, and
medical equipment. Indirect expenses include administrative labor,
office expenses, and all other expenses. The sections that follow
provide more detailed information about the methodology for translating
the resources involved in furnishing each service into service specific
PE RVUs. We refer readers to the CY 2010 Physician Fee Schedule (PFS)
final rule with comment period (74 FR 61743 through 61748) for a more
detailed explanation of the PE methodology.
2. Practice Expense Methodology
a. Direct Practice Expense
We determine the direct PE for a specific service by adding the
costs of the direct resources (that is, the clinical staff, medical
supplies, and medical equipment) typically involved with furnishing
that service. The costs of the resources are calculated using the
refined direct PE inputs assigned to each CPT code in our PE database,
which are generally based on our review of recommendations received
from the American Medical Association (AMA) )/Specialty Society
Relative Value Scale (RVS) Update Committee (referred to as the RUC)
and those provided in response to public comment periods. For a
detailed explanation of the direct PE methodology, including examples,
we referred readers to the 5-year review of work RVUs under the PFS and
proposed changes to the PE methodology in the CY 2007 PFS proposed rule
(71 FR 37242) and the CY 2007 PFS final rule with comment period (71 FR
69629).
b. Indirect Practice Expense per Hour Data
We use survey data on indirect PEs incurred per hour worked to
develop the indirect portion of the PE RVUs. Prior to CY 2010, we
primarily used the PE/HR by specialty obtained from the AMA's
Socioeconomic Monitoring System (SMS). The AMA administered a new
survey in CY 2007 and CY 2008, the Physician Practice Information
Survey (PPIS). The PPIS is a multispecialty, nationally representative,
PE survey of physicians and NPPs paid under the PFS using a survey
instrument and methods highly consistent with those used for the SMS
and the supplemental surveys. The PPIS gathered information from 3,656
respondents across 51 physician specialty and health care professional
groups. We have stated that we believe the PPIS is the most
comprehensive source of PE survey information available. We used the
PPIS data to update the PE/HR data for the CY 2010 PFS for almost all
of the Medicare-recognized specialties that participated in the survey.
When we began using the PPIS data in CY 2010, we did not change the
PE RVU methodology or how the PE/HR data are used. We only updated the
PE/HR data based on the new survey. Furthermore, as we explained in the
CY 2010 PFS final rule with comment period (74 FR 61751), because of
the magnitude of payment reductions for some specialties resulting from
the use of the PPIS data, we transitioned its use over a 4-year period
from the previous PE RVUs to the PE RVUs developed using the new PPIS
data. As provided in the CY 2010 PFS final rule with comment period (74
FR 61751), the transition to the PPIS data was complete for CY 2013.
Therefore, PE RVUs from CY 2013 forward is developed based entirely on
the PPIS data, except as noted in this section.
[[Page 32355]]
Section 1848(c)(2)(H)(i) of the Act requires us to use the medical
oncology supplemental survey data submitted in 2003 for oncology drug
administration services. Therefore, the PE/HR for medical oncology,
hematology, and hematology/oncology reflects the continued use of these
supplemental survey data.
Supplemental survey data on independent labs from the College of
American Pathologists were implemented for payments beginning in CY
2005. Supplemental survey data from the National Coalition of Quality
Diagnostic Imaging Services (NCQDIS), representing independent
diagnostic testing facilities (IDTFs), were blended with supplementary
survey data from the American College of Radiology (ACR) and
implemented for payments beginning in CY 2007. Neither IDTFs nor
independent labs participated in the PPIS. Therefore, we continue to
use the PE/HR that was developed from their supplemental survey data.
Consistent with our past practice, the previous indirect PE/HR
values from the supplemental surveys for these specialties were updated
to CY 2006 using the Medicare Economic Index (MEI) to put them on a
comparable basis with the PPIS data.
We also do not use the PPIS data for reproductive endocrinology and
spine surgery since these specialties are not separately recognized by
Medicare, nor do we have a method to blend the PPIS data with Medicare-
recognized specialty data.
Previously, we established PE/HR values for various specialties
without SMS or supplemental survey data by crosswalking them to other
similar specialties to estimate a proxy PE/HR. For specialties that
were part of the PPIS for which we previously used a crosswalked PE/HR,
we instead used the PPIS based PE/HR. We use crosswalks for specialties
that did not participate in the PPIS. These crosswalks have been
generally established through notice and comment rulemaking and are
available in the file titled ``CY 2026 PFS proposed rule PE/HR'' on the
CMS website under downloads for the CY 2026 PFS proposed rule at
<a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html</a>.
For CY 2026, we have incorporated the available utilization data
for one new specialty, Epileptologists, which we recognized effective
July 1, 2024 through our established process. We are proposing to use
proxy PE/HR values from Neurology for this new specialty, as there are
no PPIS data for this specialty.
These updates are reflected in the ``CY 2026 PFS proposed rule PE/
HR'' file available on the CMS website under the supporting data files
for the CY 2026 PFS proposed rule at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html</a>.
c. Allocation of PE to Services
To establish PE RVUs for specific services, it is necessary to
establish the direct and indirect PE associated with each service.
(1) Direct Costs
The relative relationship between the direct cost portions of the
PE RVUs for any two services is determined by the relative relationship
between the sum of the direct cost resources (that is, the clinical
staff, medical supplies, and medical equipment) typically involved with
furnishing each of the services. The costs of these resources are
calculated from the refined direct PE inputs in our PE database. For
example, if one service has a direct cost sum of $400 from our PE
database and another service has a direct cost sum of $200, the direct
portion of the PE RVUs of the first service would be twice as much as
the direct portion of the PE RVUs for the second service.
(2) Indirect Costs
We allocate the indirect costs at the code level based on the
direct costs specifically associated with a code and the greater of
either the clinical labor costs or the work RVUs. We also incorporate
the survey data described earlier in the PE/HR discussion. The general
approach to developing the indirect portion of the PE RVUs is as
follows:
<bullet> For a given service, we use the direct portion of the PE
RVUs calculated as previously described and the average percentage that
direct costs represent of total costs (based on survey data) across the
specialties that furnish the service to determine an initial indirect
allocator. That is, the initial indirect allocator is calculated so
that the direct costs equal the average percentage of direct costs of
those specialties furnishing the service. For example, if the direct
portion of the PE RVUs for a given service is 2.00 and direct costs, on
average, represent 25 percent of total costs for the specialties that
furnish the service, the initial indirect allocator would be calculated
so that it equals 75 percent of the total PE RVUs. Thus, in this
example, the initial indirect allocator would equal 6.00, resulting in
a total PE RVU of 8.00 (2.00 is 25 percent of 8.00 and 6.00 is 75
percent of 8.00).
<bullet> Next, we add the greater of the work RVUs or clinical
labor portion of the direct portion of the PE RVUs to this initial
indirect allocator. In our example, if this service had a work RVU of
4.00 and the clinical labor portion of the direct PE RVU was 1.50, we
would add 4.00 (since the 4.00 work RVUs are greater than the 1.50
clinical labor portion) to the initial indirect allocator of 6.00 to
get an indirect allocator of 10.00. In the absence of any further use
of the survey data, the relative relationship between the indirect cost
portions of the PE RVUs for any two services would be determined by the
relative relationship between these indirect cost allocators. For
example, if one service had an indirect cost allocator of 10.00 and
another service had an indirect cost allocator of 5.00, the indirect
portion of the PE RVUs of the first service would be twice as great as
the indirect portion of the PE RVUs for the second service.
<bullet> Then, we incorporate the specialty specific indirect PE/HR
data into the calculation. In our example, if, based on the survey
data, the average indirect cost of the specialties furnishing the first
service with an allocator of 10.00 was half of the average indirect
cost of the specialties furnishing the second service with an indirect
allocator of 5.00, the indirect portion of the PE RVUs of the first
service would be equal to that of the second service.
(3) Facility and Nonfacility Costs
For procedures that can be furnished in a physician's office, as
well as in a facility setting, where Medicare makes a separate payment
to the facility for its costs in furnishing a service, we establish two
PE RVUs: facility and nonfacility. The methodology for calculating PE
RVUs is generally the same for both the facility and nonfacility RVUs
but is applied independently to yield two separate PE RVUs. In
calculating the PE RVUs for services furnished in a facility, we do not
include resources that would generally not be provided by physicians
when furnishing the service. For this reason, the facility PE RVUs are
generally lower than the nonfacility PE RVUs. We note, too, that in
this proposed rule we are proposing a modification in the allocation of
indirect PE, described in detail below.
(4) Services With Technical Components and Professional Components
Diagnostic services are generally comprised of two components: a
[[Page 32356]]
professional component (PC); and a technical component (TC). The PC and
TC may be furnished independently or by different healthcare providers,
or they may be furnished together as a global service. When services
have separately billable PC and TC components, the payment for the
global service equals the sum of the payment for the TC and PC. To
achieve this, we use a weighted average of the ratio of indirect to
direct costs across all the specialties that furnish the global
service, TCs, and PCs; that is, we apply the same weighted average
indirect percentage factor to allocate indirect expenses to the global
service, PCs, and TCs for a service. (The direct PE RVUs for the TC and
PC sum to the global.)
(5) PE RVU Methodology
For a more detailed description of the PE RVU methodology, we
direct readers to the CY 2010 PFS final rule with comment period (74 FR
61745 through 61746). We also direct readers to the file titled
``Calculation of PE RVUs under Methodology for Selected Codes'' which
is available on our website under downloads for the CY 2026 PFS
proposed rule at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html</a>. This
file contains a table that illustrates the calculation of PE RVUs as
described in this proposed rule for individual codes.
(a) Setup File
First, we create a setup file for the PE methodology. The setup
file contains the direct cost inputs, the utilization for each
procedure code at the specialty and facility/nonfacility place of
service level, and the specialty specific PE/HR data calculated from
the surveys.
(b) Calculate the Direct Cost PE RVUs
Sum the costs of each direct input.
Step 1: Sum the direct costs of the inputs for each service.
Step 2: Calculate the aggregate pool of direct PE costs for the
current year. We set the aggregate pool of PE costs equal to the
product of the ratio of the current aggregate PE RVUs to current
aggregate work RVUs and the projected aggregate work RVUs.
Step 3: Calculate the aggregate pool of direct PE costs for use in
ratesetting. This is the product of the aggregate direct costs for all
services from Step 1 and the utilization data for that service.
Step 4: Using the results of Step 2 and Step 3, use the CF to
calculate a direct PE scaling adjustment to ensure that the aggregate
pool of direct PE costs calculated in Step 3 does not vary from the
aggregate pool of direct PE costs for the current year. Apply the
scaling adjustment to the direct costs for each service (as calculated
in Step 1).
Step 5: Convert the results of Step 4 to an RVU scale for each
service. To do this, divide the results of Step 4 by the CF. Note that
the actual value of the CF used in this calculation does not influence
the final direct cost PE RVUs as long as the same CF is used in Step 4
and Step 5. Different CFs would result in different direct PE scaling
adjustments, but this has no effect on the final direct cost PE RVUs
since changes in the CFs and the associated direct scaling adjustments
offset one another.
(c) Create the Indirect Cost PE RVUs
Create indirect allocators.
Step 6: Based on the survey data, calculate direct and indirect PE
percentages for each physician specialty.
Step 7: Calculate direct and indirect PE percentages at the service
level by taking a weighted average of the results of Step 6 for the
specialties that furnish the service. Note that for services with TCs
and PCs, the direct and indirect percentages for a given service do not
vary by the PC, TC, and global service.
We generally use an average of the three most recent years of
available Medicare claims data to determine the specialty mix assigned
to each code. Codes with low Medicare service volume require special
attention since billing or enrollment irregularities for a given year
can result in significant changes in specialty mix assignment. We
finalized a policy in the CY 2018 PFS final rule (82 FR 52982 through
59283) to use the most recent year of claims data to determine which
codes are low volume for the coming year (those that have fewer than
100 allowed services in the Medicare claims data). For codes that fall
into this category, instead of assigning a specialty mix based on the
specialties of the practitioners reporting the services in the claims
data, we use the expected specialty that we identify on a list
developed based on medical review and input from expert interested
parties. We display this list of expected specialty assignments as part
of the annual set of data files we make available as part of notice and
comment rulemaking and consider recommendations from the RUC and other
interested parties on changes to this list annually. Services for which
the specialty is automatically assigned based on previously finalized
policies under our established methodology (for example, ``always
therapy'' services) are unaffected by the list of expected specialty
assignments. We also finalized in the CY 2018 PFS final rule (82 FR
52982 through 52983) a policy to apply these service-level overrides
for both PE and MP, rather than one or the other category.
The full list of expected specialty assignments is included in the
CY 2026 public use files, which are available on the CMS website under
downloads for the CY 2026 PFS proposed rule at <a href="http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html">http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html</a>.
Step 8: Calculate the service level allocators for the indirect PEs
based on the percentages calculated in Step 7. The indirect PEs are
allocated based on the three components: the direct PE RVUs; the
clinical labor PE RVUs; and the work RVUs.
For most services the indirect allocator is: indirect PE percentage
* (direct PE RVUs/direct percentage) + work RVUs.
There are two situations where this formula is modified:
<bullet> If the service is a global service (that is, a service
with global, professional, and technical components), then the indirect
PE allocator is: indirect percentage (direct PE RVUs/direct percentage)
+ clinical labor PE RVUs + work RVUs.
<bullet> If the clinical labor PE RVUs exceed the work RVUs (and
the service is not a global service), then the indirect allocator is:
indirect PE percentage (direct PE RVUs/direct percentage) + clinical
labor PE RVUs.
(Note: For global services, the indirect PE allocator is based on
both the work RVUs and the clinical labor PE RVUs. We do this to
recognize that, for the PC service, indirect PEs would be allocated
using the work RVUs, and for the TC service, indirect PEs would be
allocated using the direct PE RVUs and the clinical labor PE RVUs. This
also allows the global component RVUs to equal the sum of the PC and TC
RVUs.)
For presentation purposes, in the examples in the download file
titled ``Calculation of PE RVUs under Methodology for Selected Codes'',
the formulas were divided into two parts for each service.
<bullet> The first part does not vary by service and is the
indirect percentage (direct PE RVUs/direct percentage).
<bullet> The second part is either the work RVU, clinical labor PE
RVU, or both depending on whether the service is a global service and
whether the clinical PE RVUs exceed the work RVUs (as described earlier
in this step).
We note that for CY 2026, we are proposing a change to the
methodology so that when work RVUs are used to
[[Page 32357]]
allocate indirect PE to the facility RVUs, they are assigned at one-
half the amount allocated to the nonfacility PE RVUs for that same
service. This proposed change is detailed later in this section.
Apply a scaling adjustment to the indirect allocators.
Step 9: Calculate the current aggregate pool of indirect PE RVUs by
multiplying the result of step 8 by the average indirect PE percentage
from the survey data.
Step 10: Calculate an aggregate pool of indirect PE RVUs for all
PFS services by adding the product of the indirect PE allocators for a
service from Step 8 and the utilization data for that service.
Step 11: Using the results of Step 9 and Step 10, calculate an
indirect PE adjustment so that the aggregate indirect allocation does
not exceed the available aggregate indirect PE RVUs and apply it to
indirect allocators calculated in Step 8.
Calculate the indirect practice cost index.
Step 12: Using the results of Step 11, calculate aggregate pools of
specialty specific adjusted indirect PE allocators for all PFS services
for a specialty by adding the product of the adjusted indirect PE
allocator for each service and the utilization data for that service.
Step 13: Using the specialty specific indirect PE/HR data,
calculate specialty specific aggregate pools of indirect PE for all PFS
services for that specialty by adding the product of the indirect PE/HR
for the specialty, the work time for the service, and the specialty's
utilization for the service across all services furnished by the
specialty.
Step 14: Using the results of Step 12 as the denominator and Step
13 as the numerator, calculate the specialty specific indirect PE
scaling factors.
Step 15: Using the results of Step 14, calculate an indirect
practice cost index at the specialty level by dividing each specialty
specific indirect scaling factor by the average indirect scaling factor
for the entire PFS.
Step 16: Calculate the indirect practice cost index at the service
level to ensure the capture of all indirect costs. Calculate a weighted
average of the practice cost index values for the specialties that
furnish the service. (Note: For services with TCs and PCs, we calculate
the indirect practice cost index across the global service, PCs, and
TCs. Under this method, the indirect practice cost index for a given
service (for example, echocardiogram) does not vary by the PC, TC, and
global service.)
Step 17: Apply the service level indirect practice cost index
calculated in Step 16 to the service level adjusted indirect allocators
calculated in Step 11 to get the indirect PE RVUs.
(d) Calculate the Final PE RVUs
Step 18: Add the direct PE RVUs from Step 5 to the indirect PE RVUs
from Step 17 and apply the final PE budget neutrality (BN) adjustment.
The final PE BN adjustment is calculated by comparing the sum of steps
5 and 17 to the aggregate work RVUs scaled by the ratio of current
aggregate PE and work RVUs. This adjustment ensures that all PE RVUs in
the PFS account for the fact that certain specialties are excluded from
the calculation of PE RVUs but included in maintaining overall PFS BN.
(See ``Specialties excluded from ratesetting calculation'' later in
this proposed rule.)
Step 19: Apply the phase-in of significant RVU reductions and its
associated adjustment. Section 1848(c)(7) of the Act specifies that for
services that are not new or revised codes, if the total RVUs for a
service for a year would otherwise be decreased by an estimated 20
percent or more as compared to the total RVUs for the previous year,
the applicable adjustments in work, PE, and MP RVUs shall be phased in
over a 2-year period. In implementing the phase-in, we consider a 19
percent reduction as the maximum 1-year reduction for any service not
described by a new or revised code. This approach limits the year one
reduction for the service to the maximum allowed amount (that is, 19
percent), and then phases in the remainder of the reduction. To comply
with section 1848(c)(7) of the Act, we adjust the PE RVUs to ensure
that the total RVUs for all services that are not new or revised codes
decrease by no more than 19 percent, and then apply a relativity
adjustment to ensure that the total pool of aggregate PE RVUs remains
relative to the pool of work and MP RVUs. For a more detailed
description of the methodology for the phase-in of significant RVU
changes, we refer readers to the CY 2016 PFS final rule with comment
period (80 FR 70927 through 70931).
(e) Setup File Information
<bullet> Specialties excluded from ratesetting calculation: To
calculate the PE and MP RVUs, we exclude certain specialties, such as
NPPs paid at a percentage of the PFS and low volume specialties, from
the calculation. These specialties are included to calculate the BN
adjustment. They are displayed in Table 1.
BILLING CODE 4120-01-P
[[Page 32358]]
[GRAPHIC] [TIFF OMITTED] TP16JY25.005
BILLING CODE 4120-01-C
<bullet> Crosswalk certain low volume physician specialties:
Crosswalk the utilization of certain specialties with relatively low
PFS utilization to the associated specialties.
<bullet> Physical therapy utilization: Crosswalk the utilization
associated with all physical therapy services to the specialty of
physical therapy.
<bullet> Identify professional and technical services not
identified under the usual TC and 26 modifiers: Flag the services that
are PC and TC services but do not use TC and 26 modifiers (for example,
electrocardiograms). This flag associates the PC and TC with the
associated global code for use in creating the indirect PE RVUs. For
example, the professional service, CPT code 93010 (Electrocardiogram,
routine ECG with at least 12 leads; interpretation and report only), is
associated with the global service, CPT code 93000 (Electrocardiogram,
routine ECG with at least 12 leads; with interpretation and report).
<bullet> Payment modifiers: Payment modifiers are accounted for in
creating the file consistent with the current payment policy as
implemented in claims processing. For example, services billed with the
assistant at surgery modifier are paid 16 percent of the PFS amount for
that service; therefore, the utilization file is modified to only
account for 16 percent of any service that contains the assistant at
surgery modifier. Similarly, for those services to which volume
adjustments are made to account for the payment modifiers, time
[[Page 32359]]
adjustments are applied as well. For time adjustments to surgical
services, the intraoperative portion in the work time file is used;
where it is not present, the intraoperative percentage from the payment
files used by contractors to process Medicare claims is used instead.
Where neither is available, we use the payment adjustment ratio to
adjust the time accordingly. Table 2 provides details in which the
modifiers are applied.
[GRAPHIC] [TIFF OMITTED] TP16JY25.006
We also adjust volume and time that correspond to other payment
rules, including special multiple procedure endoscopy rules and
multiple procedure payment reductions (MPPRs). We note that section
1848(c)(2)(B)(v) of the Act exempts certain reduced payments for
multiple imaging procedures and multiple therapy services from the BN
calculation under section 1848(c)(2)(B)(ii)(II) of the Act. These MPPRs
are not included in the development of the RVUs.
Beginning in CY 2022, section 1834(v)(1) of the Act required that
we apply a 15 percent payment reduction for outpatient occupational
therapy services and outpatient physical therapy services that are
provided, in whole or in part, by a physical therapist assistant (PTA)
or occupational therapy assistant (OTA). Section 1834(v)(2)(A) of the
Act required CMS to establish modifiers to identify these services,
which we did in the CY 2019 PFS final rule (83 FR 59654 through 59661),
creating the CQ and CO payment modifiers for services provided in whole
or in part by PTAs and OTAs, respectively. These payment modifiers are
required to be used on claims for services with dates of service
beginning January 1, 2020, as specified in the CY 2020 PFS final rule
(84 FR 62702 through 62708). We applied the 15 percent payment
reduction to therapy services provided by PTAs (using the CQ modifier)
or OTAs (using the CO modifier), as required by statute. Under sections
1834(k) and 1848 of the Act, payment is made for outpatient therapy
services at 80 percent of the lesser of the actual charge or applicable
fee schedule amount (the allowed charge). The remaining 20 percent is
the beneficiary copayment. For therapy services to which the new
discount applies, payment will be made at 85 percent of the 80 percent
of allowed charges. Therefore, the volume discount factor for therapy
services to which the CQ and CO modifiers apply is: (0.20 + (0.80 *
0.85), which equals 88 percent.
For anesthesia services, we do not apply adjustments to volume
since we use the average allowed charge when simulating RVUs;
therefore, the RVUs as calculated already reflect the payments as
adjusted by modifiers, and no volume adjustments are necessary.
However, a time adjustment of 33 percent is made only for medical
direction of two to four cases since that is the only situation where a
single practitioner is involved with multiple beneficiaries
concurrently, so that counting each service without regard to the
overlap with other services would overstate the amount of time spent by
the practitioner furnishing these services.
<bullet> Work RVUs: The setup file contains the work RVUs from this
proposed rule.
(6) Equipment Cost per Minute
The equipment cost per minute is calculated as:
(1/(minutes per year * usage)) * price * ((interest rate/(1 (1/((1 +
interest rate)[supcaret] life of equipment)))) + maintenance)
Where:
minutes per year = maximum minutes per year if usage were continuous
(that is, usage=1); generally, 150,000 minutes.
usage = variable, see discussion below in this proposed rule.
price = price of the particular piece of equipment.
life of equipment = useful life of the particular piece of
equipment.
maintenance = factor for maintenance; 0.05.
interest rate = variable, see discussion below in this proposed
rule.
Usage: We currently use an equipment utilization rate assumption of
50 percent for most equipment, with the exception of expensive
diagnostic imaging equipment, for which we use a 90 percent assumption
as required by section 1848(b)(4)(C) of the Act.
[[Page 32360]]
Useful Life: In the CY 2005 PFS final rule we stated that we
updated the useful life for equipment items primarily based on the
AHA's ``Estimated Useful Lives of Depreciable Hospital Assets''
guidelines (69 FR 66246). The most recent edition of these guidelines
was published in 2018. This reference material provides an estimated
useful life for hundreds of different types of equipment, the vast
majority of which fall in the range of 5 to 10 years, and none of which
are lower than two years in duration. We believe that the updated
editions of this reference material remain the most accurate source for
estimating the useful life of depreciable medical equipment.
In the CY 2021 PFS final rule, we finalized a proposal to treat
equipment life durations of less than 1 year as having a duration of 1
year for the purpose of our equipment price per minute formula. In the
rare cases where items are replaced every few months, we noted that we
believe it is more accurate to treat these items as disposable supplies
with a fractional supply quantity as opposed to equipment items with
very short equipment life durations. For a more detailed discussion of
the methodology associated with very short equipment life durations, we
refer readers to the CY 2021 PFS final rule (85 FR 84482 through
84483).
<bullet> Maintenance: We finalized the 5 percent factor for annual
maintenance in the CY 1998 PFS final rule with comment period (62 FR
33164). As we previously stated in the CY 2016 PFS final rule with
comment period (80 FR 70897), we do not believe the annual maintenance
factor for all equipment is precisely 5 percent, and we concur that the
current rate likely understates the true cost of maintaining some
equipment. We also noted that we believe it likely overstates the
maintenance costs for other equipment. When we solicited comments
regarding data sources containing equipment maintenance rates,
commenters could not identify an auditable, robust data source that CMS
could use on a wide scale. We noted that we did not believe voluntary
submissions regarding the maintenance costs of individual equipment
items would be an appropriate methodology for determining costs. As a
result, in the absence of publicly available datasets regarding
equipment maintenance costs or another systematic data collection
methodology for determining a different maintenance factor, we did not
propose a variable maintenance factor for equipment cost per minute
pricing as we did not believe that we have sufficient information at
present. We noted that we would continue to investigate potential
avenues for determining equipment maintenance costs across a broad
range of equipment items.
<bullet> Interest Rate: In the CY 2013 PFS final rule with comment
period (77 FR 68902), we updated the interest rates used in developing
an equipment cost per minute calculation (see 77 FR 68902 for a
thorough discussion of this issue). The interest rate was based on the
Small Business Administration (SBA) maximum interest rates for
different categories of loan size (equipment cost) and maturity (useful
life). The interest rates are listed in Table 3.
[GRAPHIC] [TIFF OMITTED] TP16JY25.007
We are not proposing any changes to the equipment interest rates
for CY 2026.
3. Adjusting RVUs To Match the PE Share of the Medicare Economic Index
(MEI)
In the past, we have stated that we believe that the MEI is the
best measure available of the relative weights of the three components
in payments under the PFS--work, practice expense (PE), and malpractice
(MP). Accordingly, we believe that to ensure that the PFS payments
reflect the relative resources in each of these PFS components as
required by section 1848(c)(3) of the Act, the RVUs used in developing
rates should reflect the same weights in each component as the cost
share weights in the Medicare Economic Index (MEI). In the past, we
have proposed (and subsequently finalized) to accomplish this by
holding the work RVUs constant and adjusting the PE RVUs, MP RVUs, and
CF to produce the appropriate balance in RVUs among the three PFS
components and payment rates for individual services, that is, that the
total RVUs on the PFS are proportioned to approximately 51 percent work
RVUs, 45 percent PE RVUs, and 4 percent MP RVUs. As the MEI cost shares
are updated, we would typically propose to modify steps 3 and 10 to
adjust the aggregate pools of PE costs (direct PE in step 3 and
indirect PE in step 10) in proportion to the change in the PE share in
the 2017-based MEI cost share weights, and to recalibrate the
relativity adjustment that we apply in step 18 as described in the CY
2023 PFS final rule (87 FR 69414 and 69415) and CY 2014 PFS final rule
(78 FR 74236 and 74237). The most recent recalibration was done for the
CY 2014 RVUs.
In the CY 2014 PFS proposed rule (78 FR 43287 through 43288) and
final rule (78 FR 74236 through 74237), we detailed the steps necessary
to accomplish this result (see steps 3, 10, and 18). The CY 2014
proposed and final adjustments were consistent with our longstanding
practice to make adjustments to match the RVUs for the PFS components
with the MEI cost share weights for the components, including the
adjustments described in the CY 1999 PFS final rule (63 FR 58829), CY
2004 PFS final rule (68 FR 63246 and 63247), and CY 2011 PFS final rule
(75 FR 73275).
In the CY 2023 PFS final rule (87 FR 69688 through 69711), we
finalized to rebase and revise the MEI to reflect more current market
conditions faced by physicians in furnishing physicians' services
(referred to as the ``2017-based MEI''). We also finalized a delay of
the adjustments to the PE pools in steps 3 and 10 and the recalibration
of the relativity adjustment in step 18 until the
[[Page 32361]]
public had an opportunity to comment on the rebased and revised 2017-
based MEI (87 FR 69414 through 69416). Because we finalized significant
methodological and data source changes to the MEI in the CY 2023 PFS
final rule and significant time had elapsed since the last rebasing and
revision of the MEI in CY 2014, we believed that delaying the
implementation of the finalized 2017-based MEI was consistent with our
efforts to balance payment stability and predictability with
incorporating new data through more routine updates. We refer readers
to the discussion of our comment solicitation in the CY 2023 PFS final
rule (87 FR 69429 through 69432), where we reviewed our ongoing efforts
to update data inputs for PE to aid stability, transparency,
efficiency, and data adequacy. We also solicited comments in the CY
2023 PFS proposed rule on when and how to best incorporate the 2017-
based MEI into PFS ratesetting, and whether it would be appropriate to
consider a transition to full implementation for potential future
rulemaking. We presented the impacts of implementing the 2017-based MEI
in PFS ratesetting through a 4-year transition and through full
immediate implementation, that is, with no transition period in the CY
2023 PFS proposed rule. We also solicited comments on other
implementation strategies for potential future rulemaking in the CY
2023 PFS proposed rule. In the CY 2023 PFS final rule, we discussed
that many commenters supported our proposed delayed implementation, and
many commenters expressed concerns with the redistributive impacts of
the implementation of the 2017-based MEI in PFS ratesetting. Many
commenters also noted the AMA's intent to collect practice cost data
from physician practices, which could be used to derive cost share
weights for the MEI and RVU shares.
In CY 2025 PFS rulemaking (89 FR 97722), we stated that in light of
the AMA's current data collection efforts and because the
methodological and data source changes to the 2017-based MEI finalized
in the CY 2023 PFS final rule would have significant impacts on PFS
payments, similar to our discussion of this topic in the CY 2024 PFS
rulemaking cycle (88 FR 78829 through 78831), we continued to believe
that delaying the implementation of the finalized 2017-based MEI cost
share weights for the RVUs was consistent with our efforts to balance
payment stability and predictability with incorporating new data
through more routine updates. For these reasons, we did not propose to
incorporate the 2017-based MEI in PFS ratesetting for CY 2024 and CY
2025. As we noted in the CY 2024 PFS final rule, many commenters on the
CY 2024 PFS proposed rule supported our continued delayed
implementation of the 2017-based MEI in PFS ratesetting (88 FR 78830).
Most of these commenters recommended to us to pause consideration of
other sources for the MEI until the AMA's efforts to collect practice
cost data from physician practices concluded, although a few commenters
recommended that we implement the MEI for PFS ratesetting as soon as
possible. We stated that we agree with the commenters that it would be
prudent, and avoid potential duplication of effort, to wait to consider
other data sources for the MEI while the AMA's data collection
activities were ongoing. We stated that as we discussed in the CY 2024
PFS final rule, we continue to monitor the data available related to
physician services' input expenses, but we were not proposing to update
the data underlying the MEI cost weights at that time.
At the time of publication of this proposed rule, the AMA has
concluded their data collection efforts and, in early 2025, submitted
data from its Physician Practice Information (PPI) and Clinician
Practice Information (CPI) Surveys to CMS for us to consider
implementing the PE/HR data and cost shares in PFS ratesetting for CY
2026. We appreciate the AMA's data collection efforts, and recognize
the significant efforts required to develop the survey and collect the
data. We have prioritized review of the submitted information during
the first part of this year based on our longstanding interest in the
value of updated practice expense information. At this time, however,
we have substantive concerns about the accuracy and suitability of the
PPI and CPI Survey data as an immediate replacement for the current PE/
HR data and cost shares for use in CY 2026 PFS ratesetting. Due to
overarching concerns with the data as described below and our
previously described policy goal to balance PFS payment stability and
predictability with incorporating new data through routine updates to
the MEI, we are not proposing to implement the PE/HR or cost shares
from the AMA's survey data at this time. Instead, we propose to
maintain the current PE/HR and 2006-based MEI cost shares for CY 2026
PFS ratesetting.
4. Changes to Direct PE Inputs for Specific Services
This section focuses on specific PE inputs. The direct PE inputs
are included in the CY 2026 direct PE input public use files, which are
available on the CMS website under downloads for the CY 2026 PFS
proposed rule at <a href="https://www.cms.gov/Medicare/Medicare-Fee-fafor-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html">https://www.cms.gov/Medicare/Medicare-Fee-fafor-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html</a>.
a. Standardization of Clinical Labor Tasks
As we noted in the CY 2015 PFS final rule with comment period (79
FR 67640 through 67641), we continue to make improvements to the direct
PE input database to provide the number of clinical labor minutes
assigned for each task for every code in the database instead of only
including the number of clinical labor minutes for the preservice,
service, and post service periods for each code. In addition to
increasing the transparency of the information used to set PE RVUs,
this level of detail would allow us to compare clinical labor times for
activities associated with services across the PFS, which we believe is
important to maintaining the relativity of the direct PE inputs. This
information would facilitate the identification of the usual numbers of
minutes for clinical labor tasks and the identification of exceptions
to the usual values. It would also allow for greater transparency and
consistency in the assignment of equipment minutes based on clinical
labor times. Finally, we believe that the detailed information can be
useful in maintaining standard times for particular clinical labor
tasks that can be applied consistently to many codes as they are valued
over several years, similar in principle to physician preservice time
packages. We believe that setting and maintaining such standards would
provide greater consistency among codes that share the same clinical
labor tasks and could improve the relativity of values among codes. For
example, as medical practice and technologies change over time,
standards could be updated simultaneously for all codes with the
applicable clinical labor tasks instead of waiting for individual codes
to be reviewed.
In the CY 2016 PFS final rule with comment period (80 FR 70901), we
solicited comments on the appropriate standard minutes for the clinical
labor tasks associated with services that use digital technology. After
consideration of comments received, we finalized standard times for
clinical labor tasks associated with digital imaging at 2 minutes for
``Availability of prior images confirmed'', 2 minutes for ``Patient
clinical information and questionnaire reviewed by technologist,
[[Page 32362]]
order from physician confirmed and exam protocoled by radiologist'', 2
minutes for ``Review examination with interpreting MD'', and 1 minute
for ``Exam documents scanned into PACS'' and ``Exam completed in RIS
system to generate billing process and to populate images into
Radiologist work queue.'' In the CY 2017 PFS final rule (81 FR 80184
through 80186), we finalized a policy to establish a range of
appropriate standard minutes for the clinical labor activity,
``Technologist QCs images in PACS, checking for all images, reformats,
and dose page.'' These standard minutes will be applied to new and
revised codes that make use of this clinical labor activity when they
are reviewed by us for valuation. We finalized a policy to establish 2
minutes as the standard for the simple case, 3 minutes as the standard
for the intermediate case, 4 minutes as the standard for the complex
case, and 5 minutes as the standard for the highly complex case. These
values were based upon a review of the existing minutes assigned for
this clinical labor activity; we determined that 2 minutes is the
duration for most services and a small number of codes with more
complex forms of digital imaging have higher values. We also finalized
standard times for a series of clinical labor tasks associated with
pathology services in the CY 2016 PFS final rule with comment period
(80 FR 70902). We do not believe these activities would be dependent on
number of blocks or batch size, and we believe that the finalized
standard values accurately reflect the typical time it takes to perform
these clinical labor tasks.
In reviewing the RUC-recommended direct PE inputs for CY 2019, we
noticed that the 3 minutes of clinical labor time traditionally
assigned to the ``Prepare room, equipment and supplies'' (CA013)
clinical labor activity were split into 2 minutes for the ``Prepare
room, equipment and supplies'' activity and 1 minute for the ``Confirm
order, protocol exam'' (CA014) activity. We proposed to maintain the 3
minutes of clinical labor time for the ``Prepare room, equipment and
supplies'' activity and remove the clinical labor time for the
``Confirm order, protocol exam'' activity wherever we observed this
pattern in the RUC-recommended direct PE inputs. Commenters explained
in response that when the new version of the PE worksheet introduced
the activity codes for clinical labor, there was a need to translate
old clinical labor tasks into the new activity codes, and that a prior
clinical labor task was split into two of the new clinical labor
activity codes: CA007 (Review patient clinical extant information and
questionnaire) in the preservice period, and CA014 (Confirm order,
protocol exam) in the service period. Commenters stated that the same
clinical labor from the old PE worksheet was now divided into the CA007
and CA014 activity codes, with a standard of 1 minute for each
activity. We agreed with commenters that we would finalize the RUC-
recommended 2 minutes of clinical labor time for the CA007 activity
code and 1 minute for the CA014 activity code in situations where this
was the case. However, when reviewing the clinical labor for the
reviewed codes affected by this issue, we found that several of the
codes did not include this old clinical labor task, and we also noted
that several of the reviewed codes that contained the CA014 clinical
labor activity code did not contain any clinical labor for the CA007
activity. In these situations, we believe that the three total minutes
of clinical staff time would be more accurately described by the CA013
``Prepare room, equipment and supplies'' activity code, and we
finalized these clinical labor refinements. We direct readers to the
discussion in the CY 2019 PFS final rule (83 FR 59463 through 59464)
for additional details.
Following the publication of the CY 2020 PFS proposed rule, one
commenter expressed concern with the published list of common
refinements to equipment time. The commenter stated that these
refinements were the formulaic result of applying refinements to the
clinical labor time and did not constitute separate refinements; the
commenter requested that CMS no longer include these refinements in the
table published each year. In the CY 2020 PFS final rule, we agreed
with the commenter that these equipment time refinements did not
reflect errors in the equipment recommendations or policy discrepancies
with the RUC's equipment time recommendations. However, we believed it
was important to publish the specific equipment times that we were
proposing (or finalizing in the case of the final rule) when they
differed from the recommended values due to the effect these changes
can have on the direct costs associated with equipment time. Therefore,
we finalized the separation of the equipment time refinements
associated with changes in clinical labor into a separate table of
refinements. We direct readers to the discussion in the CY 2020 PFS
final rule (84 FR 62584) for additional details.
Historically, the RUC has submitted a ``PE worksheet'' that details
the recommended direct PE inputs for our use in developing PE RVUs. The
format of the PE worksheet has varied over time, and among the medical
specialties developing the recommendations. These variations have made
it difficult for the RUC's development and our review of code values
for individual codes. Beginning with its recommendations for CY 2019,
the RUC mandated the use of a new PE worksheet for its recommendation
development process that standardizes the clinical labor tasks and
assigns them a clinical labor activity code. We believe the RUC's use
of the new PE worksheet in developing and submitting recommendations
helps us simplify and standardize the hundreds of clinical labor tasks
currently listed in our direct PE database. As in previous calendar
years, to facilitate rulemaking for CY 2026, we are continuing to
display two versions of the Labor Task Detail public use file: one
version with the old listing of clinical labor tasks and one with the
same tasks crosswalked to the new listing of clinical labor activity
codes. These lists are available on the CMS website under downloads for
the CY 2026 PFS proposed rule at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html</a>.
b. Updates to Prices for Existing Direct PE Inputs
In the CY 2011 PFS final rule with comment period (75 FR 73205), we
finalized a process to act on public requests to update equipment and
supply price and equipment useful life inputs through annual
rulemaking, beginning with the CY 2012 PFS proposed rule. Beginning in
CY 2019 and continuing through CY 2022, we conducted a market-based
supply and equipment pricing update using information developed by our
contractor, StrategyGen, which updated pricing recommendations for
approximately 1,300 supplies and 750 equipment items currently used as
direct PE inputs. Given the potentially significant changes in payment
that would occur, in the CY 2019 PFS final rule, we finalized a policy
to phase in our use of the new direct PE input pricing over a 4-year
period using a 25/75 percent (CY 2019), 50/50 percent (CY 2020), 75/25
percent (CY 2021), and 100/0 percent (CY 2022) split between new and
old pricing. We believed that implementing the proposed updated prices
with a 4-year phase-in would improve payment accuracy while maintaining
stability and allowing interested parties to address potential
[[Page 32363]]
concerns about changes in payment for particular items. This 4-year
transition period to update supply and equipment pricing concluded in
CY 2022; for a more detailed discussion, we refer readers to the CY
2019 PFS final rule with comment period (83 FR 59473 through 59480).
For CY 2026, we are proposing to update the price of 35 supplies
and seven equipment items in response to the public submission of
invoices following the publication of the CY 2025 PFS final rule. The
42 supply and equipment items with proposed updated prices are listed
in the valuation of specific codes section of the preamble under Table
6, CY 2026 Invoices Received for Existing Direct PE Inputs.
We received a series of invoices associated with the SD339 supply
prior to our February 10th submission deadline and are proposing to
update its pricing accordingly for CY 2026, as detailed in Table 6, CY
2026 Invoices Received for Existing Direct PE Inputs. We later received
additional invoices associated with this supply several months
following our February 10th deadline which arrived too late to be
included in the proposed updated pricing for this supply as shown in
Table 6. Consistent with our previously finalized policy associated
with the February 10th deadline (79 FR 67608), we will review these
invoices during the comment period following the publication of this CY
2026 PFS proposed rule for potential inclusion in the final rule.
We are not proposing to update the price of another eight supplies
and one equipment item, which were the subject of public submission of
invoices. Our reasons for not proposing updates to these prices are
detailed below, and we are soliciting additional information from
interested parties for assistance in pricing these supplies:
<bullet> Radiation treatment vault (ER056): We received pricing
information associated with the radiation treatment vault from an
interested party. However, this pricing information contained numerous
costs associated with building construction which would not be included
on a traditional invoice, such as surveying, plumbing and HVAC
expenses, drywall packaging, and the installation of electrical
equipment. As we previously stated in the CY 2021 PFS final rule about
similar costs associated with proton beam treatment delivery services,
the expenses associated with constructing new office facilities fall
outside of our direct PE methodology and would be more accurately
classified as a form of building maintenance or office rent under
indirect PE (85 FR 84626). We do not agree that construction costs
should be included as a form of direct PE because they are not
individually allocable to a particular patient for a particular
service. Therefore, we do not believe that it would serve the interests
of relativity to include these building construction costs for the
radiation treatment vault as a type of direct PE expense. In the
absence of other pricing information associated with the radiation
treatment vault, or pricing of the vault absent these building
construction costs, we are proposing to maintain its current price of
$773,104.
<bullet> Congo red kits (SA110) and UltraView Universal DAB
Detection Kit (SL488): We received three invoices from interested
parties requesting an increase in the price of the SA110 supply from
$6.80 to $20.12 and another three invoices from interested parties
requesting an increase in the price of the SL488 equipment from $12.28
to $41.26. In both cases, we do not understand how the typical price of
these supplies could be increasing by such a large amount, tripling the
current price in both cases, given that the price of both supplies was
recently updated. Both the SA110 supply and the SL488 supply had their
prices updated in the CY 2024 PFS final rule, with the SA110 supply
increasing from $6.16 to $6.80 and the SL488 supply increasing from
$9.70 to $12.28 (88 FR 78966 through 78967). We do not believe that the
typical price for these supplies would increase to such a great degree
given that their pricing was already recently updated for CY 2024;
therefore, we are not proposing to update.
<bullet> Catheter, balloon, rectal pressure (SD017); catheter,
pressure, urodynamic (SD027); and transducer dome (pressure) (SD125):
We received one invoice from interested parties for each of these three
supplies. Interested parties requested an increase in the price of the
SD017 supply from $35.89 to $74.00, an increase in the price of the
SD027 supply from $19.35 to $86.80, and an increase in the price of the
SD125 supply from $3.58 to 17.32. However, in each of these three
cases, it was unclear if the item on the invoice matched the supply
item in question. The invoice for the SD017 supply listed a ``Abdominal
Sensor Catheter'', the invoice for the SD027 supply listed a ``Single
Sensor Catheter'', and the invoice for the SD125 supply listed a
``transducer cartridge with luer lock''. Given the differences between
the names of the items in question, and the significant increases in
requested pricing, we are not proposing to update the pricing of these
three supplies as we cannot verify that the invoices refer to the same
supply items.
<bullet> Electrode, surface (SD062): We received one invoice from
interested parties requesting a decrease in the price of the SD062
supply from $1.58 to $0.34. The invoice appeared to state that there
are 10 copies of 10 packs of 3 electrodes which, when dividing the
total price of $103 by 300 electrodes, results in a price of $0.34 per
electrode. We do not believe that the interested parties intended to
submit an invoice resulting in a 78 percent decrease in pricing for the
SD062 supply, and we are not convinced that we have correctly
understood the unit quantity for this item. As a result, we are not
proposing to change the pricing of the SD062 supply at this time.
<bullet> Biohazard specimen transport bag (SM008): We received one
invoice from interested parties requesting an increase in the price of
the SM008 supply from $0.087 to $0.750, an increase of more than 750
percent. However, when we reviewed the invoice, we determined that it
referred to a different type of disposal bag than the biohazard
specimen transport bag described by the SM008 supply, which explained
the disparity in the pricing. We are therefore not proposing to update
the pricing of the SM008 supply.
<bullet> Wipes, lens cleaning (per wipe) (Kimwipe) (SM027): We
received one invoice from interested parties requesting an increase in
the price of the SM027 supply from $0.04 to $0.33, an increase of
approximately 700 percent. However, when we reviewed the supply in
question, we found that lens cleaning wipes were readily available for
purchase at the current price of $0.04 per wipe. We are therefore not
proposing to update the pricing of the SM027 supply.
(1) Invoice Submission
We remind readers that we routinely accept public submissions of
invoices as part of our process for developing payment rates for new,
revised, and potentially misvalued codes. Often, these invoices are
submitted in conjunction with the RUC-recommended values for the codes.
To be included in a given year's proposed rule, we generally need to
receive invoices by the same February 10th deadline we noted for
consideration of RUC recommendations. However, we will consider
invoices submitted as public comments during the comment period
following the publication of the PFS proposed rule and will consider
any invoices received after February 10th or outside of the public
comment
[[Page 32364]]
process as part of our established annual process for requests to
update supply and equipment prices. Interested parties are encouraged
to submit invoices with their public comments or, if outside the notice
and comment rulemaking process, via email at
<a href="/cdn-cgi/l/email-protection#4010051f10322923251f092e3035341f15302421342500232d336e2828336e272f36"><span class="__cf_email__" data-cfemail="6d3d28323d1f040e083224031d181932381d090c19082d0e001e4305051e430a021b">[email protected]</span></a>.
(2) Supply Pack Pricing Update
Interested parties previously notified CMS that they identified
numerous discrepancies between the aggregated cost of some supply packs
and the individual item components contained within. The interested
parties indicated that CMS should rectify these mathematical errors as
soon as possible to ensure that the sum correctly matches the totals
from the individual items, and they recommended that we resolve these
pricing discrepancies in the supply packs during CY 2024 rulemaking.
The AMA RUC convened a workgroup on this subject and submitted
recommendations to update pricing for a series of supply packs along
with the RUC's comment letter for the CY 2024 rule cycle.
We appreciated the additional information and RUC workgroup
recommendations regarding discrepancies in the aggregated cost of some
supply packs. However, due to the projected significant cost revisions
in the pricing of supply packs and because we did not propose to
address supply pack pricing in the CY 2024 proposed rule, we stated in
the CY 2024 final rule that this issue would be better addressed in
future rulemaking. For example, the cleaning and disinfecting endoscope
pack (SA042) is included as a supply input in more than 300 HCPCS
codes, which could have a sizable impact on the overall valuation of
these services, and which was not incorporated into the proposed RVUs
published for the CY 2024 proposed rule. We stated that interested
parties would be better served if we comprehensively addressed this
topic during future rulemaking in which commenters could provide
feedback in response to proposed pricing updates (88 FR 78833 through
78834).
For CY 2025, we proposed to implement the supply pack pricing
update and associated revisions as recommended by the RUC's workgroup
(89 FR 97726 through 97727). We proposed to update the pricing of the
``pack, cleaning and disinfecting, endoscope'' (SA042) supply from
$19.43 to $31.29, to update the pricing of the ``pack, drapes,
cystoscopy'' (SA045) supply from $17.33 to $14.99, to update the
pricing of the ``pack, ocular photodynamic therapy'' (SA049) supply
from $16.35 to $26.35, to update the pricing of the ``pack, urology
cystoscopy visit'' (SA058) supply from $113.70 to $37.63, and to update
the pricing of the ``pack, ophthalmology visit (w-dilation)'' (SA082)
supply from $3.91 to $2.33. As recommended by the RUC workgroup, we
also proposed to delete the ``pack, drapes, laparotomy (chest-
abdomen)'' (SA046) supply entirely. The updated prices for these supply
packs were listed in the valuation of specific codes section of the
preamble under Table 6, CY 2025 Invoices Received for Existing Direct
PE Inputs (89 FR 97852).
In accordance with the RUC workgroup's recommendations, we also
proposed to create 8 new supply codes, including components contained
within previously existing supply packs. Aside from the SB056 supply,
which is a replacement in several HCPCS codes for the deleted SA046
supply pack, all of these new supplies are not included as standalone
direct PE inputs in any current HCPCS codes, as they are, again,
components contained within previously existing supply packs. We
proposed to add:
<bullet> The kit, ocular photodynamic therapy (PDT) (SA137) supply
at a price of $26.00 as a component of the SA049 supply pack;
<bullet> The Abdominal Drape Laparotomy Drape Sterile (100 in x 72
in x 124 in) (SB056) supply at a price of $8.049 as a replacement for
the SA046 supply pack;
<bullet> The drape, surgical, legging (SB057) supply at a price of
$3.284 as a component of the SA045 supply pack;
<bullet> The drape, surgical, split, impervious, absorbent (SB058)
supply at a price of $8.424 as a component of the SA045 supply pack;
<bullet> The post-mydriatic spectacles (SB059) supply at a price of
$0.328 as a component of the SA082 supply pack;
<bullet> The y-adapter cap (SD367) supply at a price of $0.352 as a
component of the SA049 supply pack;
<bullet> The ortho-phthalaldehyde 0.55 percent (for example, Cidex
OPA) (SM030) supply at a price of $0.554 as a component of the SA042
supply pack; and
<bullet> The ortho-phthalaldehyde test strips (SM031) supply at a
price of $1.556 as a component of the SA042 supply pack.
The new supply pack component items were listed in the valuation of
specific codes section of the preamble under Table 8, CY 2025 New
Invoices (89 FR 97853).
We also proposed the following additional supply substitutions
based on the recommendations of the RUC workgroup. We proposed to
remove the deleted SA046 supply pack and replace it with the drape,
sterile, fenestrated 16in x 29in (SB011) supply for CPT codes 19020,
19101, 19110, 19112, 20101, and 20102. We proposed to remove the
deleted SA046 supply pack and replace it with two supplies--the drape,
sterile, three-quarter sheet (SB014) and the drape, towel, sterile 18in
x 26in (SB019)--for CPT codes 19000 and 60300. We proposed to remove
the deleted SA046 supply pack and replace it with 2 supplies--the
drape, towel, sterile 18in x 26in (SB019) and the newly created
Abdominal Drape Laparotomy Drape Sterile (100 in x 72 in x 124 in)
(SB056) supply--for CPT codes 22510, 22511, 22513, and 22514. We
proposed to remove the deleted SA046 supply pack without replacing it
with anything for CPT code 22526; the RUC workgroup did not make a
recommendation on what to do with CPT code 27278, which also previously
contained the SA046 supply pack. Therefore, we also proposed not to
replace the SA046 supply pack with any supplies for this code. The RUC
workgroup also recommended removing the SA046 supply pack from CPT code
64595 with no replacement; however, this code was recently reviewed at
the April 2022 RUC meeting and it no longer includes the SA046 supply.
In the comments on the CY 2025 PFS proposed rule (89 FR 97727
through 97729), several commenters supported the proposed supply pack
pricing update as recommended by the RUC workgroup, however they
indicated concern over the proposed decrease in the price of the
urology cystoscopy visit pack (SA058) from $113.70 to $37.63.
Commenters stated that the proposed pricing reduction in the SA058
supply could result in drastic payment rate cuts for physicians
performing cystoscopy services in the office setting. Commenters
requested that CMS either delay the pricing update or phase-in the
supply pack changes over a four-year period like it has done for other
PE changes with significant redistributive effects, allowing
independent urology practices to better prepare for the negative
financial impact this change will have.
[[Page 32365]]
After considering these comments, we agreed that the use of a
phased-in transition period would be appropriate to allow practitioners
to adjust to the updated pricing of these supplies. During our previous
supply and equipment pricing update in the CY 2019 PFS final rule, we
finalized a policy to phase in any updated pricing that we established
during the 4-year transition period for very commonly used supplies and
equipment, such as sterile gloves (SB024) or exam tables (EF023), even
if invoices were provided as part of the formal review of a code family
(83 FR 59475). Based on this previously established policy, we
finalized the use of a pricing transition for three supply packs in
Table 4:
[GRAPHIC] [TIFF OMITTED] TP16JY25.008
Following the same pattern as our previous supply/equipment and
clinical labor pricing updates, we finalized the implementation of this
pricing transition over 4 years such that one-quarter of the difference
between the current price and the fully phased-in price is implemented
for CY 2025, one-third of the difference between the CY 2025 price and
the final price is implemented for CY 2026, and one-half of the
difference between the CY 2026 price and the final price is implemented
for CY 2027, with the new direct PE prices fully implemented for CY
2028. For the other proposed supply packs, the cystoscopy drapes pack
(SA045) is only included in 7 HCPCS codes and the ocular photodynamic
therapy pack (SA049) is only included in a single HCPCS code which do
not meet these criteria established in previous rulemaking and
described above. We therefore finalized each of them at their updated
pricing for CY 2025 as proposed in the proposed rule. We believe that
the use of this pricing transition will minimize any potential
disruptive effects during the 4-year transition period that could be
caused by other sudden shifts in RVUs due to the high number of
services that make use of these very common supply packs.
Several commenters also stated that although five incomplete packs
would have their pricing updated in the proposed rule, mathematical
errors still remained for a number of additional supply packs.
Commenters stated that only 3 of the 18 affirmed packs were priced
correctly to match their components and provided tables showing the
pricing of an additional 15 packs that needed mathematical correction
by deconstructing the packs to determine the correct price through
summing their individual components. Commenters requested that CMS
initiate a correction of the packs pricing such that the sum of the
individual components match the price of the corresponding pack as
detailed in Table 5:
[GRAPHIC] [TIFF OMITTED] TP16JY25.009
While we shared the concerns of the commenters regarding the need
for accuracy in the pricing of these supply packs, we had reservations
about their potential for pricing disruptions. Ten of these supply
packs are included in the direct PE inputs for at least 100 HCPCS
codes, and three of the packs are included in more than 1000 HCPCS
codes. Many of these pricing updates would lead to drastic changes in
pricing for these supply packs which are
[[Page 32366]]
included in hundreds of HCPCS codes, such as the SA051 pelvic exam pack
decreasing in price from $20.16 to $2.81 (-86 percent) and the SA048
minimum multi-specialty visit pack decreasing in price from $5.02 to
$1.98 (-61 percent). We were particularly concerned that these changes
in supply pack pricing could lead to significant shifts in the overall
PE RVU for affected HCPCS codes, without these proposed rates appearing
in the proposed rule or allowing any opportunity for public comment.
Therefore, we did not finalize pricing updates for these additional
15 supply packs as requested by commenters. We anticipated returning to
this subject in future rulemaking to allow any changes in associated
pricing for HCPCS codes to appear in the proposed rule and provide an
opportunity for the public to comment. Should these supply pack pricing
updates be proposed in future rulemaking, we anticipated that we might
propose the same pricing transition described above due to the number
of potentially affected HCPCS codes. We finalized all of the other
supply pack pricing changes as proposed, with the exception of the
4[dash]year pricing transition for three supply packs as described
above.
For CY 2026, we are proposing to continue implementing the supply
pack pricing update and associated revisions as previously recommended
by the RUC's workgroup. We are proposing to update the price of the 15
supply packs detailed in Table 5 which were received too late in CY
2025 to allow for proposed pricing or public comment. In the case of
the surgical instruments cleaning pack (SA043), the moderate sedation
pack (SA044) and the small ortho drapes pack (SA081), the proposed
pricing update is modest enough that we are proposing these supplies
move immediately to their final prices for CY 2026.
For the 12 other supply packs, we are proposing that they be
incorporated into the muti-year supply pack pricing transition
finalized in CY 2025 rulemaking. Rather than having two separate 4-year
pricing transitions associated with supply packs, we are proposing that
these 12 additional supply packs fold into the previous pricing
transition using the same methodology, such that one-third of the
difference between the CY 2025 price and the final price is implemented
for CY 2026, and one-half of the difference between the CY 2026 price
and the final price is implemented for CY 2027, with the new direct PE
prices fully implemented for CY 2028 (89 FR 97728). With the inclusion
of the SA042, SA058, and SA082 supply packs which began their pricing
transition last year for CY 2025, we are proposing the total supply
pack pricing update detailed in Table 6:
[GRAPHIC] [TIFF OMITTED] TP16JY25.010
This table also includes the hydrophilic guidewire (SD089) supply
which we are proposing to transition in pricing over three years given
its inclusion in approximately 100 HCPCS codes. We continue to believe
that the use of this pricing transition will minimize any potential
disruptive effects during the transition period that could be caused by
other sudden shifts in RVUs due to the high number of services that
make use of these very common supply items.
c. Technical Corrections To Direct PE Input Database and Supporting
Files
Following the publication of the CY 2025 PFS final rule, we
received a request from the RUC to remove all equipment items priced
below $500 from the CMS ratesetting database. The RUC stated that since
CMS has defined that medical equipment must be at least $500 and all
equipment inputs under $500 are considered indirect expense, the 11
current equipment items under this threshold should no longer be listed
as equipment. The RUC requested that CMS remove these items from its
equipment list and from the specific HCPCS codes to conform to the
definition of direct medical equipment and to ensure that the rule
remains consistently applied.
We appreciate the RUC bringing this topic to our attention.
However, we are not proposing to remove these 11 equipment items that
fall under the $500 threshold from the CMS ratesetting database. These
equipment items have historically been included as direct PE inputs in
their respective HCPCS codes for the last two decades and, given the
very small valuation associated with their use (such as the ED004
digital
[[Page 32367]]
camera priced at approximately 0.06 cents per minute of use), we do not
believe that it is necessary to remove them from the database. We
believe that it better serves relativity by continuing to maintain
these equipment items due to their historical inclusion in their
associated HCPCS codes, as opposed to the removal of long-standing
direct PE inputs which may cause unnecessary confusion and lead to
concern that the valuation of these services would be negatively
impacted. We are soliciting comments on whether to maintain or remove
these equipment items.
We also received a request from the RUC to update the names of
several supplies and equipment items in the CMS ratesetting database.
The RUC stated that these naming changes would remove specific product
or brand names and more accurately describe the items in question. We
agree with the RUC and we are proposing naming changes for the
following supplies and equipment items:
<bullet> EQ392: We are proposing to rename the ``heart failure
patient physiologic monitoring equipment package'' to ``patient
physiologic monitoring equipment package''.
<bullet> ER089: We are proposing to rename the ``IMRT Accelerator''
to ``Radiation Treatment Delivery Linear Accelerator''.
<bullet> SD253: We are proposing to rename the ``atherectomy device
(Spectronetics laser or Fox Hollow)'' supply to ``atherectomy device''.
<bullet> SD254: We are proposing to rename the ``covered stent
(VIABAHN, Gore)'' to ``covered stent (VIABAHN)''.
We received a separate request from the RUC for a technical
correction involving CPT code 65780 (Ocular surface reconstruction;
amniotic membrane transplantation, multiple layers). The RUC stated
that there was a potential issue with the intraservice work time for
CPT code 65780, which was recommended by the RUC with 35 minutes of
work time and finalized by CMS with no work time refinements. However,
CPT code 65780 was listed with 25 minutes of intraservice work time in
the work time public use file issued with the CY 2025 PFS final rule;
the RUC questioned whether this was a potential technical error. We
have reviewed CPT code 65780 and concluded that the intraservice work
time was unintentionally listed with the incorrect work time of 25
minutes; we are proposing to correct this to the intended work time of
35 minutes. We note that the total work time of 192 minutes was listed
correctly for CPT code 65780 and does not require a technical
correction.
We also received a request from the RUC for a technical correction
involving CPT code 15851 (Removal of sutures or staples requiring
anesthesia (that is, general anesthesia, moderate sedation)). The RUC
stated that CPT code 15851 continued to receive PE RVUs in the
nonfacility setting despite no longer having any direct PE inputs
following its review at the January 2022 RUC meeting. Since CMS
finalized the RUC's recommended lack of direct PE inputs for CPT code
15851 in the CY 2023 PFS final rule, the RUC questioned whether this
was a potential technical error. We have reviewed CPT code 15851 and
concluded that the continued assignment of PE RVUs in the nonfacility
setting is an unintended technical error; we are proposing to correct
this code by removing the nonfacility PE RVUs for CY 2026.
5. Development of Strategies for Updates to Practice Expense Data
Collection and Methodology
a. Background
The AMA PPIS was first introduced in 2007 as a means to collect
comprehensive and reliable data on the direct and indirect PEs incurred
by physicians (72 FR 66222). In considering the use of PPIS data, the
goal was to improve the accuracy and consistency of PE RVUs used in the
PFS. The data collection process included a stratified random sample of
physicians across various specialties, and the survey was administered
between August 2007 and March 2008. Data points from that period of
time are integrated into PFS calculations today. In the CY 2009 PFS
proposed rule (73 FR 38507 through 3850), we discussed the indirect PE
methodology that used data from the AMA's survey that predated the
PPIS. In CY 2010 PFS rulemaking, we announced our intent to incorporate
the AMA PPIS data into the PFS ratesetting process, which would first
affect the PE RVU. In the CY 2010 PFS proposed rule, we outlined a 4-
year transition period, during which we would phase in the AMA PPIS
data, replacing the existing PE data sources (74 FR 33554). We also
explained that our proposals intended to update survey data only (74 FR
33530 through 33531). In our CY 2010 final rule, we finalized our
proposal, with minor adjustments based on public comments (74 FR 61749
through 61750). We responded to the comments we received about the
transition to using the PPIS to inform indirect PE allocations (74 FR
61750). In the responses, we acknowledged concerns about potential gaps
in the data, which could impact the allocation of indirect PE for
certain physician specialties and suppliers, which are issues that
remain important today. The CY 2010 PFS final rule explains that
section 212 of the Balanced Budget Refinement Act of 1999 (Pub. L. 106-
113, November 29, 1999) (BBRA) directed the Secretary to establish a
process under which we accept and use, to the maximum extent
practicable and consistent with sound data practices, data collected or
developed by entities and organizations to supplement the data we
normally collect in determining the PE component. BBRA required us to
establish criteria for accepting supplemental survey data. Since the
supplemental surveys were specific to individual specialties and not
part of a comprehensive multispecialty survey, we had required that
certain precision levels be met in order to ensure that the
supplemental data was sufficiently valid, and acceptable for use in the
development of the PE RVUs. At the time, our rationale included the
assumption that because the PPIS is a contemporaneous, consistently
collected, and comprehensive multispecialty survey, we do not believe
similar precision requirements are necessary, and we did not propose to
establish them for the use of the PPIS data (74 FR 61742). We noted
potential gaps in the data, which could impact the allocation of
indirect PE for certain physician and suppliers. The CY 2010 final rule
adopted the proposal, with minor adjustments based on public comments,
and explained that these minor adjustments were in part due to non-
response bias that results when the characteristics of survey
respondents differ in meaningful ways, such as in the mix of practices
sizes, from the general population (74 FR 61749 through 61750).
Throughout the 4-year transition period, from CY 2010 to CY 2013,
we gradually incorporated the AMA PPIS data into the PFS rates,
replacing the previous data sources. The process involved addressing
concerns and making adjustments as necessary, such as refining the PFS
ratesetting methodology in consideration of interested party feedback.
For background on the refinements that we considered after the
transition began, we refer readers to discussions in the CY 2011
through 2014 final rules (75 FR 73178 through 73179; 76 FR 73033
through 73034; 77 FR 98892; 78 FR 74272 through 74276).
In the CY 2011 PFS proposed rule, we requested comments on the
methodology for calculating indirect PE RVUs, explicitly seeking input
on using survey data, allocation methods, and
[[Page 32368]]
potential improvements (75 FR 40050). In our CY 2011 PFS final rule, we
addressed comments regarding the methodology for indirect PE
calculations, focusing on using survey data, allocation methods, and
potential improvements (75 FR 73178 through 73179). We recognized some
limitations of the current PFS ratesetting methodology but maintained
that the approach was the most appropriate at the time. In the CY 2012
PFS final rule, we responded to comments related to indirect PE
methodology, including concerns about allocating indirect PE to
specific services and using the AMA PPIS data for certain specialties
(76 FR 73033 through 73034). We indicated that CMS would continue to
review and refine the methodology and work with interested parties to
address their concerns. In the CY PFS 2014 final rule, we responded to
comments about fully implementing the AMA PPIS data. By 2014, the AMA
PPIS data had been fully integrated into the PFS, serving as the
primary source for determining indirect PE inputs (78 FR 74235). We
continued to review data and the PE methodology annually, considering
interested party feedback and evaluating the need for updates or
refinements to ensure the accuracy and relevance of PE RVUs (79 FR
67548). In the years following the full implementation of the AMA PPIS
data, we further engaged with interested parties, thought leaders and
subject matter experts to improve our PE inputs' accuracy and
reliability. For further background, we refer readers to our
discussions in final rules for CY 2016 through 2022 (80 FR 70892; 81 FR
80175; 82 FR 52980 through 52981; 83 FR 59455 through 59456; 84 FR
62572; 85 FR 84476 through 84478; 86 FR 62572).
In our CY 2023 PFS final rule, we issued an RFI to solicit public
comment on strategies to update PE data collection and methodology (87
FR 69429 through 69432). We solicited comments on current and evolving
trends in health care business arrangements, the use of technology, or
similar topics that may affect or factor into PE calculations. As
described in previous rulemaking, we have continued interest in
developing a roadmap for updates to our PE methodology that account for
changes in the health care landscape. Of various considerations
necessary to form a roadmap for updates, we reiterate that allocations
of indirect PE continue to present a wide range of challenges and
opportunities. As discussed in multiple cycles of previous rulemaking,
our PE methodology currently relies on AMA PPIS data, which we have
maintained represented the best aggregated available source of
information at the time of its implementation. We noted in our CY 2023
and CY 2024 rules that there are several competing concerns that CMS
must take into account when considering updated data sources, which
also should support and enable ongoing refinements to our PE
methodology.
b. Refreshed Data and Request for Information on Timing To Effectuate
Routine Updates
In the CY 2024 PFS proposed rule, we continued to encourage
interested parties to provide feedback and suggestions to CMS that give
an evidentiary basis to shape optimal PE data collection and
methodological adjustments over time. Considering our ratesetting
methodology and prior experiences implementing new data, we issued a
follow-up from the CY 2023 comment solicitation for general
information. We solicited comments from interested parties on
strategies to incorporate information that could address known
challenges we experienced in implementing the initial AMA PPIS data.
Our current methodology relies on the AMA PPIS data, legislatively
mandated supplemental data sources (for, example, we use supplemental
survey data collected in 2003, as required by section 1848(c)(2)(H)(i)
of the Act to set rates for oncology and hematology specialties), and
in some cases crosswalks to allocate indirect PE as necessary for
certain specialties and practitioner types. We also sought to
understand whether, upon completion of the updated PPIS data collection
effort by the AMA, contingencies or alternatives may be necessary and
available to address the lack of data availability or response rates
for a given specialty, set of specialties, or specific service
suppliers who are paid under the PFS.
In response to the CY 2024 RFI, most commenters stated that CMS
should defer significant changes until the AMA PPIS results become
available. For further background, refer to 88 FR 78841 through 78843.
In responding to our RFI, the AMA RUC provided a set of responses,
which many other commenters echoed in separate comments. In summary,
the AMA RUC letter submission from CY 2024 suggested that CMS should
not consider further changes until PPIS data collection and analysis is
complete. Overall, the AMA comments generally do not support any change
to the methodology and stated that CMS should wait to consider any
further changes until PPIS updates become available. Further, we noted
that through its contractor, Mathematica, the AMA secured an
endorsement for the PPIS updates from each State society, national
medical specialty society, and others prior to fielding the survey (88
FR 78843). Refer to the AMA's summary of the PPIS, available at <a href="https://www.ama-assn.org/system/files/physician-practice-information-survey-summary.pdf">https://www.ama-assn.org/system/files/physician-practice-information-survey-summary.pdf</a>. The AMA stated that it expects analysis, reporting, and
documentation to be completed by the end of CY 2024 and would share
data with CMS when results become available.
Some commenters did not recommend that CMS defer significant
changes until the AMA PPIS results become available. These commenters
stated that reliance on the PPIS updates may not improve the accuracy
and stability of the PE methodology because of the survey design,
possible implementation challenges, and a possible lack of transparency
or granularity in resulting datasets. Other commenters stated that
dependence on the PPIS or survey data in general, due to timing and
frequency constraints, may continue to jeopardize independent practice
and discourage fair competition among suppliers and providers of
services paid under the PFS. These commenters assert that if current
trends continue, it will result in far fewer independent practices and
more consolidation before the availability of updated survey data,
undermining the sampling methodology of any survey and the general
goals of our PE methodology updates.
As we stated in the CY 2025 proposed rule (89 FR 61614), we believe
the AMA's approach may possibly mitigate nonresponse bias, which
created challenges using previous PPIS data. However, we remain
uncertain about whether endorsements prior to fielding the survey may
inject other types of bias in the validity and reliability of the
information collected. We believe it remains important to reflect on
the challenges with our current methodology, and to continue to
consider alternatives that improve the stability and accuracy of our
overall PE methodology. We reiterate our discussion summarizing the
responses to previous years' RFIs in each of the CY 2023 and CY 2024
final rules (refer to 87 FR 69429 through 69432 and 88 FR 78841 to
78843). We also requested general information from the public on ways
that CMS may continue work to improve the stability and predictability
of any future updates. Specifically, we
[[Page 32369]]
requested feedback from interested parties regarding scheduled,
recurring updates to PE inputs for supply and equipment costs. We
stated that we believe that establishing a cycle of timing to update
supply and equipment cost inputs every 4 years may be one means of
advancing shared goals of stability and predictability. CMS would
collect available data, including, but not limited to, submissions and
independent third-party data sources, and propose a phase-in period
over the following 4 years. The phase-in approach maps to our
experience with previous updates. Additionally, we stated that more
frequent updates may have the unintended consequence of
disproportionate effects of various supplies and equipment that have
newly updated costs.
Further, we solicited feedback in the CY 2025 proposed rule RFI (89
FR 61614) on possible mechanisms to establish a balance whereby our
methodology would account for inflation and deflation in supply and
equipment costs. We stated that we remain uncertain how economies of
scale (meaning a general principle that cost per unit of production
decreases as the scale of production increases) should or should not
factor into future adjustments to our methodology. We stated that there
remains a diversity of perspectives among interested parties about such
effects. We sought information about specific mechanisms that may be
appropriate, and in particular, approaches that would leverage
verifiable and independent third-party data that is not managed or
controlled by active market participants.
In response to our CY 2025 proposed rule RFI (89 FR 97737),
numerous commenters expressed concerns regarding CMS's current PE
methodology, particularly highlighting its perceived inadequacies in
accommodating modern medical technologies and services, such as
Software as a Service (SaaS) and artificial intelligence (AI). These
commenters stated that there is a need for CMS to revise its PE
methodology to better reflect the actual costs of running medical
practices today, which includes more frequent updates and the
incorporation of direct costs for software and innovative technologies.
Many also supported the AMA's PPIS efforts to ensure updated and
accurate data informs PE calculations. Commenters urged CMS to
collaborate closely with medical associations and incorporate broad
stakeholder feedback without increasing reporting burdens, particularly
for smaller practices.
We note that we have an ongoing contract with the RAND Corporation
to analyze and develop alternative methods for measuring PE and related
inputs for implementation of updates to payment under the PFS. We will
continue to study possible alternatives and have included analysis of
the updated PPI and CPI Survey data in this proposed rule, as part of
our ongoing work.
As previously stated above and discussed in sections II.N. and VI.
of this proposed rule, we acknowledge that, at the time of publication
of this proposed rule, the AMA concluded their data collection efforts
and has submitted the data to CMS for us to consider implementing the
PE/HR data and cost shares in PFS ratesetting for CY 2026. In the
current system, accurate measurement of the indirect to direct PE ratio
and the PE/HR for each specialty is critical to ensure that allocated
indirect PE RVUs (and therefore total PE RVUs) accurately estimate
service-level PE as defined by PFS ratesetting steps described above.
Because the PE methodology is budget neutral, inaccuracies in the PE/HR
data for some specialties can significantly impact the overall pool of
PE available to distribute across all services, and therefore overall
valuation and payment.
We appreciate the AMA's PPI and CPI Survey data collection efforts,
and recognize the significant costs incurred to collect the data.
However, our initial review of the new data raises substantive concerns
about their accuracy, utility, and suitability as an immediate
replacement for the current PE/HR data and cost shares for use in
allocating nearly $91 billion in payments across PFS services. These
concerns relate to issues including:
<bullet> Low Response Rates and Representativeness: A primary
concern is the low response rate of the surveys. The 2024 PPI Survey
had a response rate of 3 to 7 percent, depending on whether practices
that did not click through the invitation email link were counted as
non-respondents. The CPI Survey had a slightly higher response rate
between 7 to 9 percent. In comparison, the 2008 PPIS had a response
rate of 12 percent. Low response rates raise concerns as to whether
responding practices are systematically different from sampled
practices that did not or could not respond. Additionally, in response
to lower-than-expected response rates, the AMA allowed 102 practices to
volunteer to participate in the survey. Although most of these
volunteer practices did not complete the survey, allowing practices to
volunteer data adds to concerns about the representativeness of the
data.
Additionally, the 2008 PE/HR estimates were based on the
observations (about half of responses) that had no missing expense
data, whereas the 2024 PE/HR estimates and the shares are based on
observations that had at least some non-missing data where the missing
data was imputed as described in the Survey Methods Report (Step 6).\1\
It should be noted that some expense categories were reported more
consistently by survey respondents. For example, 97 percent of the
respondents reported compensation (physician work) compared to only 69
percent that were able to report non-billable drugs (direct expense
under supplies) and information technology (indirect expense).
Similarly, many survey respondents were not able to separately report
expenses for qualified health providers (QHPs). Nearly 40 percent of
the responses used in the calculation of the PE/HR estimates reported
that they had nurse practitioners or physician assistants in their
practice, but only 27 percent were able to separately report non-
physician compensation expenses.
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\1\ <a href="https://www.ama-assn.org/system/files/ppi-survey-methods-report.pdf">https://www.ama-assn.org/system/files/ppi-survey-methods-report.pdf</a>.
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<bullet> Small Sample Sizes and Sampling Variation: Due in part to
the low response rates, the number of respondents was small for many
specialties included in the 2024 PPI and CPI data. For example, the PE/
HR measures for Vascular Surgery are based upon responses from only 20
practices. Moreover, the PPI and CPI survey estimates give more weight
to responses from practice types that would otherwise be under-
represented in the sample, relative to the population of all eligible
practices in a given specialty. For example, such an adjustment would
be applied if the sample contained a higher proportion of facility-
based practices than there are in the full population of practices in a
given specialty. Applying such weights generally results in estimates
that are less precise than an unweighted sample of a given size. One
way to quantify this is via the effective sample size, which estimates
the sample size from an unweighted sample that would be required to
produce survey estimates that are as precise as those from the weighted
sample. The effective sample size can be estimated as the ratio of the
sample size to the design effect, which is reported in the PPI/CPI
Methods Reports.<SUP>2 3</SUP> For Vascular Surgery, the
[[Page 32370]]
reported design effect is 1.82, meaning that the 20 observations
correspond to an effective sample size of only 11 (calculated as
11.0=20/1.82). For 12 of 18 broad specialty groupings reported in the
2024 PPI Survey, the effective sample size is less than 18.0 and for
four of these specialties the effective sample size is less than 10.0.
Similarly, in the CPI Survey data, the effective sample sizes are also
small, with all but one below 20.0, and as low as 6.2 for Oral Surgery.
Not including practices that volunteered, only 327 sampled practices
completed the 2024 PPI Survey compared to 3,088 anticipated
completions.
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\2\ <a href="https://www.ama-assn.org/system/files/ppi-survey-methods-report.pdf">https://www.ama-assn.org/system/files/ppi-survey-methods-report.pdf</a>.
\3\ <a href="https://www.ama-assn.org/system/files/cpi-survey-methods-report-main-report.pdf">https://www.ama-assn.org/system/files/cpi-survey-methods-report-main-report.pdf</a>.
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The low sample sizes contribute to substantial statistical
uncertainty regarding the true specialty-level PE/HR measures. Figure
A-B1 illustrates the 95 percent confidence intervals for direct and
indirect PE/HR as reported in the 2024 PPI/CPI Surveys. The large
points represent the new PE/HR estimates, the bars indicate the
confidence intervals, and the smaller points show the current PE/HR
estimates used in PFS ratesetting from the 2008 PPIS. The 2024 CPI and
PPI Survey confidence intervals are so broad that they cover most of
the original 2008 PPI PE/HR values in nominal dollars (that is, not
adjusted for inflation). Therefore, in most cases, the new data are
unable to establish statistically significant changes from the status
quo, especially since the old PE/HR measures were themselves estimated
with substantial levels of statistical uncertainty. Even so, the new
PE/HR estimates differ enough from the old ones that many specialty-
level impacts of adopting the new data are quite large. When translated
into RVUs, the PE/HR standard errors for specialties such as
Cardiology, Pathology, Ophthalmology, and Vascular Surgery correspond
to a wide range of payments for services provided by those specialties
meaning that the new data are compatible with a wide range of specialty
impacts for many specialties.
<bullet> Lack of Comparability to Previous Survey Data: The 2024
PPI and CPI Survey data groups specialties in a considerably different
way from the current structure, with 29 specialty groupings compared to
51 in the 2008 data. We found that using the 2008 PE/HR data averaged
within the 2024 PPI Survey specialty groupings would lead to large
specialty-level impacts in some cases, further complicating comparisons
between the old and new data and indicating that the new 2024 specialty
groupings is impactful on redistribution among the PFS alone. We refer
readers to section VI. of this proposed rule for discussion of the
impacts of the 2024 PPI Survey specialty groupings on PFS ratesetting.
It is also unclear why some specialties were collapsed into relatively
broad groups for the purposes of data collection and reporting while
others were not.
<bullet> Potential Measurement Error: We are concerned that sampled
practices were not able to accurately report the data necessary to
respond to the PPI and CPI Surveys. For example, the survey contractor
found that practices frequently had challenges reporting the number of
physicians working in the practice. One may expect that the number of
physicians in a practice is relatively easier for practices to measure
than some of the specific costs integral to reporting PE/HR. However,
the contractor noted that--prior to an adjustment--their estimate of
the total number of physicians was nearly three times as large as the
number of physicians in their sampling frame which ``indicated a large
potential for measurement error in this estimate.'' \4\ Also, because
information on the number of physicians in each practice was available
from external data which were obtained before survey data were
collected, to inform the survey design, we believe it is likely that
the number of physicians was highlighted as having high potential
measurement error because it was possible to compare this measure
against external data. Moreover, some responding practices reported
that it took more than 40 hours to complete the survey, which suggests
that the required data are not readily captured by their accounting
systems and therefore may not be fully reliable.
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\4\ <a href="https://www.ama-assn.org/system/files/ppi-survey-methods-report.pdf">https://www.ama-assn.org/system/files/ppi-survey-methods-report.pdf</a>.
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Thus, we are left with doubts about not just the amount of data
collected, but its quality as well.
<bullet> Missing and Incomplete Data Submission: The PPI Survey
summary data was submitted to CMS in January 2025 and the CPI Survey
summary data in February 2025. These initial submissions were missing
from many of the elements required to analyze the data and determine
their usability in our PE methodology. We inquired about these elements
and have since received some additional information, but some of the
information was not available due to the survey contract concluding,
such as estimates based solely on the survey responses that had no
missing expense data or the impact of the trims and edits of the data
described in the PPI Survey Methods Report. Additionally, some data is
completely missing from the submission, therefore we had to utilize old
PE/HR data in analyses for specialties such as Independent Diagnostic
Testing Facilities (IDTFs) when developing models to incorporate the
data. Additionally, the American Occupational Therapists Association
(AOTA) requested the continued crosswalk of PE/HR data from Physical
Therapy to Occupational Therapy because the CPI respondents may have
indirectly reported the salaries of occupational therapy assistants
with provider compensation rather than including their salaries in
clinical staff compensation.
Additionally, there is summary data provided from the PPI Survey
\5\ that are not provided for the CPI Survey.\6\ For example, the PPI
Survey summary data include two lines--``MEI shares'' and ``All
[specialties]''--that could presumably be used to establish the share
of total RVUs that should be attributed to work, practice expense, and
malpractice, but we do not believe that they reflect the specialties'
data from the CPI Survey, even though those specialties are included in
PFS ratesetting, account for a significant portion of the PFS PE RVU
pool, and draw from the same pool of RVUs as the PPI Survey
specialties. Similarly, we do not have the corresponding CPI Survey
specialty weighting information provided to CMS for the PPI Survey
specialties, therefore, we have limited information to develop an
approach for calculating shares for all CMS specialties accounted for
in both the PPI and CPI Surveys.
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\5\ <a href="https://www.ama-assn.org/system/files/table-1-results-from-ppi.pdf">https://www.ama-assn.org/system/files/table-1-results-from-ppi.pdf</a>.
\6\ <a href="https://www.ama-assn.org/system/files/table-1-results-from-cpi-final.pdf">https://www.ama-assn.org/system/files/table-1-results-from-cpi-final.pdf</a>.
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In an effort to incorporate PPI and CPI Survey specialties' data
despite the lack of analogous summary data, we developed possible
methods to weight the data for all CMS specialties in a cohesive manner
for use in the PFS PE methodology such as estimates of total RVUs and
total service time by specialty used for CY 2026 PFS ratesetting. We
refer readers to section VI. of this proposed rule for discussion of
the different weighting methodologies and their resulting shares of
work, PE, and MP.
Overall, the small sample sizes and the apparent presence of high
levels of measurement error in data elements that could be compared to
external estimates suggest that specialty-level PE/HR measures may be
challenging to measure reliably through voluntary surveys alone. We
note that the
[[Page 32371]]
interested parties may concur with this assertion based on the Methods
Report, which states considerations for future data collection efforts
that may forego the survey structure and rely on other practice expense
sources such as tax returns. We believe that a more efficient and
transparent system that could be updated on a regular basis may be
possible using available administrative data (such as Medicare claims;
hospital cost reports; publicly-reported tax information such as from
IRS Form 990; and data collected by other agencies, such as the Census
Bureau's Service Annual Survey (SAS)) to the fullest extent possible
and relying on survey data only to fill gaps only where available data
do not exist. An alternative to collecting any survey data would be to
modify the PE allocation system so that it only relies only on data
that can be measured accurately and on an on-going basis. For example,
if there are components of indirect PE that are not captured in
administrative data, those expense categories could potentially be re-
classified as direct costs and accounted for in a manner similar to how
direct costs are currently considered.
Beyond the use of the data in our PE methodology, we need
information on the total share of PFS payments that should be allocated
for work, PE, and MP. Data collected in the 2024 PPI and CPI Surveys
could be used for this purpose, as well as potentially be considered in
a construction of the MEI in the future; however, there still remain
underlying concerns with the sample representativeness for these
purposes. The AMA has asserted that shares derived from data collected
from the Service Annual Survey (SAS) for the 2017-based MEI miss many
physicians who work in facility settings and thereby understate the
percent of total PFS payments that should be allocated to physician
work. The data needed to derive the three component shares (work, PE,
and MP) are more aggregated than the specialty-level PE/HR data
required for the PE methodology, so we have fewer concerns with the
small sample sizes for this application. However, we continue to have
similar concerns with the data related to measurement error and sample
representativeness for purposes of the shares.
BILLING CODE 4120-01-P
[[Page 32372]]
[GRAPHIC] [TIFF OMITTED] TP16JY25.011
BILLING CODE 4120-01-C
At the time of the publication of this proposed rule, we continue
to conduct ongoing analyses on the potential impact of the AMA's PPI
and CPI Survey data on PFS ratesetting. Due to overarching concerns
with the data described above and our previously described policy goal
to balance PFS payment stability and predictability with incorporating
new data through routine updates to the MEI, we reiterate that we are
not proposing to implement the PE/HR data or cost shares from the AMA's
survey data at this time, and are proposing instead to maintain the
current PE/HR data and cost shares for CY 2026 PFS ratesetting. At the
same time, we remain focused on proposals that reflect evolutions in
practice, including the site of service payment differential discussed
below, while we continue to hold strong interest in specialty-level
practice expense updates. Consequently, we intend to work with
interested parties, including the AMA, to understand whether and how
such data should be used in PFS ratesetting in future rulemaking.
c. Updates to Practice Expense (PE) Methodology--Site of Service
Payment Differential
While we are not proposing to incorporate the PPI and CPI Survey
data into PFS ratesetting for CY 2026, we are proposing a significant
refinement to our PE methodology to better reflect trends in physician
practice settings. As detailed in the description of the
[[Page 32373]]
practice expense methodology above, many services have a site of
service payment differential between the facility (F) and nonfacility
(NF) settings under the PFS. Services furnished in the nonfacility
setting, such as a physician's office, include the physician work RVUs,
direct costs for supplies, clinical staff, and equipment, and indirect
costs allocated based on the direct costs and the greater of either the
clinical labor costs or the physician work RVUs. In the facility
setting, the payment rate includes physician work RVUs and the indirect
practice expense allocated based on the physician work RVU. The direct
costs in the facility setting are paid under a different payment system
than the PFS, such as the OPPS. Indirect costs allocated to services
furnished in the facility setting are meant to reflect the typical
costs associated with practice expenses in that setting of care.
In the decades since implementing the PE methodology, there have
been significant transformations to the landscape of the healthcare
delivery system in the United States, particularly regarding physician
practice patterns. Historically, private practice was the dominant
model for physicians, offering them autonomy, flexibility, and the
opportunity to build independent practices. Specifically, in 1988,
approximately 72 percent of physicians were full or part owners in
their practice.\7\ This percentage had dropped to 35.4 percent by 2024,
representing a 52 percent decrease, with a corresponding rise in
physicians in hospital-owned practices and physicians employed directly
by a hospital. The percentage of physicians in hospital-owned practices
has increased by over 47 percent, from 23.4 percent in 2012 to 34.5
percent in 2024. Similarly, 12.2 percent of physicians were employed
directly by a hospital (or contracted directly with a hospital) in
2024, up from 5.6 percent in 2012.\8\ In their June 2025 Report to
Congress,\9\ MedPAC notes that there are 9 specialties where 60 percent
of the clinicians who billed Medicare furnished 90 percent or more of
their services in the facility setting. These trends indicate a steady
decline in the percentage of physicians working in private practice,
with a corresponding rise in physician employment by hospitals; and
growth in the percentage of physicians who practice exclusively, or
almost exclusively, in the facility setting. When the PFS was
established, the methodology for allocating indirect practice expense
was based in part on an assumption that the physician maintained an
office-based practice even when also practicing in a facility setting.
In that context, the PE methodology has allocated the same amount of
indirect costs per work RVU, without regard to setting of care.
---------------------------------------------------------------------------
\7\ Kane CK. Emmons, DW. New data on physician practice
arrangements: private practice remains strong despite shifts toward
hospital employment. Chicago (IL): American Medical Association;
2013. Policy Research Perspective 2013-2.
\8\ Kane CK. Physician Practice Characteristics in 2024: Private
Practices Account for Less Than Half of Physicians in Most
Specialties. American Medical Association.
\9\ MedPAC. (2025). June 2025 Report to the Congress: Medicare
Payment Policy. Chapter 1 Reforming physician fee schedule updates
and improving the accuracy of relative payment rates. <a href="https://www.medpac.gov/wp-content/uploads/2025/06/Jun25_MedPAC_Report_To_Congress_SEC.pdf">https://www.medpac.gov/wp-content/uploads/2025/06/Jun25_MedPAC_Report_To_Congress_SEC.pdf</a>.
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We note that, in the AMA's comment letter on the CY 2023 PFS
proposed rule,\10\ they stated that physician practices maintain some
indirect practice expense costs for physicians who are solely facility-
based such as coding, billing, and scheduling. We acknowledge that
these indirect costs should be accounted for in PFS payment through PE
RVUs, but we believe that allocating the same amount of indirect
practice expense based on work RVUs in both settings may overstate the
range of indirect costs incurred by facility-based physicians if it is
now less likely that they would maintain an office-based practice
separate from their facility practice. In a 2018 report developed under
contract with CMS, RAND noted that ``operating from the perspective of
paying for the `typical' instance of a procedure, these analyses
suggest that the current system could be improved by shifting more of
the allocation of PE RVUs to the physician office setting''.\11\ As
MedPAC notes in their June 2025 report, ``In cases when clinicians
practice exclusively or almost exclusively in a facility, or where a
facility is financing indirect PE for clinicians, payment to both
entities for indirect PE costs may be duplicative and unnecessary''.
While the relative relationship between the PE allocated to services
furnished in a facility and nonfacility setting may have been more
reflective of the actual expenses incurred by physicians when the PE
methodology was originally established, maintenance of that element of
the methodology in the face of changing practice patterns likely
represents an imbalance of the practice expense allocated to the
facility relative to the nonfacility. Within the PFS relative value
system, any overstatement of practice expenses in the facility setting
would affect the allocation of indirect costs in the nonfacility
setting. This dynamic, in which relative resources involved in
furnishing PFS services may not be adequately reflected in facility and
nonfacility settings, has the potential to contribute to broader
undesirable financial incentives toward higher-priced settings of care,
like hospitals, and away from more efficient settings, like physician
offices.\12\ \13\ \14\ This could result in unnecessary costs for
payers and beneficiaries, and obstacles to physicians and other
professionals operating independent practices.
---------------------------------------------------------------------------
\10\ <a href="https://downloads.regulations.gov/CMS-2023-0121-2694/attachment_1.pdf">https://downloads.regulations.gov/CMS-2023-0121-2694/attachment_1.pdf</a>.
\11\ Burgette, Lane F., Jodi L. Liu, Benjamin M. Miller, Barbara
O. Wynn, Stephanie Dellva, Rosalie Malsberger, Katie Merrell, et al.
``Practice Expense Methodology and Data Collection Research and
Analysis.'' RAND Corporation, April 11, 2018. <a href="https://www.rand.org/pubs/research_reports/RR2166.html">https://www.rand.org/pubs/research_reports/RR2166.html</a>.
\12\ https://pmc.ncbi.nlm.nih.gov/articles/PMC4191490/
#:~:text=Using%20generally%20accepted%20accounting%20practices,to%20m
ore%20intense%20resource%20use.
\13\ <a href="https://healthcostinstitute.org/hcci-originals-dropdown/all-hcci-reports/shifting-care-office-to-outpatient">https://healthcostinstitute.org/hcci-originals-dropdown/all-hcci-reports/shifting-care-office-to-outpatient</a>.
\14\ <a href="https://www.bcbs.com/dA/392da3b5a7/fileAsset/BHI%20Issue%20Brief%20December_121323_SiteNeutral.pdf">https://www.bcbs.com/dA/392da3b5a7/fileAsset/BHI%20Issue%20Brief%20December_121323_SiteNeutral.pdf</a>.
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We share MedPAC's concerns regarding the potential for duplicative
payment under the current PE methodology for allocating indirect costs
for physicians practicing in the facility setting. Allocating the same
amount of indirect PE per work RVU for services furnished in the
facility setting as the nonfacility setting may no longer reflect
contemporary physician practice trends. As we noted above, data
suggests that fewer than half of physicians currently own their
practices, but the underlying assumption embedded in the PFS payment
methodology presumed that physicians generally maintained office
practices (and incurred associated indirect costs) even when they
furnished care in facility settings. For these reasons, for each
service valued in the facility setting under the PFS, we are proposing
to reduce the portion of the facility PE RVUs allocated based on work
RVUs to half the amount allocated to nonfacility PE RVUs beginning in
CY 2026. This proposed change would occur in step 8 of the PE RVU
Methodology described earlier in this section, in which indirect
allocators (direct costs, clinical labor, and work RVUs) are assigned.
For example, the work RVU for CPT code 33533 (Coronary artery bypass,
using arterial graft(s); single arterial graft) is 33.75. For CY 2025,
using the full work RVU as an indirect allocator, CPT code 33533 had
approximately 12 indirect PE RVUs. Under this proposed change to the
[[Page 32374]]
methodology, where we would reduce the portion of the facility PE RVUs
allocated based on work RVUs to half the amount allocated to
nonfacility PE RVUs, CPT code 33533 would have approximately 7.2
indirect PE RVUs.
We note that this proposed change to the indirect cost allocation
methodology is intended to better recognize the relative resources
involved in furnishing services paid under the PFS in facility and
nonfacility settings. We compare this proposed change to our current
methodology, which functionally presumes approximately equal indirect
costs incurred by physicians across sites of service. This presumption
was initially made in the context of most practitioners maintaining
office practices independent of the facilities in which they provided
care, and as we discussed above, appears to be inconsistent with
contemporary trends in physician practice. We understand from the AMA's
comment letter on the CY 2023 PFS proposed rule noted above that
physician practices may incur some indirect PE costs (such as coding,
billing, and scheduling) for physicians who are facility-based. To
better inform our consideration of how to account for any such costs in
the PE RVU methodology, we are seeking comment on the specific types
and magnitude of indirect PE costs incurred that are attributable to
physicians who practice in part or exclusively in a facility setting,
and any variables that affect whether and to what extent a practice
would incur them. We are also seeking comments on whether our proposal
to reduce the portion of the facility PE RVUs allocated based on work
RVUs to half the amount allocated to nonfacility PE RVUs is an
appropriate reduction or whether we should consider a different
percentage reduction for CY 2026 or in future years. While our proposed
change to the methodology represents a starting point to correcting
potential historic distortions in the allocation of indirect PE costs
across settings of care, we intend to further examine our methodology
and consider additional refinements based upon public comments received
and any studies or data sources identified. We are seeking comments on
whether there are additional data sources that might help identify a
more precise site of service difference in the allocation of indirect
PE RVUs. We believe the implementation of this proposal would more
accurately account for the resource costs involved in physicians
furnishing care across all settings and correct potential distortions
in the allocation of indirect PE under our current methodology. We
refer readers to section VI. of this proposed rule for discussion of
the impacts of this proposal on CY 2026 PFS ratesetting.
We are specifically soliciting comments on whether and how this
proposed policy should apply to codes with MMM global periods
(maternity services) and how it could specifically impact access to
maternity services, given our understanding that many of the patient
encounters across those services occur in the office setting. As we
noted in the CY 2024 PFS final rule (88 FR 78949), maternity services
are unique within the PFS in that they are the only global codes that
provide a single payment for almost 12 months of services, which
include a relatively large number of E/M visits performed along with
delivery services and imaging; and were valued using a building-block
methodology as opposed to the magnitude estimation method. Given that
the work RVUs for maternity services encompass significant care during
this lengthy period that may be furnished in the nonfacility setting,
we are soliciting comment on whether we should include these services
in our proposed policy to reduce the allocation of PE based on work in
the facility setting.
We welcome comments on all aspects of this proposal, including ways
to improve the allocation of facility and nonfacility PE RVUs in the
future. We also seek comments on alternative approaches to improving
the allocation of indirect PE as outlined in Chapter 1 of MedPAC's June
2025 Report to the Congress (pages 27 through 33).
d. Use of OPPS Data for PFS Ratesetting
For several kinds of PFS services, we are proposing to deviate from
the use of the AMA survey data, and instead utilize data from
auditable, routinely updated hospital data to either set relative or
absolute rates, especially for technical services paid under the PFS.
This approach promotes price transparency across settings, offers more
predictable ratesetting outcomes, and limits the influence of
anecdotal/survey data. We refer readers to sections II.E.24 and II.E.30
of this proposed rule for specific proposals related to radiation
treatment delivery and superficial radiation therapy services and
remote patient monitoring and remote therapeutic monitoring services
respectively and section II.K of this proposed rule for specific
proposals related to skin substitutes. Although we are proposing
different methodologies for use of OPPS data based on service type, we
are seeking comment on whether it would be preferable to adopt a single
methodology, such as a scaler and how such a methodology would account
for differences in practice expenses between services, such as services
with extensive clinical staff time versus services where the valuation
is primarily driven by the equipment costs.
6. Payment for Services in Urgent Care Centers
In the CY 2025 PFS proposed rule (89 FR 61746 through 61747), we
sought comment on urgent care centers, noting that interested parties
describe that hospital emergency departments are often used by
beneficiaries to address non-emergent urgent care needs that could be
appropriately served in less acute settings, but where other settings,
such as physician offices, urgent care centers or other clinics, are
not available or readily accessible. Patients enter EDs to treat common
conditions like allergic reactions, lacerations, sprains and fractures,
common respiratory illnesses (for example, flu or RSV), and bacterial
infections (for example, strep throat, urinary tract infections or
foodborne illness). Conditions like these often can be treated in less
acute settings. We stated that we were interested in system capacity
and workforce issues broadly and are interested in hearing more on
those issues, including how entities such as urgent care centers can
play a role in addressing some of the capacity issues in emergency
departments.
In response to our CY 2025 PFS proposed rule (89 FR 61746 through
61747) question about whether the current ``Urgent Care Facility''
Place of Service code (POS 20) adequately identify and define the scope
of services furnished in such settings other than the existing place of
service codes,, commenters stated that the current place of service
(POS) definitions are inadequately differentiated, especially if CMS
wishes to encourage proliferation of the type of urgent care centers
that can provide suitable alternatives to EDs, noting that POS 11
generally refers to physician offices that provide diagnostic and
therapeutic care in an office setting, by appointment, typically during
regular business hours; POS 17 generally refers to clinics that are
attached to retail operations, such as pharmacies, grocery stores or
big box stores, and provide low-acuity primary and preventive health
care, such as vaccinations; and POS 20 refers to Urgent Care Facilities
but does not adequately differentiate between those that offer services
more akin to the typical general practitioner's office and those that
offer enhanced diagnostic and therapeutic services and extended
[[Page 32375]]
hours. They recommended that the creation of a new POS code describing
``enhanced''' urgent care centers that offer specific diagnostic and
therapeutic services and that operate outside typical business hours
could fill this need. In response to our CY 2025 PFS proposed rule (89
FR 61746 through 61747) question about whether the current ``Urgent
Care Facility'' Place of Service code (POS 20) adequately identify and
define the scope of services furnished in such settings other than the
existing code set and valuation, they stated that Medicare's fee-for-
service payment systems do not recognize and adequately value services
furnished in Urgent Care Clinics (UCCs) and stated that while there is
some overlap in the types of professional services furnished in UCCs
and physician offices, UCCs that operate for extended hours and that
have enhanced diagnostic and therapeutic capabilities incur additional
costs to provide these services.
In recent months, an interested party has requested that for CY
2026, we consider adopting a new Place of Service code for ``enhanced''
urgent care centers as well as create a new add-on G-code to describe
the resource costs involved when practitioners furnish certain services
in enhanced urgent care centers that offer extended hours and certain
diagnostic and therapeutic services. The interested party suggested the
following descriptor: ``Visit complexity inherent to evaluation and
management associated with medical care services that serve as the
immediate focal point for all needed urgent, non-emergent health care
services and/or with urgent, non-emergent medical care services that
are related to diagnosis and treatment of an unscheduled, ambulatory
patient's urgent, non-emergent conditions. (Add-on code, list
separately in addition to office/outpatient evaluation and management
visits, new or established)'' and recommended that it be valued based
on a crosswalk to HCPCS code G2211 (Visit complexity inherent to
evaluation and management associated with medical care services that
serve as the continuing focal point for all needed health care services
and/or with medical care services that are part of ongoing care related
to a patient's single, serious condition or a complex condition. (add-
on code, list separately in addition to office/outpatient evaluation
and management visit, new or established) and made billable with all
levels of office/outpatient E/M visits for both new and established
patients when services are furnished in an enhanced urgent care center.
We are seeking comments from the public regarding whether separate
coding and payment is needed for evaluation and management visits
furnished at urgent care centers, including whether or not an add-on
code would be appropriate or if a new set of visit codes would be more
practical We note that the process for requesting new place of service
codes or modification of existing place of service codes is described
on the CMS website at <a href="https://www.cms.gov/medicare/coding-billing/place-of-service-codes/process-requesting-new-codes-modification-existing-codes">https://www.cms.gov/medicare/coding-billing/place-of-service-codes/process-requesting-new-codes-modification-existing-codes</a>. Additionally, as discussed in Section II.B of this
proposed rule, many PFS services have a site of service payment
differential between the facility and nonfacility settings under the
PFS. Services furnished in the nonfacility setting, such as a
physician's office, include direct costs for supplies, clinical staff,
and equipment, the physician work RVU and indirect practice expense
allocated based on the direct costs and the physician work RVU. In the
facility setting, the payment rate includes physician work and the
indirect practice expense allocated based on physician work. The direct
costs in the facility setting are paid under a different payment system
other than the PFS, such as the OPPS. PE allocated to services
furnished in the facility setting is meant to reflect typical costs
associated with practice expenses in that setting of care. We note that
we are proposing a change in our PE RVU methodology to better recognize
variations in indirect costs between facility and nonfacility settings
of care in section II.B of this rule. We note here that we are likewise
interested in understanding how practice costs, including but not
limited to indirect costs, may vary among different nonfacility
settings of care. We are also interested in receiving feedback
regarding how either the code set, or the PE methodology might be
improved to better recognize the relative resources involved in
furnishing services across these kinds of settings.
C. Potentially Misvalued Services Under the PFS
1. Background
Section 1848(c)(2)(B) of the Act directs the Secretary to conduct a
periodic review, not less often than every 5 years, of the relative
value units (RVUs) established under the PFS. Section 1848(c)(2)(K) of
the Act requires the Secretary to periodically identify potentially
misvalued services using certain criteria and to review and make
appropriate adjustments to the relative values for those services.
Section 1848(c)(2)(L) of the Act also requires the Secretary to develop
a process to validate the RVUs of certain potentially misvalued codes
(PMVC) under the PFS, using the same criteria used to identify PMVC,
and to make appropriate adjustments.
As outlined in section II.E. of this proposed rule, under Valuation
of Specific Codes, each year we develop appropriate adjustments to the
RVUs taking into account recommendations provided by the American
Medical Association (AMA)/Specialty Society Relative Value Scale (RVS)
Update Committee (referred to as the RUC), MedPAC, and other interested
parties. For many years, the RUC has provided us with recommendations
on the appropriate relative values for new, revised, and potentially
misvalued PFS services. We review these recommendations on a code-by-
code basis and consider these recommendations in conjunction with
analyses of other data, such as claims data, to inform the decision-
making process as authorized by statute. We may also consider analyses
of work time, work RVUs, or direct practice expense (PE) inputs using
other data sources, such as the Veterans Health Administration (VHA),
National Surgical Quality Improvement Program (NSQIP), the Society for
Thoracic Surgeons (STS), and the Merit-based Incentive Payment System
(MIPS) data. In addition to considering the most recently available
data, we assess the results of physician surveys and specialty
recommendations submitted to us by the RUC for our review. We also
consider information provided by other interested parties such as from
the general medical-related community and the public. We conduct a
review to assess the appropriate RVUs in the context of contemporary
medical practice. We note that section 1848(c)(2)(A)(ii) of the Act
authorizes the use of extrapolation and other techniques to determine
the RVUs for physicians' services for which specific data are not
available and requires us to take into account the results of
consultations with organizations representing physicians who provide
the services. In accordance with section 1848(c) of the Act, we
determine and make appropriate adjustments to the RVUs.
In its March 2006 Report to the Congress (<a href="https://www.medpac.gov/document/report-to-the-congress-2006-medicare-payment-policy/">https://www.medpac.gov/document/report-to-the-congress-2006-medicare-payment-policy/</a>), MedPAC
discussed the importance of appropriately valuing physicians'
[[Page 32376]]
services, stating that misvalued services can distort the market for
physicians' services, as well as for other health care services that
physicians order, such as hospital services. In that same report,
MedPAC postulated that physicians' services under the PFS can become
misvalued over time. MedPAC stated, ``When a new service is added to
the physician fee schedule, it may be assigned a relatively high value
because of the time, technical skill, and psychological stress that are
often required to furnish that service. Over time, the work required
for certain services would be expected to decline as physicians become
more familiar with the service and more efficient in furnishing it.''
We believe services can also become overvalued when PE costs decline.
This can happen when the costs of equipment and supplies fall, or when
equipment is used more frequently than is estimated in the PE
methodology, reducing its cost per use. Likewise, services can become
undervalued when physician work increases, or PE costs rise.
As MedPAC noted in its March 2009 Report to Congress (<a href="https://www.medpac.gov/docs/default-source/reports/march-2009-report-to-congress-medicare-payment-policy.pdf">https://www.medpac.gov/docs/default-source/reports/march-2009-report-to-congress-medicare-payment-policy.pdf</a>), in the intervening years since
MedPAC made the initial recommendations, CMS and the RUC have taken
several steps to improve the review process. Also, section
1848(c)(2)(K)(ii) of the Act augments our efforts by directing the
Secretary to specifically examine, as determined appropriate,
potentially misvalued services in the following categories:
<bullet> Codes that have experienced the fastest growth.
<bullet> Codes that have experienced substantial changes in PE.
<bullet> Codes that describe new technologies or services within an
appropriate time-period (such as 3 years) after the relative values are
initially established for such codes.
<bullet> Codes which are multiple codes that are frequently billed
in conjunction with furnishing a single service.
<bullet> Codes with low relative values, particularly those that
are often billed multiple times for a single treatment.
<bullet> Codes that have not been subject to review since
implementation of the fee schedule.
<bullet> Codes that account for the majority of spending under the
PFS.
<bullet> Codes for services that have experienced a substantial
change in the hospital length of stay or procedure time.
<bullet> Codes for which there may be a change in the typical site
of service since the code was last valued.
<bullet> Codes for which there is a significant difference in
payment for the same service between different sites of service.
<bullet> Codes for which there may be anomalies in relative values
within a family of codes.
<bullet> Codes for services where there may be efficiencies when a
service is furnished at the same time as other services.
<bullet> Codes with high intraservice work per unit of time.
<bullet> Codes with high PE RVUs.
<bullet> Codes with high cost supplies.
<bullet> Codes as determined appropriate by the Secretary.
Section 1848(c)(2)(K)(iii) of the Act also specifies that the
Secretary may use existing processes to receive recommendations on the
review and appropriate adjustment of potentially misvalued services. In
addition, the Secretary may conduct surveys, other data collection
activities, studies, or other analyses, as the Secretary determines to
be appropriate, to facilitate the review and appropriate adjustment of
potentially misvalued services. This section also authorizes the use of
analytic contractors to identify and analyze potentially misvalued
codes, conduct surveys or collect data, and make recommendations on the
review and appropriate adjustment of potentially misvalued services.
Additionally, this section provides that the Secretary may coordinate
the review and adjustment of any RVU with the periodic review described
in section 1848(c)(2)(B) of the Act. Section 1848(c)(2)(K)(iii)(V) of
the Act specifies that the Secretary may make appropriate coding
revisions (including using current processes for consideration of
coding changes), which may involve consolidating individual services
into bundled codes for payment under the PFS.
2. Progress in Identifying and Reviewing Potentially Misvalued Codes
To fulfill our statutory mandate, we have identified and reviewed
numerous PMVC as specified in section 1848(c)(2)(K)(ii) of the Act, and
we intend to continue our work examining PMVC in these areas over the
upcoming years. As part of our current process, we identify PMVC for
review, and request recommendations from the RUC and other public
commenters on revised work RVUs and direct PE inputs for those codes.
The RUC, through its own processes, also identifies PMVC for review.
Through our public nomination process for PMVC established in the CY
2012 PFS final rule with comment period (76 FR 73026, 73058 through
73059), other individuals and groups submit nominations for review of
PMVC as well. Individuals and groups may submit codes for review under
the PMVC initiative to CMS in one of two ways. Nominations may be
submitted to CMS via email or through postal mail. Email submissions
should be sent to the CMS e-mailbox at
<a href="/cdn-cgi/l/email-protection#0c416968656f6d7e695c64757f656f656d624a69695f6f6469687960694c6f617f2264647f226b637a"><span class="__cf_email__" data-cfemail="723f17161b11130017221a0b011b111b131c34171721111a1716071e1732111f015c1a1a015c151d04">[email protected]</span></a>, with the phrase ``Potentially
Misvalued Codes'' and the referencing CPT code number(s) and/or the CPT
descriptor(s) in the subject line. Physical letters for nominations
should be sent via the U.S. Postal Service to the Centers for Medicare
& Medicaid Services, Mail Stop: C4-01-26, 7500 Security Blvd,
Baltimore, Maryland 21244. Envelopes containing the nomination letters
must be labeled ``Attention: Division of Practitioner Services,
Potentially Misvalued Codes.'' Nominations for consideration in our
next annual rule cycle should be received by our February 10th
deadline. Since CY 2009, as a part of the annual PMVC review and Five-
Year Review process, we have reviewed over 1,700 PMVC to refine work
RVUs and direct PE inputs. We have assigned appropriate work RVUs and
direct PE inputs for these services as a result of these reviews. A
more detailed discussion of the extensive prior reviews of PMVC is
included in the CY 2012 PFS final rule with comment period (76 FR 73052
through 73055). In the same CY 2012 PFS final rule with comment period,
we finalized our policy to consolidate the review of physician work and
PE at the same time and established a process for the annual public
nomination of potentially misvalued services.
In the CY 2013 PFS final rule with comment period (77 FR 68892,
68896 through 68897), we built upon the work we began in CY 2009 to
review PMVC that have not been reviewed since the implementation of the
PFS (so-called ``Harvard-valued codes'' \15\). In the CY 2009 PFS
proposed rule (73 FR 38589), we requested recommendations from the RUC
to aid in our review of Harvard-valued codes that had not yet been
reviewed, focusing first on high-volume,
[[Page 32377]]
low intensity codes. In the fourth Five-Year Review of Work RVUs
published in a separate notice (76 FR 32410, 32419), we requested
recommendations from the RUC to aid in our review of Harvard-valued
codes with annual utilization of greater than 30,000 services. In the
CY 2013 PFS final rule with comment period, we identified specific
Harvard-valued services with annual allowed charges that total at least
$10,000,000 as potentially misvalued. In addition to the Harvard-valued
codes, in the CY 2013 PFS final rule with comment period we finalized
for review a list of PMVC that have stand-alone PE (codes with
physician work and no listed work time and codes with no physician work
that have listed work time). We continue each year to consider and
finalize a list of PMVC that have or will be reviewed and revised as
appropriate in future rulemaking.
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\15\ The research team and panels of experts at the Harvard
School of Public Health developed the original work RVUs for most
CPT codes, in a cooperative agreement with the Department of Health
and Human Services (HHS). Experts from both inside and outside the
Federal Government obtained input from numerous physician specialty
groups. This input was incorporated into the initial PFS, which was
implemented on January 1, 1992.
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3. CY 2026 Identification and Review of Potentially Misvalued Services
In the CY 2012 PFS final rule with comment period (76 FR 73058
through 73059), we finalized a process for the public to nominate PMVC.
In the CY 2015 PFS final rule with comment period (79 FR 67548, 67606
through 67608), we modified this process whereby the public and
interested parties may nominate PMVC for review by submitting the code
with supporting documentation by February 10th of each year. Supporting
documentation for codes nominated for the annual review of PMVC may
include the following:
<bullet> Documentation in peer reviewed medical literature or other
reliable data that demonstrate changes in physician work due to one or
more of the following: technique, knowledge and technology, patient
population, site-of-service, length of hospital stay, and work time.
<bullet> An anomalous relationship between the code being proposed
for review and other codes.
<bullet> Evidence that technology has changed physician work.
<bullet> Analysis of other data on time and effort measures, such
as operating room logs or national and other representative databases.
<bullet> Evidence that incorrect assumptions were made in the
previous valuation of the service, such as a misleading vignette,
survey, or flawed crosswalk assumptions in a previous evaluation.
<bullet> Prices for certain high cost supplies or other direct PE
inputs that are used to determine PE RVUs are inaccurate and do not
reflect current information.
<bullet> Analyses of work time, work RVU, or direct PE inputs using
other data sources (for example, VA, NSQIP, the STS National Database,
and the MIPS data).
<bullet> National surveys of work time and intensity from
professional and management societies and organizations, such as
hospital associations.
We evaluate the supporting documentation submitted with the
nominated codes and assess whether the nominated codes appear to be
PMVC appropriate for review under the annual process. In the following
year's PFS proposed rule, we publish the list of nominated codes and
indicate for each nominated code whether we agree with its inclusion as
a PMVC. The public has the opportunity to comment on these and all
other proposed PMVC. In each year's final rule, we finalize our list of
PMVC.
a. Public Nominations
In each proposed rule, we seek nominations from the public and from
interested parties of codes that they believe we should consider as
potentially misvalued. We receive public nominations for PMVC by
February 10th and we display these nominations on our public website
(<a href="https://www.cms.gov/medicare/payment/fee-schedules/physician/federal-regulation-notices">https://www.cms.gov/medicare/payment/fee-schedules/physician/federal-regulation-notices</a>?DLSort=2&DLEntries=10&DLPage=1&DLSortDir=descending), where we
include the submitter's name, their associated organization and the
submitted studies for full transparency. We sometimes receive
submissions for specific, PE-related inputs for codes, and discuss
these PE-related submissions, as necessary under the Determination of
PE RVUs section of the rule. We summarize below this year's submissions
under the PMVC initiative. For CY 2026, we received 11 requests
concerning various codes as PMVC. The nominations are as follows:
(1) Maxillofacial Prosthetic Services (CPT codes 21076, 21077,
21079, 21080, 21081, 21082, 21083, 21084, 21085, 21086, 21087)
An interested party nominated CPT codes 21076 (Impression and
custom preparation; surgical obturator prosthesis), 21077 (Impression
and custom preparation; orbital prosthesis), 21079 (Impression and
custom preparation; interim obturator prosthesis), 21080 (Impression
and custom preparation; definitive obturator prosthesis), 21081
(Impression and custom preparation; mandibular resection prosthesis),
21082 (Impression and custom preparation; palatal augmentation
prosthesis), 21083 (Impression and custom preparation; palatal lift
prosthesis), 21084 (Impression and custom preparation; speech aid
prosthesis), 21085 (Impression and custom preparation; oral surgical
splint), 21086 (Impression and custom preparation; auricular
prosthesis), and 21087 (Impression and custom preparation; nasal
prosthesis) as potentially misvalued based on what they believe to be
missing, outdated, and undervalued practice expense inputs. The
nominator stated that these misvalued PE inputs (equipment, supplies,
and clinical staff time) result in inadequate payment rates to
clinicians who furnish these services, which limits patient access to
necessary care. The nominator indicated that the physician work values
remain accurate for all of the nominated codes.
According to the nominator, maxillofacial prosthodontists provide
specialized rehabilitation care for patients with compromised oral and
facial anatomy due to conditions such as cancer, trauma, or congenital
defects, addressing both physical and psychological challenges
experienced by such patients. Custom prosthetic obturators are medical
devices that restore vital oral functions in cancer patients with
palatal defects. These implant-retained devices are prescribed based on
the location of the defect: maxillary obturators for hard palate
issues, pharyngeal obturators for soft palate problems, or a
combination for both. The primary purpose of the intraoral prostheses
is to enable patients to speak, eat, and swallow more naturally. The
nominator stated that these implants can improve patients' quality of
life and may eliminate the need for feeding tubes.
The nominator is concerned that CMS payment rates for maxillofacial
prosthetic services, which were last reviewed in 1995, are outdated. In
particular, the nominator stated that CPT codes 21080 and 21081 have
undergone significant changes since the development of their PE values
in the mid-1990s. At that time, mandibular reconstruction was rare, and
removable prostheses were used to align the jaw. Microvascular
reconstruction and virtual surgical planning have since transformed the
procedures described by CPT codes 21080 and 21081, allowing precise
prosthetic rehabilitation during surgery and improving oral function,
speech, and quality of life. The nominator asserted that the PE inputs
for CPT codes 21080 and 21081 did not account for these advancements,
which did not exist in 1995 when the codes were valued. Furthermore,
they stated that when these maxillofacial prosthetic services
[[Page 32378]]
were valued in 1995, CMS used inaccurate inputs, which they believe did
not account for the appropriate clinical staff time and materials
required for prostheses. They stated that changes in clinical staff
time, supplies, and equipment require the direct PE inputs to be
updated.
The nominator stated that significant technological advancements
have also occurred for extraoral prostheses, such as orbital (CPT code
21077), auricular (CPT code 21086), and nasal prostheses (CPT code
21087). For orbital prostheses, hand sculpting and painting remain
time-intensive tasks, with limited use of 3D technology. In auricular
prostheses, 3D technology has significantly improved the waxing
process. For nasal prostheses, preoperative scanning now helps to shape
the prosthesis, leading to better cosmetic outcomes. All extraoral
prostheses (for example, orbital, auricular, and nasal) now commonly
use 3D technology, craniofacial implants, and color-matching devices,
which were not standard in the 1990s. The nominator asserted that the
practice expense inputs for these codes fail to account for these
advancements.
Additionally, the nominator asserts that there are other instances
where the nominated codes fail to reflect the significant technological
advancements in treatment delivery since 1995. The nominator requested
an update to the PE inputs for all of the nominated codes, stating that
the dental x-ray (ER071), valued at $128,020.91, has been replaced by
various pieces of capital equipment. For example, they listed a ``CMS
Planmeca CBCT Imaging'' system, which costs $163,767.66, and stated
that this takes the place of the x-ray unit, highlighting a notable
price difference between the x-ray machine and the CT. Furthermore,
they provided a lengthy list of additional equipment (e.g., 3D printer)
that is not accounted for in the PE inputs for all of the nominated
codes, underscoring the extensive modernization in service delivery
since 1995.
To support their nomination, the nominator included information on
what they believe to be more accurate PE inputs, including invoices for
supplies and equipment. For items where invoices paid were unavailable,
price quotes from a supplier were included. In addition, their
appendices included recommendations for deleting and adding supplies,
equipment, and clinical staff time. For more information, we refer
readers to the submitted nomination, which is posted in the public use
files for this proposed rule available on our public website under PFS
Federal Regulation Notices at <a href="https://www.cms.gov/medicare/payment/fee-schedules/physician/federal-regulation-notices">https://www.cms.gov/medicare/payment/fee-schedules/physician/federal-regulation-notices</a>.
Although the nomination stated that the work RVUs are accurate as
currently valued, because these codes have not been reviewed in the
last 30 years, we believe it is appropriate to examine both PE and work
inputs. Given the technological advancements the nominator described,
there may also be resulting changes in the physician work involved in
performing these services, and therefore, a comprehensive review of
both practice expense and work values would be appropriate. While we
are not proposing to nominate these codes as potentially misvalued, we
welcome public comments and recommendations, including those from the
RUC, to better understand these codes, particularly regarding typical
direct PE inputs and work values.
(2) Supervision of Preparation and Provision of Antigens for
Allergen Immunotherapy (CPT codes 95145, 95146, 95147, 95148, 95149).
An interested party nominated the professional supervision of
preparation and provision of stinging insect venom for allergen
immunotherapy described by CPT codes 95145 (Professional services for
the supervision of preparation and provision of antigens for allergen
immunotherapy (specify number of doses); single stinging insect venom),
95146 (Professional services for the supervision of preparation and
provision of antigens for allergen immunotherapy (specify number of
doses); 2 single stinging insect venoms), 95147 (Professional services
for the supervision of preparation and provision of antigens for
allergen immunotherapy (specify number of doses); 3 single stinging
insect venoms), 95148 (Professional services for the supervision of
preparation and provision of antigens for allergen immunotherapy
(specify number of doses); 4 single stinging insect venoms), and 95149
(Professional services for the supervision of preparation and provision
of antigens for allergen immunotherapy (specify number of doses); 5
single stinging insect venoms) as potentially misvalued, stating that
the current payment rates for these CPT codes do not accurately reflect
the practice expenses required for these procedures. The nominator
indicated that the cost to manufacture venom therapy has drastically
increased since the last time these codes were reviewed by the RUC in
2001, citing higher labor and raw material costs.
Venom immunotherapy, used for treating insect stings, involves
extracting venom from various stinging insects like honeybees and
wasps. According to the nominator, the manufacturing process is labor-
intensive, requiring 520 staff hours to manually extract venom from
130,000 insects per batch, along with substantial equipment investment.
The final product is packaged in single, five, or twelve-dose vials for
medical use. For more information, we refer readers to the submitted
nomination, which is posted in the public use files for this proposed
rule available on our public website under PFS Federal Regulation
Notices at <a href="https://www.cms.gov/medicare/payment/fee-schedules/physician/federal-regulation-notices">https://www.cms.gov/medicare/payment/fee-schedules/physician/federal-regulation-notices</a>.
The nominator stated that before 1995, venom products were paid
under product-specific HCPCS J-codes, but due to infrequent use and
limited budget impact on the Medicare trust funds, CMS retired the J-
codes and instead bundled venom products within CPT codes 95145, 95146,
95147, 95148, and 95149. According to the nominator, current payment
rates for these codes are based on the Harvard valuation and have not
been surveyed by the RUC since February 2001. The nominator stated that
when surveyed in 2001, the PE inputs for these codes only accounted for
swab-pad, antigen, syringe, and gloves. In contrast, the nominator
indicated that CPT code 95165 (Professional services for the
supervision of preparation and provision of antigens for allergen
immunotherapy; single or multiple antigens (specify number of doses),
which was more recently reviewed in 2016 and shares similar PE inputs
as the nominated codes, includes additional items such as a surgical
cap, gown, mask, alcohol, paper towel, and vial transport envelope. The
nominator stated that, according to the 2019 standards for allergen
extract compounding under USP Chapter 797,\16\ the procedures described
by CPT codes 95145, 95146, 95147, 95148, and 95149 require additional
supplies and practice expenses, such as sterile powder-free gloves,
face mask, hair net/beard net, gown/sterile garb, isopropyl alcohol,
paper towel, sterile empty vials, and albumin saline, in addition to
the allergenic extract. The nominator stated that these standards also
mandate significantly more annual training for providers, including
competency observation, media fill test, gloved fingertip test, and
corrective actions. Furthermore, the nominator asserted
[[Page 32379]]
that the overall cost of venom therapy has increased substantially and
submitted invoices to support this statement.
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\16\ <a href="https://college.acaai.org/wp-content/uploads/2021/01/Section-21-USP-Compounding-Allergenic-Extracts.pdf">https://college.acaai.org/wp-content/uploads/2021/01/Section-21-USP-Compounding-Allergenic-Extracts.pdf</a>.
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At this time, we are not proposing the CPT codes submitted by the
nominator as potentially misvalued. CPT codes 95145-95149 are typically
billed in conjunction with CPT codes 95115 and 95117. We note that the
nominator has listed PE inputs that are also included in the inputs for
CPT codes 95115 and 95117 and these same inputs may overlap with inputs
included in CPT codes 95145-95149. While the PE inputs that overlap
between CPT codes 95145-95149 and 95115 and 95117 may contain the
necessary elements, we are seeking feedback regarding these overlapping
PE inputs in relation to billing frequencies and the possibility of
duplicative payment. Specifically, we request comments on whether these
inputs overlap and what potential adjustments should be made to avoid
duplicative payment. We request comments regarding the standard minutes
for clinical activity code CA008 (Perform regulatory mandated quality
assurance activity (pre-service)) and the standard unit measurement for
supply code SH004 (albumin saline). Additionally, we seek input
regarding the establishment of clinical activity codes for two specific
procedures requested by the nominator: cleaning and disinfecting the
compounding area, and sterile preparation of compounds.
Furthermore, anomalies were identified related to the clinical
activities described by CA021 (Perform procedure/service--NOT directly
related to physician work time). Specifically, the typical times
associated with these activities in the RUC database are as follows:
2.3 minutes for CPT code 95145, 3.3 minutes for CPT code 95146, 2.3
minutes for CPT code 95147, 3.3 minutes for CPT code 95148, and 4.3
minutes for CPT code 95149. The nominator has requested 10 minutes for
all of the nominated CPT codes without providing any justification for
this time. Regarding the clinical labor direct inputs (L037D), we seek
comments on several aspects of dosage preparation, including but not
limited to: the typical number of dosages, the time required for
preparation, the number of vials or dosages that can be prepared from
each vial, and the total time needed for preparation of these vials and
dosages. Additionally, we seek information about the derivation of the
2.3-minute time. This information would help inform the appropriate
time for both clinical labor activities.
We received several invoices for mixed and single venom prices from
the nominator; however, we are unable to determine the number of
individual venoms in the mixed venom preparations. Specifically, supply
codes SH009 (antigen, venom) and SH010 (antigen, venom, tri-vespid) are
currently priced at $35.58 and $69.21 respectively, with prices last
updated in the CY 2024 PFS final rule (88 FR 78967). The nominator
stated that the venom cost has increased to $481.50 for a 5-dose wasp
venom as of April 1, 2024, and submitted invoices to support this claim
to update the current price. Since we are unsure whether these invoices
are for mixed or single venom prices, we welcome additional invoices
and comments regarding the methodology for calculating venom prices
using mixture invoices. We welcome feedback to gain a broader
understanding of these codes, including how standards of practice have
evolved over time, as this information can help identify related coding
issues.
(3) Electronic analysis of implanted neurostimulator pulse
generator/transmitter (CPT codes 95970, 95976, 95977).
CPT codes 95970 (Electronic analysis of implanted neurostimulator
pulse generator/transmitter (eg, contact group[s], interleaving,
amplitude, pulse width, frequency [Hz], on/off cycling, burst, magnet
mode, dose lockout, patient selectable parameters, responsive
neurostimulation, detection algorithms, closed loop parameters, and
passive parameters) by physician or other qualified health care
professional; with brain, cranial nerve, spinal cord, peripheral nerve,
or sacral nerve, neurostimulator pulse generator/transmitter, without
programming), 95976 (Electronic analysis of implanted neurostimulator
pulse generator/transmitter (eg, contact group[s], interleaving,
amplitude, pulse width, frequency [Hz], on/off cycling, burst, magnet
mode, dose lockout, patient selectable parameters, responsive
neurostimulation, detection algorithms, closed loop parameters, and
passive parameters) by physician or other qualified health care
professional; with simple cranial nerve neurostimulator pulse
generator/transmitter programming by physician or other qualified
health care professional), and 95977 (Electronic analysis of implanted
neurostimulator pulse generator/transmitter (eg, contact group[s],
interleaving, amplitude, pulse width, frequency [Hz], on/off cycling,
burst, magnet mode, dose lockout, patient selectable parameters,
responsive neurostimulation, detection algorithms, closed loop
parameters, and passive parameters) by physician or other qualified
health care professional; with complex cranial nerve neurostimulator
pulse generator/transmitter programming by physician or other qualified
health care professional) were nominated as potentially misvalued for
two reasons identified by the nominator: there has been a significant
shift in the clinical specialties utilizing these codes, and the PE
inputs currently assigned to these codes may not accurately reflect the
costs associated with analyzing and programming the hypoglossal nerve
stimulation (HGNS) system.
The nominator stated that, from 2017 to 2023, there has been a
significant change in the clinical specialties that utilize these codes
in the non-facility setting. According to the nominator, while CPT
codes 95970, 95976, and 95977 were primarily billed by neurologists
when last surveyed by the RUC in 2017, the usage of these codes has
shifted away from neurologists toward sleep specialists. The nominator
asserted that this shift necessitates changes to the work RVUs and PE
inputs for these codes. In addition, the nominator stated that many
sleep specialists believe CPT codes 95970, 95976, and 95977 do not
appropriately reflect the practice expenses involved in furnishing
these services. According to the nominator, a survey conducted among
several high-volume sleep specialists (the details of which the
nominator did not share with CMS) showed unanimous agreement that these
codes do not accurately reflect the practice expense inputs. These
three codes currently have 0 minutes of clinical staff time included in
the direct PE inputs. However, the nominator stated that based on the
survey results the typical clinical staff time spent for patient care
was 35 minutes for CPT code 95970, 37 minutes for CPT code 95976, and
46 minutes for CPT code 95977. The nominator stated that CPT codes
95970, 95976, and 95977 should reflect the same clinical staff time as
similar analysis and programming procedures, such as CPT codes 93150
(Therapy activation of implanted phrenic nerve stimulator system,
including all interrogation and programming), 93151 (Interrogation and
programming (minimum one parameter) of implanted phrenic nerve
stimulator system), and 93153 (Interrogation without programming of
implanted phrenic nerve stimulator system). The nominator stated that
these codes more accurately account for the clinical staff time.
We appreciate the nominator sharing their survey results from high-
volume
[[Page 32380]]
sleep specialists, which may indicate potential inaccuracies in the
direct PE inputs for CPT codes 95970, 95976, and 95977. Our review of
the submitted information, however, reveals a lack of survey details
(for example, sampling methods, data collection procedures), so it is
difficult to understand the context of the information provided by the
nominator and identify potential biases of this survey. While we
acknowledge potential changes in the specialties utilizing these codes,
and sleep medicine's Medicare specialty percentage has grown over time,
neurology remains the dominant billing practitioner type. For these
reasons, we are not proposing to consider these codes as potentially
misvalued. We are, however, seeking comments and additional information
on the information provided by the nominator. This includes any
analysis or studies demonstrating that one or more of these codes meet
the criteria listed in section II.C.3 of this proposed rule, under
``Identification and Review of Potential Misvalued Services,''
particularly regarding changes in practice expense inputs for service
delivery.
(4) Excimer laser treatment for psoriasis (CPT codes 96920, 96921,
96922).
An interested party nominated CPT codes 96920 (Excimer laser
treatment for psoriasis; total area less than 250 sq cm), 96921
(Excimer laser treatment for psoriasis; 250 sq cm to 500 sq cm), and
96922 (Excimer laser treatment for psoriasis; over 500 sq cm) as
potentially misvalued, due to the CPT Editorial Panel's recent
modifications to the code descriptor and allegedly inaccurate data used
by CMS in valuing these services.
According to the nominator, the misvaluation of these codes creates
a significant healthcare access barrier by reducing payment for excimer
laser therapy, which disproportionately impacts vulnerable populations
while potentially increasing overall healthcare costs. The nominator
stated that the low payment rates for these codes make it financially
unfeasible for dermatologists to offer this FDA-approved treatment,
effectively making it unavailable to Medicare beneficiaries despite its
proven effectiveness and potential cost savings.
We discussed our review of these codes and our rationale for
finalizing the current work RVUs and direct PE extensively in the CY
2025 PFS final rule (89 FR 97797 through 97801). We stated that we
disagreed with the RUC recommended work RVUs for CPT codes 96920,
96921, and 96922 of 1.00, 1.07, and 1.32. The RUC noted that there have
been multiple reviews of these CPT codes, and the valuation of the
codes is currently based on the original valuation over two decades ago
in 2002 where the physician time values were lower than the current
times. A subsequent review in 2012 adopted new survey times while
maintaining the work RVUs from 2002 for CPT codes 96920 and 96922. The
RUC noted that for both CPT code 96921 and 96922, with the largest
treatment area, the total times had not changed since first implemented
more than 20 years ago. At the time we also believed that, since the
two components of work are time and intensity, absent an obvious or
explicitly stated rationale for why the relative intensity of a given
procedure had increased, significant decreases in time should be
reflected in decreases to work RVUs. We noted that our proposed work
RVU of 0.83 maintained the intensity associated with the 2002 review of
CPT code 96920, which we believed to be more appropriate than the
significant increase in intensity that results from the RUC-recommended
work RVU of 1.00 which nearly doubled the current intensity of the code
(89 FR 97797). We had no evidence to indicate that the intensity of CPT
code 96920 had increased to this degree given how the surveyed work
time had substantially decreased.
For CY 2026, the nominator raised two issues related to these
codes. First, according to the nominator, a coding change by the CPT
Editorial Panel that was released in 2024 and effective January 1,
2025, modified the code descriptor from ``Laser treatment for
inflammatory skin disease(psoriasis)'' to ``Excimer laser treatment for
psoriasis.'' We remind readers that, in April 2022, the RUC referred
CPT codes 96920, 96921, and 96922 to the CPT Editorial Panel to capture
expanded indications beyond what was currently noted in the codes'
descriptions to include laser treatment for other inflammatory skin
disorders such as vitiligo, atopic dermatitis, and alopecia areata, and
those expanded indications could reflect changes in physician work as
compared to the codes' current descriptors. The coding change
application was subsequently withdrawn from the September 2022 CPT
Editorial Panel meeting when it was determined that existing literature
was insufficient and did not support expanded indications at that time.
Therefore, these CPT codes were re-surveyed and reviewed at the April
2023 RUC meeting without any revisions to their code descriptors. We
note that, according to the CPT Editorial Panel and the RUC's publicly
available meeting notes, since the descriptors for CPT codes 96920,
96921, and 96922 were established in 2002, psoriasis is the only
approved indication and use for this treatment modality.\17\
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\17\ <a href="https://www.ama-assn.org/system/files/ap-2023-ruc-meeting-minutes.pdf">https://www.ama-assn.org/system/files/ap-2023-ruc-meeting-minutes.pdf</a>.
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While the nominator is working with the CPT Editorial Panel again
to expand the indications for excimer laser treatment beyond psoriasis
to include other inflammatory skin conditions, they stated that they
believe establishing a temporary G-code for interim coverage is
necessary and therefore requested that CMS create coding to more
accurately reflect the clinically appropriate use of the excimer laser.
The nominator states that this would ensure patients with skin
conditions other than psoriasis can access excimer laser treatments
without delay.
To provide more evidence as to the accuracy of including non-
psoriasis inflammatory skin diseases in the code definition, the
nominator provided a data compendium supporting the excimer laser's
versatility and key studies demonstrating positive outcomes for
conditions like vitiligo, atopic dermatitis, leukoderma, and alopecia
areata. Reviewing these submitted studies, the nominator stated that
sufficient clinical evidence exists to support expanding coverage for
excimer laser treatment beyond just psoriasis. The nominator requested
that CMS create additional coding to describe the expanded indications
for the excimer laser treatment, because the nominator believes that
the standard CPT process is time-consuming and could leave many
patients without adequate care in the interim; thus, implementing a
temporary G-code would ensure continued access to this essential
therapy for these patients.
Second, the nominator provided additional invoices and data
detailing PE costs related to the excimer laser devices. The nominator
claimed that their own analysis relies on real-world data (which was
not shared with CMS) and shows that CMS has overestimated the
utilization rate of excimer lasers. Using their own survey, they found
that on average, dermatologists perform 244 excimer laser treatments
per device annually, with each treatment requiring approximately 38 to
46 minutes of excimer laser use. This amounts to nearly 15,000 minutes
of total utilization per year, resulting in an effective utilization
rate of 10 percent, rather than the 50 percent rate currently used by
CMS. As stated in section II.B. of this proposed rule, we currently use
an equipment utilization rate
[[Page 32381]]
assumption of 50 percent for most equipment, with the exception of
expensive diagnostic imaging equipment, for which we use a 90 percent
assumption as required by section 1848(b)(4)(C) of the Act.
Based on their real-world device utilization data, the nominator
calculated the direct PE cost using CMS' standard equipment formula.
The calculated equipment costs are $99.88 for CPT code 96920, $105.14
for CPT code 96921, and $120.91 for CPT code 96922. The nominator also
stated that CMS currently assumes a maintenance cost of $7,560 for
excimer lasers, based on a 5% maintenance rate applied to a purchase
price of $151,200. However, the nominator stated that excimer lasers
are technical devices with substantially higher maintenance costs.
According to the nominator, the annual service cost for the excimer
laser is $30,000, and they claimed that a laser chamber replacement
service costs $44,000; however, as discussed in section II.B. of this
proposed rule, we finalized a 5 percent factor for annual maintenance
in the CY 1998 PFS final rule with comment period (62 FR 33164). As we
previously stated in the CY 2016 PFS final rule with comment period (80
FR 70897), we do not believe the annual maintenance factor for all
equipment is precisely 5 percent, and we stated that this estimate
likely understates the true cost of maintaining some equipment. We also
noted that we believe it likely overstates the maintenance costs for
other equipment. When we solicited comments regarding data sources
containing equipment maintenance rates, commenters could not identify
an auditable, robust data source that CMS could use on a wide scale. As
a result, in the absence of publicly available datasets regarding
equipment maintenance costs or another systematic data collection
methodology for determining a different maintenance factor, we did not
propose a variable maintenance factor for equipment cost per minute
pricing as we did not believe that we have sufficient information at
present. Therefore, we remind readers that we do not believe voluntary
submissions regarding the maintenance costs of individual equipment
items would be an appropriate methodology for determining costs.
Moreover, the nominator asserted that CMS currently does not
include the costs of consumable gas (code EQ154) and the optical
delivery system (code EQ155) in the direct practice expense cost for
these services. Based on our review of the January 2012 RUC
recommendations submitted to CMS, it appears that these equipment items
were removed by RUC PE Subcommittee for CY 2013. The requestor stated
that the gas cylinder (EQ154) costs $6,300 (excluding labor and
shipping costs), and the optical delivery system (EQ155) costs $7,429;
however, no supporting invoices or evidence of the typicality of the
equipment items' usage for these services were provided to support the
equipment items' reintegration into the codes' direct practice expense.
Based on this information, the nominator recommended creating a G-
code for excimer laser treatment of inflammatory skin diseases.
Furthermore, they requested to include their own real-world data on
excimer laser utilization rates in the practice expense calculation,
adjust the maintenance cost in the practice expense calculation to
reflect the actual cost of maintaining excimer laser devices, and
reinstate the costs of consumable gas (code EQ154) and the optical
delivery system (code EQ155) in the practice expense calculation.
We appreciate the detailed information submitted by the nominator.
However, we continue to disagree that CPT codes 96920, 96921, and 96922
are potentially misvalued. We note that the CPT code change request was
withdrawn from the AMA in September 2022 due to insufficient supporting
literature for expanded indications. Additionally, according to RUC's
publicly available meeting notes, psoriasis is the only approved
indication and use for this treatment modality since the descriptors
for CPT codes 96920, 96921, and 96922 were established in 2002. When
the cod
[…truncated; see source link]Indexed from Federal Register on July 16, 2025.
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