Rule2025-19787
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
November 5, 2025
Effective
January 1, 2026
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This major final 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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[Federal Register Volume 90, Number 212 (Wednesday, November 5, 2025)]
[Rules and Regulations]
[Pages 49266-50481]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-19787]
[[Page 49265]]
Vol. 90
Wednesday,
No. 212
November 5, 2025
Part II
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; Final Rule
Federal Register / Vol. 90, No. 212 / Wednesday, November 5, 2025 /
Rules and Regulations
[[Page 49266]]
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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-F]
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: Final rule.
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SUMMARY: This major final 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: These regulations are effective on January 1, 2026.
FOR FURTHER INFORMATION CONTACT:
<a href="/cdn-cgi/l/email-protection#3c715958555f5d4e596c54454f555f555d527a59596f5f5459584950597c5f514f1254544f125b534a"><span class="__cf_email__" data-cfemail="551830313c36342730053d2c263c363c343b13303006363d3031203930153638267b3d3d267b323a23">[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#367b53525f55574453665e4f455f555f575870535365555e5352435a5376555b45185e5e4518515940"><span class="__cf_email__" data-cfemail="226f47464b41435047724a5b514b414b434c64474771414a4746574e4762414f510c4a4a510c454d54">[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#a7eac2c3cec4c6d5c2f7cfded4cec4cec6c9e1c2c2f4c4cfc2c3d2cbc2e7c4cad489cfcfd489c0c8d1"><span class="__cf_email__" data-cfemail="de93bbbab7bdbfacbb8eb6a7adb7bdb7bfb098bbbb8dbdb6bbbaabb2bb9ebdb3adf0b6b6adf0b9b1a8">[email protected]</span></a>, for issues
related to potentially misvalued services under the PFS.
Julie Rauch, or <a href="/cdn-cgi/l/email-protection#ace1c9c8c5cfcddec9fcc4d5dfc5cfc5cdc2eac9c9ffcfc4c9c8d9c0c9eccfc1df82c4c4df82cbc3da"><span class="__cf_email__" data-cfemail="c28fa7a6aba1a3b0a792aabbb1aba1aba3ac84a7a791a1aaa7a6b7aea782a1afb1ecaaaab1eca5adb4">[email protected]</span></a>, for
issues related to Malpractice RVUs.
Morgan Kitzmiller, Terry Simananda, or
<a href="/cdn-cgi/l/email-protection#2f624a4b464c4e5d4a7f47565c464c464e41694a4a7c4c474a4b5a434a6f4c425c0147475c01484059"><span class="__cf_email__" data-cfemail="d39eb6b7bab0b2a1b683bbaaa0bab0bab2bd95b6b680b0bbb6b7a6bfb693b0bea0fdbbbba0fdb4bca5">[email protected]</span></a>, for issues related to
Geographic Practice Cost Indices.
Mikayla Murphy, or <a href="/cdn-cgi/l/email-protection#dc91b9b8b5bfbdaeb98cb4a5afb5bfb5bdb29ab9b98fbfb4b9b8a9b0b99cbfb1aff2b4b4aff2bbb3aa"><span class="__cf_email__" data-cfemail="ade0c8c9c4ceccdfc8fdc5d4dec4cec4ccc3ebc8c8fecec5c8c9d8c1c8edcec0de83c5c5de83cac2db">[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#773a12131e14160512271f0e041e141e161931121224141f1213021b1237141a04591f1f0459101801"><span class="__cf_email__" data-cfemail="266b43424f45475443764e5f554f454f474860434375454e4342534a4366454b55084e4e5508414950">[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#3f725a5b565c5e4d5a6f57464c565c565e51795a5a6c5c575a5b4a535a7f5c524c1157574c11585049"><span class="__cf_email__" data-cfemail="9dd0f8f9f4fefceff8cdf5e4eef4fef4fcf3dbf8f8cefef5f8f9e8f1f8ddfef0eeb3f5f5eeb3faf2eb">[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="7e331b1a171d1f0c1b2e16070d171d171f10381b1b2d1d161b1a0b121b3e1d130d5016160d50191108">[email protected]</span></a>, for
issues related to global surgery payment accuracy.
Pamela West, or <a href="/cdn-cgi/l/email-protection#b0fdd5d4d9d3d1c2d5e0d8c9c3d9d3d9d1def6d5d5e3d3d8d5d4c5dcd5f0d3ddc39ed8d8c39ed7dfc6"><span class="__cf_email__" data-cfemail="470a22232e24263522172f3e342e242e262901222214242f2223322b2207242a34692f2f3469202831">[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#2e634b4a474d4f5c4b7e46575d474d474f40684b4b7d4d464b4a5b424b6e4d435d0046465d00494158"><span class="__cf_email__" data-cfemail="266b43424f45475443764e5f554f454f474860434375454e4342534a4366454b55084e4e5508414950">[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#bbf6dedfd2d8dac9deebd3c2c8d2d8d2dad5fddedee8d8d3dedfced7defbd8d6c895d3d3c895dcd4cd"><span class="__cf_email__" data-cfemail="08456d6c616b697a6d5860717b616b6169664e6d6d5b6b606d6c7d646d486b657b2660607b266f677e">[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#d69bb3b2bfb5b7a4b386beafa5bfb5bfb7b890b3b385b5beb3b2a3bab396b5bba5f8bebea5f8b1b9a0"><span class="__cf_email__" data-cfemail="d19cb4b5b8b2b0a3b481b9a8a2b8b2b8b0bf97b4b482b2b9b4b5a4bdb491b2bca2ffb9b9a2ffb6bea7">[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#65360d041700013604130c0b021635170a02170408250608164b0d0d164b020a13"><span class="__cf_email__" data-cfemail="e7b48f86958283b486918e898094b795888095868aa7848a94c98f8f94c9808891">[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#7c2f141d0e19182f1d0a15121b0f2c0e131b0e1d113c1f110f5214140f521b130a"><span class="__cf_email__" data-cfemail="2d7e454c5f48497e4c5b44434a5e7d5f424a5f4c406d4e405e0345455e034a425b">[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#33605b524156576052455a5d544063415c5441525e73505e401d5b5b401d545c45"><span class="__cf_email__" data-cfemail="693a01081b0c0d3a081f00070e1a391b060e1b0804290a041a4701011a470e061f">[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#7b3a16190e171a0f140902280b1e18121a170f0236141f1e173b18160855131308551c140d"><span class="__cf_email__" data-cfemail="12537f70677e73667d606b416277717b737e666b5f7d76777e52717f613c7a7a613c757d64">[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, (410) 786-6600, 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#3c7a6d747f116c6c6f7c5f514f1254544f125b534a"><span class="__cf_email__" data-cfemail="97d1c6dfd4bac7c7c4d7f4fae4b9ffffe4b9f0f8e1">[email protected]</span></a>, for issues
related to FQHC payments.
Michele Franklin, (410) 786-9226, or <a href="/cdn-cgi/l/email-protection#90c2d8d3d0f3fde3bef8f8e3bef7ffe6"><span class="__cf_email__" data-cfemail="7123393231121c025f1919025f161e07">[email protected]</span></a>, for issues
related to RHC payments.
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 final 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 final rule, refer to item CMS-1832-F. Readers with questions
related to accessing any of the Addenda or other supporting documents
referenced in this final rule and posted on the CMS website identified
above should contact <a href="/cdn-cgi/l/email-protection#115c7475787270637441796862787278707f5774744272797475647d7451727c623f7979623f767e67"><span class="__cf_email__" data-cfemail="95d8f0f1fcf6f4e7f0c5fdece6fcf6fcf4fbd3f0f0c6f6fdf0f1e0f9f0d5f6f8e6bbfdfde6bbf2fae3">[email protected]</span></a>.
CPT (Current Procedural Terminology) Copyright Notice:
[[Page 49267]]
Throughout this final 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.
I. Executive Summary
A. Purpose
This major annual rule revises payment policies under the Medicare
PFS and makes other policy changes, including policies 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 final rule includes provisions regarding other Medicare
payment provisions described in sections III. and IV. of this final
rule.
This final rule updates 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). For the Medicare Part B Drug Inflation Rebate Program,
this rule describes the identification of payment amount benchmark
quarter in certain instances and the calculation for the Part B rebate
amount in such instances. For the Medicare Part D Drug Inflation Rebate
Program, this rule finalizes a methodology for removal of units for a
Part D rebatable drug for which a manufacturer provides a discount
under the 340B Program for the applicable period beginning October 1,
2025, as well as the establishment of a voluntary 340B data repository
for Part D claims for testing purposes.
This final rule modifies 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 final rule, we are establishing 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 final rule also includes discussions
and provisions regarding several other Medicare Part B payment
policies, and other policies regarding programs administered by CMS.
Specifically, this final 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 Policies to Improve Care for Chronic Illness and
Behavioral Health Needs (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.)
<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> Regulatory Impact Analysis (section VI.)
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
final 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 provisions, 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 VI.,
Regulatory Impact Analysis, of this final rule.
II. Provisions of the 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
[[Page 49268]]
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 final 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.
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 final rule PE/HR'' on the
CMS website under downloads for the CY 2026 PFS final 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 final rule, we have incorporated the available
utilization data for one new specialty, Epileptologists, which we
recognized effective July 1, 2024 through our
[[Page 49269]]
established process. We proposed to use proxy PE/HR values from
Neurology for this new specialty, as there are no PPIS data for this
specialty. We did not receive public comments on this provision, and
therefore, we are finalizing as proposed.
These updates are reflected in the ``CY 2026 PFS final rule PE/HR''
file available on the CMS website under the supporting data files for
the CY 2026 PFS final 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 Non-Facility 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 non-facility. The methodology for calculating PE
RVUs is generally the same for both the facility and non-facility 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 non-facility PE RVUs. We note, too, that in
the CY 2026 PFS proposed rule (90 FR 32593 through 32597), we proposed
a modification in the allocation of indirect PE, described in detail in
the CY 2026 PFS proposed rule.
(4) Services With Technical Components and Professional Components
Diagnostic services are generally comprised of two components: a
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 final
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 final 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/non-facility 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
[[Page 49270]]
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 3 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.
We did not make any proposals associated with the list of expected
specialty assignments for low volume services, however we received
public comments on this topic from interested parties. The following is
a summary of the comments we received and our responses.
Comment: Several commenters stated that they had performed an
analysis to identify all codes that meet the criteria to receive a
specialty override under this CMS policy and drafted updated
recommendations for codes that meet these criteria for the CY 2026 PFS
rule. Commenters stated that the purpose of assigning a specialty to
these codes was to avoid the significant adverse impact on MP RVUs that
results from errors in specialty utilization data magnified in
representation (percentage) by small sample size. These commenters
submitted a list of approximately 75 low volume HCPCS codes with
recommended expected specialty assignments.
Response: For the past few years, we have reviewed the information
provided by the commenters to determine whether the specialty
assignments they recommended were appropriate for the services in
question, based on determining if the recommended specialty matches the
dominant specialty in the claims data. However, we have long held
reservations on whether this is the most accurate method for
implementing updates to the expected specialty assignments list. Since
these updates to the list have never been formally proposed in the CY
2026 PFS proposed rule (90 FR 32593 through 32597), there has been no
opportunity for interested parties to comment and provide feedback
before the assignments are finalized in the final rule. We believe that
it would provide greater transparency and more opportunities for public
comment if additions to the expected specialty assignments list were
instead proposed in a future year's proposed rule.
Therefore, we are not finalizing any additions to the expected
specialty assignments list in this final rule. We will instead review
the list of approximately 75 low volume HCPCS codes submitted by
commenters and propose additions to the list in next year's CY 2027 PFS
proposed rule. We will also review any submissions for inclusion to the
expected specialty assignments list by the same February 10th deadline
that we have finalized in the past for consideration of RUC
recommendations and invoice-based updates to supply and equipment
pricing. We believe that synchronizing submissions to the expected
specialty assignments list for low volume services with the same annual
date used for RUC recommendations and invoice submissions will help
standardize the process, while also providing more opportunities for
feedback from interested parties by going through the annual comment
process.
Comment: A commenter stated that there were four cardiothoracic
surgery codes on the expected specialty assignments list which did not
have the override applied. The commenter stated that these codes should
meet the low volume criteria if their utilization were calculated using
the number of services with no modifier or calculated using services
with modifiers 22, 52 or 53. The commenter stated that if the
utilization were calculated using data for all services, including
modifiers 80, 82, 62 or AS, then the codes would not qualify for the 3-
year average and requested clarification on the policy from CMS.
Response: We note again that we did not propose any changes to the
methodology associated with the list of expected specialty assignments
for low volume services. We continue to use an average of the most
recent 3 years of claims data to determine low volume status (those
that have fewer than 100 allowed services) based on using all of the
information contained in the claims data, including all modifiers.
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 final 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.
[[Page 49271]]
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 proposed a change to the methodology
so that when work RVUs are used to allocate indirect PE to the facility
RVUs, they are assigned at one-half the amount allocated to the non-
facility PE RVUs for that same service. This 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 final 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 1
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).
We did not make any proposals associated with the allocation of
indirect PE for some office-based services policy for CY 2026, however
we received public comments on this topic from interested parties. The
following is a summary of the comments we received and our responses.
Comment: Many commenters expressed concerns associated with the
previously finalized adjustment to allocation of indirect PE for some
office-based services policy, also known as the cognitive floor policy.
The commenters stated that critical psychological and
neuropsychological testing services are expected to receive a reduction
in national average non-facility payment due to a technical calculation
CMS uses to determine if a service meets specific criteria for the fee
schedule's indirect PE floor (specifically a 0.40 non-facility PE to
work RVU ratio). The commenters stated that these codes met the
requirement to receive this adjustment in 2025 but were projected to
miss the technical screen by a slim margin in the 2026 proposed rule
calculations, resulting in unexpected year-over-year payment
fluctuations. The commenters stated that this current eligibility
screen produces payment instability for services that are often on the
cusp of eligibility, and in recent years developmental testing and
neuropsychological testing services have been finalized as both
eligible and ineligible depending on this calculation. The commenters
requested that CMS
[[Page 49272]]
use a rolling 3-year average of each services' non-facility PE and work
RVUs when screening for the 0.40 non-facility PE to work RVU ratio,
release eligibility calculations in each year's proposed rule for
improved transparency into the technical screen, and adopt a 1-year
notice period before finalizing a previously eligible code as newly
ineligible for the indirect PE floor.
Response: We did not make any proposals associated with the
allocation of indirect PE for some office-based services policy for CY
2026, the details of which were finalized in the CY 2018 PFS final rule
(82 FR 52999 through 53000). As such, we are not finalizing any changes
in this policy for CY 2026 PFS final rule, since the codes identified
by the commenters do not meet the criteria for application of this
policy as previously finalized. However, we will take the feedback from
the commenters into consideration for potential use in future
rulemaking.
(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 A-B1.
[GRAPHIC] [TIFF OMITTED] TR05NO25.000
[[Page 49273]]
<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
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 A-B2 provides details in which the
modifiers are applied.
[GRAPHIC] [TIFF OMITTED] TR05NO25.001
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.
We received many comments stating that CMS should not apply the
multiple procedure payment reduction (MPPR) to always therapy services
due to the way in which CMS finalized direct PE recommendations from
the HCPAC in the CY 2025 PFS final rule (89 FR 97801 through 97803).
However, we did not make any proposals associated with these always
therapy services or the MPPR policy, and as such these comments are out
of scope.
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
[[Page 49274]]
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
final 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 later in this final 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 later in this final 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.
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 2 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, (85 FR 84482 through 84483) 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, in the
proposed rule, 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 in the CY 2026 PFS proposed
rule (90 FR 32593) 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 A-B3.
[GRAPHIC] [TIFF OMITTED] TR05NO25.002
We did not propose 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
[[Page 49275]]
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 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 rule (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 rule 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 the 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 in the proposed rule
and our previously described policy goal to balance PFS payment
stability and predictability with incorporating new data through
routine updates to the MEI, we proposed not implementing the PE/HR or
cost shares from the AMA's survey data at this time. Instead, we
proposed maintaining the current PE/HR and 2006-based MEI cost shares
for CY 2026 PFS ratesetting.
We discuss the topic of the MEI shares along with the
implementation of PE/HR survey data from the AMA in section II.B.5
(Development of Strategies for Updates to Practice Expense Data
Collection and Methodology) of this final rule; we are finalizing both
of these topics as proposed.
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 final
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>.
[[Page 49276]]
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, 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
the 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, a
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.
[[Page 49277]]
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 final 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 1300 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 PFS 2019), 50/50 percent (CY PFS
2020), 75/25 percent (CY PFS 2021), and 100/0 percent (CY PFS 2022)
split between new and old pricing. We believe 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 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 proposed 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 (89 FR 97722).
The 42 supply and equipment items with updated prices are listed in the
valuation of specific codes section of the rule under Table A-B6, 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 PFS proposed rule (90 FR
32593 through 32597), as detailed in Table A-B6, CY PFS 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
updated pricing for this supply as shown in Table A-B6. Consistent with
our previously finalized policy associated with the February 10th
deadline (79 FR 67608), we noted in the proposed rule that we will
review these invoices during the comment period following the
publication of the CY 2026 PFS proposed rule (90 FR 32593) for
potential inclusion in this final rule.
The following is a summary of the comments we received and our
responses.
Comment: Several comments stated that they supported the proposed
changes to supply and equipment pricing and recommended CMS to finalize
these items as proposed. Supply and equipment items that commenters
supported in their proposed pricing included the flow cytometer
(EP014), Biodegradable Material Kit--PeriProstatic (SA126), Rezum
delivery device kit (SA128), Esketamine (56 mg vial) (SH109),
Esketamine (84 mg vial) (SH110), calibration beads (SL021), Isoton II
diluent (SL084), lysing reagent (FACS) (SL089), Antibody Estrogen
Receptor monoclonal (SL493), and 34 Beta E12 (SL496).
Response: We appreciate the support for our proposed pricing from
the commenters.
Comment: A commenter submitted a yearly sampling of invoices to
update the pricing of the ``extended external ECG patch, medical
magnetic tape recorder'' (SD339) supply. The commenter submitted 26
additional invoices which were all priced at $345 and suggested CMS to
update the SD339 pricing accordingly.
Response: We appreciate the submission of these additional invoices
from the commenter. Also, since we previously received eight invoices
associated with the SD339 supply at a price of $285, we will average
these two sets of invoices together and finalize a CY 2026 price of
$315 for this supply. We continue to welcome the submission of
additional pricing data for assistance in valuing the SD339 supply.
Comment: A commenter stated that they previously submitted a
request to CMS to update the pricing of the antigen, multi (pollen,
mite, mold, cat) (SH007) supply. The commenter stated that based on
their submitted invoices, they requested that the cost input for 1 mL
of SH007 be increased to $17.07 instead of the $13.00 proposed by CMS.
The commenter stated that while they appreciated the proposed increase
in pricing, they had significant concerns that the pricing for the
SH007 supply continued to be undervalued and was based on flawed
assumptions regarding purchase volumes. The proposed pricing was based
on averaging together the pricing of the 50 mL invoices while excluding
the submitted 5 mL invoices; the commenter stated that allergists often
purchase smaller quantities of allergens which may not require larger
50 mL purchases and allergy practices must observe a 1-year beyond-use
date which could require them to discard a significant volume at the
end of the year if their supplies were purchased in bulk.
Response: Although we appreciate the additional information
supplied by the commenter, we continue to believe that our proposed
pricing of $13.00 is a more accurate valuation for the SH007 supply.
The commenters noted that the SH007 supply is most commonly used in CPT
code 95165 (Professional services for the supervision of preparation
and provision of antigens for allergen immunotherapy; single or
multiple antigens), a high volume service that include 1 mL of the
SH007 supply. CPT code 95165 is typically administered in multiple
billings for the same patient on the same day; our claims data
indicates that 10 billings of CPT code 95165 on the same day is the
median result (with a mean of 12.54 billings). Given that each billing
of CPT code 95165 includes 1 mL of the SH007 supply, and roughly 10-12
billings are typical for each patient encounter, it strains credulity
to suggest that practitioners are typically purchasing the SH007 supply
in its more expensive 5 mL quantities. While we agree that some
practitioners will purchase the supply in 5 mL quantities, our PE
methodology prices supplies based on the typical case, and the larger
50 mL quantity appears far more likely to be typical. We are therefore
finalizing our proposed pricing of $13.00 for the
[[Page 49278]]
SH007 supply based on an average of the submitted 50 mL invoices. We
also note that the $13.00 price still represents a 45 percent increase
in the price of the SH007 supply over its previous $8.96 pricing.
Comment: A commenter stated that CMS should use the updated WAC
pricing for the Opfolda (65 mg capsule) (SH111) supply, which increased
in 2025 to $33.52 per capsule. The commenter stated that they did not
agree with the decision to use 3.5 capsules of the SH111 supply in
HCPCS code G0138 (Intravenous infusion of cipaglucosidase alfa-atga,
including provider/supplier acquisition and clinical supervision of
oral administration of miglustat in preparation of receipt of
cipaglucosidase alfa-atga) which presumed that the split between two
patient weight groupings (40-50 kilograms and 50+ kilograms) is even.
The commenter stated that the vast majority of patients (96 percent in
clinical trial and 91 percent in assembled data) receive 4 capsules of
OPFOLDA which aligns with the recommended dosage for patients weighing
50 kg or more. The commenter requested that CMS should update the SH111
supply quantity from 3.5 to 4 included in HCPCS code G0138 to match
these findings.
Response: We agree with the commenter that the SH111 supply should
be updated in pricing to match the most current WAC valuation;
therefore, we are finalizing an increase in its price from $33.00 to
$33.52. Regarding the quantity of the SH111 supply included in HCPCS
code G0138, we did not solicit comments regarding this code or nominate
it as potentially misvalued. As such, we stand by our previous
valuation of G0138, where this same topic of the SH111 supply quantity
was discussed and finalized in last year's CY 2025 PFS final rule (89
FR 97816 through 97817).
Comment: Several commenters stated that the price and useful life
of the platform mounted parallel bars (EQ201) equipment were out of
date. The commenters stated that parallel bars are much different today
than they were over 20 years ago and in order to best serve the
patient, it is typical and standard for clinics to purchase parallel
bars that have power adjustable heights and solid bases. The commenters
stated that these features are much more expensive to purchase;
however, they offer greater safety for patients who are at risk of
falling. The commenters requested that CMS update the pricing for the
EQ201 parallel bars to $18,956 and change the useful life to 5 years to
reflect its mechanical components; they also submitted four invoices to
support this pricing.
Response: We appreciate the additional information provided by the
commenters, especially the submitted invoices for assistance in
pricing. However, the motorized parallel bars described by the
commenters and priced on the submitted invoices represent a
fundamentally different type of equipment as compared with the platform
mounted parallel bars described by EQ201. Our review of current market
pricing for platform mounted parallel bars indicates that the current
EQ201 pricing of $1599.96 remains accurate for this equipment, as it
was readily available for order online at or below this pricing.
Therefore, we are not finalizing an update to the price of the EQ201
equipment; however, we will add a new equipment item for ``motorized
parallel bars'' (EQ414) priced at the requested $18,956 and with a
useful life of 5 years. This new EQ414 equipment is not currently
included in any CPT or HCPCS codes but is available for potential
future inclusion in services if the motorized version of the parallel
bars is determined to be the typical standard of care.
Comment: Several commenters recommended updating the price for the
treadmill (EQ243) equipment to $8,120.64. The commenters stated that
modern treadmills have multiple computerized and sensory components
that allow for adjustable programs and tracking of vitals, and
submitted five invoices to support this pricing update.
Response: Determining the typical market pricing for treadmill
equipment is a difficult task due to the wide range of treadmills
available for purchase; for example, the prices of the treadmills on
the five invoices submitted by the commenters ranged from a low of
$7,125.10 to a high of $26,064.00. Based on our review of the current
pricing of medical treadmills, it appears that the current EQ243 price
of $4,860.79 remains highly typical, including matching the pricing of
several other medical treadmill models available from the same
manufacturer listed on the submitted invoices. The specific model
listed on these invoices is the ``performance plus'' version of a
medical treadmill which appears to be situated at the high end of the
market; it does not appear to reflect typical pricing and therefore we
are not finalizing an increase to the price of the EQ243 treadmill
equipment.
Comment: Several commenters requested that CMS update and modify
the price of the exercise equipment (EQ118). The commenters stated that
the EQ118 equipment currently reflects exercise equipment and includes
a treadmill, bike, stepper, and upper body ergometer (UBE). The
commenters recommended removing the treadmill from this package and
having it as a stand-alone piece of equipment, while steppers and UBE's
are not typical pieces of exercise equipment in a physical therapy
clinic any longer. The commenters requested that CMS modify the
equipment included in item EQ118 to reflect a total gym, recumbent
bike, and cable columns. Commenters stated that pricing for this
equipment item should be increased to $16,700 and submitted a series of
invoices to support their requested pricing.
Response: The exercise equipment described by the commenters and
priced on the submitted invoices represent a fundamentally different
type of equipment as compared with the existing EQ118 item. The current
EQ118 equipment is based on pricing a treadmill, bike, stepper, UBE,
pulleys, and balance board; in contrast, the equipment collection
described by the commenters constitutes a total gym, recumbent bike,
and cable columns. Therefore, we are not finalizing an update to the
price of the EQ118 equipment; however, we will add a new equipment item
for ``exercise equipment (total gym, recumbent bike, and cable
columns)'' (EQ415) priced at the requested $16,700. This new EQ415
equipment is not currently included in any CPT or HCPCS codes but is
available for potential future inclusion in services if this alternate
version of exercise equipment is determined to be the typical standard
of care.
Comment: Several commenters stated that the practice of manual
therapy (CPT code 97140) and massage therapy (CPT code 97124) typically
includes the use of manual therapy hand instruments. The commenters
stated that these instruments are not included in the equipment for
these codes and requested that CMS add a new equipment item for manual
therapy instruments at a price of $1,795 and a useful life of 15 years
for CPT codes 97140 and 97124. Commenters submitted one invoice to
support this requested pricing.
Response: We concur with the commenters that the submitted invoice
at a price of $1,795 appears to be the current market price for manual
therapy hand instruments. We will therefore add a new equipment item
for ``manual therapy hand instruments'' (EQ416) priced at the requested
$1,795 and with a useful life of 15 years. However, since we do not
have any data at the moment
[[Page 49279]]
to support the claim from the commenters that the use of these manual
therapy hand instruments is typical in CPT codes 97140 and 97124, we
are not adding them to the equipment inputs for these two codes. The
new EQ416 equipment is not currently included in any CPT or HCPCS codes
but is available for potential future inclusion in services if the use
of manual therapy hand instruments is determined to be the typical
standard of care.
After reviewing the comments, we are finalizing our supply and
equipment pricing updates as proposed, with the modifications listed
above in response to the comments.
We proposed not to update the price of another eight supplies and
one equipment item, which were the subject of public submission of
invoices. Our reasons that we proposed not to update to these prices
are detailed in the proposed rule, and we solicited 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 (85 FR
84482 through 84483) 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 proposed 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 proposed not 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 proposed not 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 proposed
not 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 therefore proposed not 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 therefore proposed
not to update the pricing of the SM027 supply.
The following is a summary of the comments we received and our
responses.
Comment: A commenter stated that they supported the CMS decision
not to reduce the pricing on the surface electrode (SD062) supply from
$1.58 to $0.34. The commenter stated that it was their experience that
a single pack of electrodes includes 3-4 electrodes per pack; these
electrodes are sometimes sold in bulk orders of ten packs or twenty
packs, but not ten sets of ten packs of three electrodes as the
interested party indicated.
Response: We appreciate the support for our proposed pricing from
the commenter.
Comment: A commenter disagreed with the proposal to maintain the
current price of $773,104 for the radiation treatment vault (ER056)
equipment. The commenter stated that the radiation treatment vault is
unlike anything else in medicine as it is designed and constructed to
safely house a specific high-energy radiation treatment machine within
its space. The commenter stated that the vault must comply with
specific Federal and State licensing regulations to protect patients,
clinic staff, and the public from radiation exposure, and the Internal
Revenue Service rules treat radiation treatment vaults as medical
equipment. The commenter supported maintaining the classification of
the vault as a direct PE input and encouraged CMS to consider
alternative methods for identifying and valuing the vault separate from
general construction expenses.
[[Page 49280]]
Response: We appreciate the additional information supplied by the
commenter regarding the radiation treatment vault; we have also noted
many of the challenges associated with pricing this unusual equipment
and remain interested in different sources of data to assist in its
valuation.
After reviewing the comments, we are finalizing our proposal not to
update the pricing of these supply and equipment items.
(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 CY 2026 PFS proposed rule (90 FR 32593
and will consider any invoices received after February 10th or outside
of the public comment 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#ffafbaa0af8d969c9aa0b6918f8a8ba0aa8f9b9e8b9abf9c928cd197978cd1989089"><span class="__cf_email__" data-cfemail="dc8c99838caeb5bfb98395b2aca9a88389acb8bda8b99cbfb1aff2b4b4aff2bbb3aa">[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 rule. 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 implementing 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 this
rule under Table A-B6, 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 eight 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 0.55percent (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 in the rule under Table A-B8, CY 2025 PFS (89
FR 97722) 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
[[Page 49281]]
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),
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. The 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. The commenters requested that CMS either delay the pricing
update or phase-in the supply pack changes over a 4-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.
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 (83
FR 59475), 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. Based on this previously established policy,
we finalized the use of a pricing transition for three supply packs in
Table A-B4.
[GRAPHIC] [TIFF OMITTED] TR05NO25.003
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 PFS (89 FR 97722), one-third of the difference between the
CY 2025 PFS (89 FR 97722) price and the final price is implemented for
CY 2026 PFS, 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 previously in this section.
Therefore, we finalized each of them at their updated pricing for CY
2025 PFS (89 FR 97722) 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 A-B5:
[[Page 49282]]
[GRAPHIC] [TIFF OMITTED] TR05NO25.004
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 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-
year pricing transition for three supply packs as described previously
in this section.
For CY 2026, we proposed to continue implementing the supply pack
pricing update and associated revisions as previously recommended by
the RUC's workgroup. We proposed to update the price of the 15 supply
packs detailed in Table A-B5 which were received too late in CY 2025
PFS (89 FR 97722) 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 proposed these
supplies move immediately to their final prices for CY 2026.
For the 12 other supply packs, we proposed 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 proposed 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 PFS (89 FR 97722) 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
proposed the total supply pack pricing update detailed in Table A-B6:
[[Page 49283]]
[GRAPHIC] [TIFF OMITTED] TR05NO25.005
This table also includes the hydrophilic guidewire (SD089) supply
which we are proposing to transition in pricing over 3 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.
We received public comments on these proposals. The following is a
summary of the comments we received and our responses.
Comment: Several commenters stated that they supported the
proposals associated with supply pack pricing. Commenters stated that
they appreciated the proposal to initiate correction of the remaining
packs pricing such that the sum of the individual components will match
the price of the corresponding pack by CY 2028. Commenters stated that
they supported the proposal to move the prices of the surgical
instruments cleaning pack (SA043), the moderate sedation pack (SA044),
and the small ortho drapes pack (SA081) to their final prices for CY
2026 due to their modest pricing changes. Commenters also stated that
they agreed with the inclusion of the SD089 hydrophilic guidewire
supply in the updated pricing transition.
Response: We appreciate the support for our proposals from the
commenters.
Comment: Several commenters stated that although they appreciated
the 4-year pricing transition for the SA051 pelvic exam pack, they
remained concerned that even a phased-in reduction will materially
decrease practice expense RVUs for a broad range of services furnished
by gynecologists. Commenters stated that the proposed reduction did not
reflect the realities of practice expenses in today's environment since
supply and labor costs continue to rise due to inflation and market
pressures. Commenters stated that they were considering submission of
updated invoices and cost data related to the pelvic exam supply pack
and would welcome the opportunity to engage with CMS further to ensure
pricing accurately reflects costs across a range of practice settings.
Response: We share the concerns of the commenters regarding the
large decreases in pricing associated with the SA051 and SA058 supply
packs, which is why we finalized the use of a phased-in transition
period in the CY 2025 PFS final rule (89 FR 97722). However, we also
believe in the importance of valuing supply items at the most accurate
market-based pricing available, and therefore we cannot continue to
price these supply packs at rates much higher than the cost of the
individual components that make up the total packs. We welcome the
submission of updated invoices and other cost data associated with
these supply packs for potential inclusion in future rulemaking.
Comment: A commenter stated that the proposal to reduce the value
of the SA048 minimum multi-specialty visit pack by $1.01 was not the
result of a formal, transparent process. The commenter stated that the
proposal represented a significant reduction in the PE value of
occupational therapy evaluation codes as well as the valuation of 4,565
other codes. The commenter stated that CMS should not finalize any
reduction to the SA048 supply pack pricing at this time given the lack
of transparency and the significant impact on reimbursement. Another
related commenter stated that CMS should not finalize any supply pack
pricing updates until invoices have been provided to support such a
change.
Response: We noted in last year's CY 2025 PFS final rule (89 FR
97722), that 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 delayed any proposals associated with the SA048 supply
pack until the CY 2026 PFS proposed rule (90 FR 32593, in the interests
of transparency and to create an opportunity for interested parties to
provide feedback. We agree with the commenter that a large number of
CPT and HCPCS codes will be affected by the proposed pricing changes to
the SA048 supply pack. However, as noted previously in this section, we
also believe in the importance of valuing supply items at the most
accurate market-based pricing available, and therefore we cannot
continue to price these supply packs at rates much higher than the cost
of the individual components that make up the total packs. We also
remind interested parties
[[Page 49284]]
that we are transitioning these pricing changes over the next three
years to help minimize any potential disruptive effects on valuation.
After consideration of the public comments, we are finalizing our
supply pack pricing policies as proposed.
c. Technical Corrections to Direct PE Input Database and Supporting
Files
Following the publication of the CY 2025 PFS final rule (89 FR
97722), 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 proposed not 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 2 decades and, given the very
small valuation associated with their use (such as the ED004 digital
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 solicited comments on whether to maintain or remove these
equipment items.
We received public comments on these proposals. The following is a
summary of the comments we received and our responses.
Comment: Several commenters continued to disagree with the CMS
proposal to retain these 11 historic equipment items in the ratesetting
database. The commenters stated that this was faulty reasoning and
relativity should be based on actual resource costs using standard
definitions, not historical inclusion. The commenters recommended that
CMS remove all equipment items under $500 from its equipment list and
from the specific codes to conform to the definition of direct medical
equipment.
Response: We proposed to maintain these 11 equipment items out of a
desire to maintain historical continuity with prior ratesetting and to
minimize any disruption on valuation of their associated services.
However, since we received no comments requesting that these historic
equipment items be maintained, we concur with commenters that these
equipment items should be removed from the ratesetting database and any
associated CPT and HCPCS codes. The affected equipment items are as
follows:
[GRAPHIC] [TIFF OMITTED] TR05NO25.006
We are finalizing the removal of these 11 equipment items priced
below $500 from the ratesetting database and their associated CPT and
HCPS codes.
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 products
or brand names and more accurately describe the items in question. We
agree with the RUC and we proposed naming changes for the following
supplies and equipment items:
<bullet> EQ392: We proposed to rename the ``heart failure patient
physiologic monitoring equipment package'' to ``patient physiologic
monitoring equipment package''.
<bullet> ER089: We proposed to rename the ``IMRT Accelerator'' to
``Radiation Treatment Delivery Linear Accelerator''.
<bullet> SD253: We proposed to rename the ``atherectomy device
(Spectronetics laser or Fox Hollow)'' supply to ``atherectomy device''.
<bullet> SD254: We proposed to rename the ``covered stent (VIABAHN,
Gore)'' to ``covered stent (VIABAHN)''.
[[Page 49285]]
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
(89 FR 97722); 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 proposed 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 non-
facility 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 non-facility
setting is an unintended technical error; we proposed to correct this
code by removing the non-facility PE RVUs for CY 2026.
We received public comments on these proposals. The following is a
summary of the comments we received and our responses.
Comment: A commenter stated their support for all three technical
corrections. The commenter agreed that the name changes more accurately
describe the inputs and appreciated their implementation, as well as
appreciated the technical corrections to CPT codes 65780 and 15851. A
separate commenter agreed with the shift toward a generic name for the
EQ392 equipment and supported the CMS renaming proposal. Another
commenter also supported the technical correction to CPT code 65780 and
stated that it was appropriate to update the work time public use file
to reflect 35 minutes of intraservice time.
Response: We appreciate the support from the commenters for our
proposals.
Comment: Several commenters stated that CMS assigned a PC/TC
indicator of ``5'' (incident to) for CPT Code 38228 (Chimeric antigen
receptor T-cell (CAR-T) therapy; CAR-T cell administration, autologous)
when it was finalized in the CY 2025 PFS final rule. The commenters
stated that CPT Code 38228 is not an incident to service, as the
physician personally supervises the initiation of the product infusion
and is present for the first 15 to 30 minutes. The commenters
identified this as a potential technical error and recommended that CMS
update the PC/TC indicator for CPT code 38228 from a ``5'' to a ``0''
to appropriately capture the nature of the service and to align it with
other similar services such as CPT codes 38240 and 38242.
Response: We appreciate the feedback from the commenters and, after
reviewing the subject, we agree that this appears to be an unintended
technical error. We are therefore finalizing a change in the PC/TC
indicator for CPT code 38228 from ``5'' to ``0'' for CY 2026.
Comment: A commenter stated that CMS may have inadvertently removed
RVUs associated with CPT code 62287 (Decompression percutaneous, of
nucleus pulposus of intervertebral disc, any method utilizing needle-
based technique to remove disc material under fluoroscopic imaging or
other form of indirect visualization, with discography and/or epidural
injection(s) at the treated level(s), when performed, single or
multiple levels, lumbar). The commenter recommended CMS to restore the
RVUs associated with CPT code 62287 as non-CMS patients receive the
procedure regularly, and many private payers benchmark their physician
fee schedules against Medicare.
Response: CPT code 62287 was listed in the RUC recommendations as
being scheduled for deletion by the CPT Editorial Panel starting in CY
2026 due to low utilization. However, as identified by the commenter,
the CPT Editorial Panel later removed CPT code 62287 from the deletion
list and instead revised its descriptor. We will update our ratesetting
files accordingly to indicate that CPT code 62287 will remain in active
use for CY 2026.
Comment: A commenter stated that CMS revised the Medically Unlikely
Edit (MUE) for HCPCS code G0465 from ``1'' to ``2'' in April 2025,
acknowledging that when multiple blood-derived wound care treatments
are needed in one session, the administration, dressing, phlebotomy
centrifugation, mixing, etc. must be performed multiple times, and
multiple treatment kits are required. The commenter stated that HCPCS
code G0465 is subject to a Multiple Procedure (MPPR) indicator of ``2''
under which payment is generally based on the 100 percent of the
highest valued procedure and 50 percent of the fee schedule amount for
the remaining billed procedures. The commenter stated that this
indicator is designed to reflect efficiencies that typically occur in
either the PE or professional work or both when services are furnished
together, however this rationale was not supported for HCPCS code G0465
since over 90 percent of the valuation for the code is based on PE,
which is in turn almost wholly based on the cost for the blood-derived
wound care treatment kits used in the procedure. The commenter
recommended CMS to remove the MPPR by changing the Multiple Procedure
indicator from ``2'' to ``0'', which would align payment with the
corresponding change in the MUE and reflect the clinical resources
necessary to provide care using blood-derived wound care treatments.
Response: We appreciate the additional information supplied by the
commenter, however we continue to believe that HCPCS code G0465 has
been appropriately assigned a Multiple Procedure indicator of ``2''.
HCPCS code G0465 is not unique in having approximately 90 percent of
its valuation based in PE, and there are several dozen other such codes
which follow this pattern while also having a Multiple Procedure
indicator of ``2'' (such as CPT codes 19105, 27278, 33285, 47538,
55874, and HCPCS codes 0446T and 0448T). If the commenter has reason to
believe that HCPCS code G0465 is potentially misvalued, we encourage
them to consider once again formally nominating the procedure under the
misvalued code process.
Comment: Several commenters stated that CPT codes 76017, 76018, and
76019 were recommended by both the CPT Editorial Panel and the RUC to
be modifier -51 exempt. The commenters stated that to be consistent
with other modifier -51 exempt codes, the multiple procedure indicator
(MPPR) for these codes should be updated to ``0'' while the diagnostic
imaging family indicator should be updated to ``99''.
Response: We continue to believe that the indicators are
appropriately assigned for CPT codes 76017, 76018, and 76019, which
currently have a value of ``4'' for the MPPR indicator and ``88'' for
the diagnostic imaging family
[[Page 49286]]
indicator. The indicators for these codes were based on CPT codes 74183
and 75557, similar magnetic resonance imaging procedures that the RUC
recommended as source codes in the utilization crosswalk. The current
indicators for CPT codes 76017, 76018, and 76019 represent the standard
assignments for MR procedures, and as such we are not finalizing any
changes to these codes.
After consideration of the public comments, we are finalizing these
technical corrections as proposed along with the modifications noted
above in response to comments.
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 rule, 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 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 PFS
through 2014 PFS 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 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 PFS 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
[[Page 49287]]
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 PFS 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 PFS 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 stated 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 PFS 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 PFS and CY
2024 PFS 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 to work to improve the stability and
predictability of any future updates. Specifically, we 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' 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. The commenters recommended CMS
to collaborate closely with medical associations and incorporate broad
interested parties 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
[[Page 49288]]
payment under the PFS. We will continue to study possible alternatives
and have included analysis of the updated PPI and CPI Survey data in
the proposed rule, as part of our ongoing work.
As previously stated in this section and discussed in sections
II.N. and VI. of the proposed rule, we acknowledge that, at the time of
publication of the proposed rule, the AMA concluded their data
collection efforts and 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 previously in this section. 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 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 the 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
[[Page 49289]]
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 the 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 interested parties may concur with this statement 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 stated 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.
[[Page 49290]]
[GRAPHIC] [TIFF OMITTED] TR05NO25.007
At the time of the publication of CY 2026 PFS proposed rule (90 FR
32593 through 32597), 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
earlier 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 proposed not to
implement the PE/HR data or cost shares from the AMA's survey data at
this time, and proposed instead to maintain the current PE/HR data and
cost shares for CY 2026 PFS (90 FR 32593) ratesetting. At the same
time, we remain focused on proposals that reflect evolutions in
practice, including the site of service payment differential discussed
later in this section, 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.
We received public comments on these proposals. The following is a
summary of the comments we received and our responses.
Comment: Many commenters opposed CMS' decision to continue using
18-year-old survey data from 2007, stating that it no longer reflects
current healthcare practice costs. Additionally,
[[Page 49291]]
many commenters expressed concern about CMS' proposal to delay
implementation of the PPI Survey data for CY 2026, emphasizing that
reliance on outdated data undermines CMS' stated goal of improving
payment accuracy and ignores the reality that the healthcare system has
fundamentally changed over the past two decades.
The commenters highlighted significant methodological improvements
in the 2024 survey that make it superior to the 2007 approach.
Commenters stated that the 2024 PPI Survey represented a fundamental
shift from individual physician-level data collection to practice-level
data collection, encompassing 18,086 physicians across 831 departments
in 380 practices compared to the original 2,795 individual physicians
surveyed in 2007. Commenters stated that this change emphasized
practice attributes such as size, ownership, and care delivery settings
rather than individual physician characteristics, reflecting the
evolution of healthcare delivery models. Commenters stated that the
survey implemented several improvements including better representation
through sampling focused on practice characteristics that correlate
with practice expense per hour, more sophisticated imputation
techniques to address missing data, and the ability to analyze
department-level data by specialty.
The commenters recommended that the practice-level approach
provides a more accurate representation of modern healthcare delivery.
They stated that the survey addressed methodological biases present in
the 2007 data, where MEI shares were skewed toward practices with
higher expense levels, and provided data for all physicians rather than
just those reporting expenses at the individual level. Many commenters
emphasized that continuing to use 18-year-old data systematically
undervalues current practice costs while ignoring significant changes
in healthcare infrastructure, including substantial new information
technology expenses.
Addressing response rates, a commenter stated that approach used to
calculate the 7 percent response rate ``was equivalent to the American
Association of Public Opinion Research (AAPOR) standard response rate
calculation'' as it relates to whether delivered but unopened email
invitations should be included in the denominator of the response
rates. A commenter stated that non-reporting of specific data requested
by the PPI Survey ``indicates that practices often do not organize
their financial data in a way that easily translates to the methodology
underlying the physician payment schedule.'' We agree with this point
and believe that this indicates that it may be necessary to implement a
change in the PFS ratesetting so that it only requires input that can
be measured reliably.
The commenters suggested that there was concrete evidence
demonstrating substantial cost changes over time. They emphasized that
the 2024 survey revealed important cost trends, with overall direct
practice expense per hour increasing by almost 40 percent from 2007
while indirect expenses only increased by 5 percent, providing valuable
insights into specific expense category changes that reflect the
reality of contemporary medical practice and justify the need for
updated payment methodologies. A commenter requested that CMS convene
listening sessions to validate and incorporate the 2024 PPI data and
ensure the methodology is fully vetted, transparent, and reflective of
real-world practice.
Several commenters supported CMS' cautious approach, with some
expressing concerns about inappropriate specialty grouping that
combined unrelated specialties in a category called ``Office Based
Proceduralists'' despite having no meaningful correlation in practice
economics. A commenter stated that the payment rates resulting from the
use of this combined category would be ``disastrous for practices'
financial sustainability and patient access to care'' and expressed
appreciation for CMS' decision to maintain current data while working
toward better methodological approaches. A commenter requested that CMS
phase in any future implementation of revisions to the practice expense
methodology or inputs.
Response: Regardless of how many physicians are members of the
responding practices, the new PE/HR estimates and standard errors are
compatible with a wide range of true underlying PE/HR measures.
According to our calculations, the survey data cannot rule out PE/HR
values that would imply a range of at least 10 percentage points of
specialty-level impacts for 22 of 56 specialties, when measured through
95 percent confidence intervals. While we agree that the purpose of new
data is not to test changes in underlying PE/HR measures, utilizing the
PPI data would mean, in some cases, changing a specialty's total PFS
payments by 10 percentage points or more based on data that cannot rule
out PE/HR values consistent with no underlying change.
These assessments of sampling variation all assume no selection
bias or measurement error. While we agree that the survey design itself
is an improvement over the 2007 PPI Survey in terms of weighting for
practice characteristics, we believe there still is substantial risk of
measurement error. As an example, physician headcounts were the one
survey data element that could be externally validated, and it appears
to be the case that those data were substantially misreported. In its
report to the RUC, Mathematica indicates that ``the total number of
physicians was estimated to be 2,056,784, nearly three times larger
than the total number of physicians from the two sample frames, which
was 693,502.'' \7\ The inaccuracy in the data of the one survey element
that could be externally validated raises concerns about the quality of
data elements that cannot be externally validated.
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\7\ <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>, page 37.
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Regarding the AAPOR response rate, we note that AAPOR publishes six
definitions for the response rate. The version that the commenters
reference as the ``most-common AAPOR response rate'' uses an estimate
of the proportion of unknown eligibility cases that would, in fact, be
eligible. The assumption by the RUC and its contractor, Mathematica,
that none of the emails that were delivered but left unopened were for
eligible practices results in an ``upper bound'' response rate, not the
``most common'' rate. Nonetheless, our primary concern is with the
total number of responses that the data collection effort produced.
Against a planned 3,188 responses, only 380 were obtained. This low
survey yield means that even after grouping many specialties together,
the estimates are still highly exposed to sampling variation.
Regarding the perceived biases of the 2007 methodology toward the
expense allocation of practices with higher levels of expenses (even if
they had the same number of physicians who worked the same number of
hours as in practices with lower levels of expenses), we note that, as.
it relates to the PFS, the MEI is used to establish the size of the
pools of work, PE, and MP. Because specialties that have higher expense
levels also receive a larger share of total PFS payments, data from
high-expense specialties should have greater influence on the pools
than data from low-expense specialties, when measured on a per-
physician basis. In summary, the MEI should produce a sensible split of
total PFS dollars
[[Page 49292]]
between work, MP, and MP. This is done by aggregating total expenses
across practices, not by averaging shares at the physician level.
After consideration of the comments we received, we are finalizing
our proposal not to implement the PE/HR data or cost shares from the
AMA's survey data at this time, and to maintain the current PE/HR data
and cost shares for CY 2026 PFS ratesetting. We remain interested in
further information that could help inform updates to the PE/HR data or
cost shares through future rulemaking.
c. Updates To Practice Expense (PE) Methodology--Site of Service
Payment Differential
While we proposed not to incorporate the PPI and CPI Survey data
into PFS ratesetting for CY 2026, we proposed a significant refinement
to our PE methodology to better reflect trends in physician practice
settings. As detailed previously in the description of the practice
expense methodology, many services have a site of service payment
differential between the facility (F) and non-facility (NF) settings
under the PFS. Services furnished in the non-facility 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.\8\ 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.\9\ In their June 2025 Report to
Congress,\10\ 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.
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\8\ 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.
\9\ Kane CK. Physician Practice Characteristics in 2024: Private
Practices Account for Less Than Half of Physicians in Most
Specialties. American Medical Association.
\10\ 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,\11\ 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''.\12\ 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 non-facility 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 non-facility. Within the PFS relative value
system, any overstatement of practice expenses in the facility setting
would affect the allocation of indirect costs in the non-facility
setting. This dynamic, in which relative resources involved in
furnishing PFS services may not be adequately reflected in facility and
non-facility 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.<SUP>13 14 15</SUP> This could result in unnecessary costs for
payers and beneficiaries, and obstacles to physicians and other
professionals operating independent practices.
---------------------------------------------------------------------------
\11\ <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>.
\12\ 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>.
\13\ https://pmc.ncbi.nlm.nih.gov/articles/PMC4191490/
#:~:text=Using%20generally%20accepted%20accounting%20practices,to%20m
ore%20intense%20resource%20use.
\14\ <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>.
\15\ <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 non-facility setting may no longer reflect
contemporary physician practice trends. As we noted in the proposed
rule, data suggests that fewer than half
[[Page 49293]]
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 proposed to reduce the portion of the
facility PE RVUs allocated based on work RVUs to half the amount
allocated to non-facility PE RVUs beginning in CY 2026. This change
will 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 change to the methodology, where we will reduce the
portion of the facility PE RVUs allocated based on work RVUs to half
the amount allocated to non-facility PE RVUs, CPT code 33533 would have
approximately 7.2 indirect PE RVUs.
We noted in the proposed rule that this 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 non-facility settings. We compare this 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 in the proposed rule, 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 earlier 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 sought 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 also sought 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 non-facility PE RVUs
is an appropriate reduction or whether we should consider a different
percentage reduction for CY 2026 or in future years. While our 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 solicited 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 update will 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 the proposed rule for discussion of the
impacts of this proposal on CY 2026 PFS ratesetting.
We specifically solicited comments on whether and how this 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 non-facility setting, we also
solicited comment on whether we should include these services in our
policy to reduce the allocation of PE based on work in the facility
setting.
We requested comments on all aspects of this proposal, including
ways to improve the allocation of facility and non-facility PE RVUs in
the future. We also solicited 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).
We received public comments on these proposals. The following is a
summary of the comments we received and our responses.
Comment: Some commenters strongly supported CMS' proposal. These
supporters indicated that the proposed change increases the accuracy of
the PFS and/or advances site-neutral payments. These commenters
applauded CMS' efforts to align payments between sites of care, stating
that payment differentials by site of care increase costs without
accompanying quality improvements. The commenters also noted that
overall pay differences between hospital outpatient departments and
physician offices for the same services put independent practices at a
competitive disadvantage. Some commenters suggested that CMS should
reduce the allocation further, allocating only one third of the
indirect PE from the work RVU in developing PE RVUs, given that only
35.4 percent of physicians own their own practice.
Response: We appreciate these comments on the proposal. We agree
that updating these assumptions will improve the accuracy of the RVUs
assigned to different settings of care. We also recognize that reducing
unnecessary or unwarranted payment differences across settings of care
would likely have significant benefits in leveling the playing field.
We appreciate commenters' interest in reducing the allocation of
indirect PE RVUs beyond the proposal for the reasons the commenter
suggested. We note that we will continue to seek and be open to
information regarding how to refine the allocation methodologies in
future notice and comment rulemaking.
Comment: Several commenters opposed the proposal. Some of these
commenters stated that the proposal lacks face validity and is based on
arbitrary assumptions rather than empirical data. The commenters stated
that CMS should explore more sophisticated methodologies, grounded in
actual cost data and reflecting real-world complexity of physician
practice arrangements, rather than implementing the proposed blanket
reduction approach that relies on broad generalizations. Many
commenters requested that if CMS does implement this proposal, it
allocates 75 percent of the indirect PE based on the work RVUs, and/or
that the proposal be phased in over 3 to 4 years. Some of these
commenters noted that PE changes of similar magnitude have historically
been implemented over several years, such as clinical labor pricing
adjustments and supply/package corrections. A commenter stated that
[[Page 49294]]
CMS declined to adopt the 2024 AMA PPI survey data due to
representativeness concerns yet simultaneously proposed sweeping
methodological changes that also haven't been validated. Multiple
commenters stated that CMS should not finalize this provision without
conducting comprehensive additional data analysis to understand the
full implications of the proposed changes.
Response: We appreciate these commenters and their concerns. We
acknowledge that the proposal recognizes a change in the underlying
assumptions that are made in the PE methodology based on broad changes
in the marketplace that have occurred in the three decades since the
methodology was originally established. The underlying assumptions in
the methodology, both the status quo that assumes no variation
whatsoever in indirect costs per work RVU between settings of care and
under the proposal that would allocate half the amount of indirect
costs, are not driven by precise numbers, and the proposed change will
better recognize the relative resources involved in furnishing services
paid under the PFS in facility and non-facility settings. We are also
eager to consider more precise data to help refine the allocation
methodologies for future rulemaking, should such data become available.
We also recognize that we have historically phased in some significant
changes in PE data and methodology over several years. However, in the
case of this proposed change, we note that we consider our proposal
itself to be a tempered one, considering (as other commenters have
noted) that significantly fewer than 50 percent of practitioners own
their own practice. Furthermore, while a multi-year transition would
mean mitigating reductions for facility services, it would also reduce
the increases in payment that would otherwise be made for non-facility
services. Such a phase-in would perpetuate the overall site of service
payment disparities that have clearly contributed to significant
distortions in the market where the difference between overall payment
for services in facility settings compared to non-facility settings
continues to grow.
Comment: Some commenters raised concerns about disproportionate
impacts on providers in rural and underserved areas, stating that these
providers already face significant challenges in providing specialized
care to vulnerable Medicare populations. Other commenters specifically
noted that the proposal would improve access, particularly in rural
areas, where maintaining independent practices is often the only way
patients can access timely treatment. A commenter stated that the lack
of comprehensive impact analysis on different geographic regions,
practice types, and patient populations represents a significant
oversight that could lead to unintended access problems and practice
closures in areas where healthcare resources are already scarce.
Response: We share commenters' interest in the care of
beneficiaries in rural and underserved areas. We believe that updating
the assumptions that underly the methodology will result in more
accurate valuation across settings and agree with commenters that
improved valuation that better recognizes the costs of care in non-
facility settings will be beneficial to many of those that practice in
rural communities. We acknowledge that facility-based care can also be
an important part of care in rural and underserved communities, and we
note CMS' efforts to mitigate risks for rural providers in the context
of the OPPS and related policies. For these reasons we remain
interested in understanding the impact of PFS payment on both rural
providers and physicians and other practitioners. We believe that on
balance, this policy will support independent practices, including in
rural areas, and that for these practices, it may be all the more
urgent that we update the assumptions embedded in the PE methodology to
better reflect current practice. We did not receive comments addressing
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. While we received comments
suggesting that we should allow a higher percentage for indirect PE
allocation based on work RVUs, such as 75 percent, commenters did not
provide a justification for this figure. In contrast, commenters that
suggested that CMS only allocate one third of the indirect PE
allocation based on work RVUs in the facility setting stated that this
was justified given that 35.4 percent of physicians own their own
practice. As stated in the CY 2026 PFS proposed rule (90 FR 32593), we
believe that 50 percent is a conservative estimate of the actual
indirect practice expense that should be allocated based on the work
RVU. Several commenters acknowledged that they did not have any
evidence suggesting that the 50 percent reduction is inaccurate. We
note that we, as well as interested parties such as MedPAC, have long
been concerned about the allocation of indirect PE in the facility
setting given our imperative to establish RVUs that reflect the
relative resources involved in furnishing services, and have been
developing policy approaches to address this issue for several years.
We carefully considered analyses done over several years by MedPAC and
RAND and believe this proposal is a relatively measured step toward
addressing the overstatement of indirect costs incurred by facility-
based physicians.
Comment: Several commenters stated that CMS' fundamental
assumptions regarding employed physician costs are disconnected from
the reality of modern healthcare practice arrangements. These
commenters stated that despite the documented trend toward declining
private practice ownership and increasing physician employment by
larger health systems, the assumption that employed physicians do not
incur significant administrative and overhead costs is incorrect. The
commenters stated that physicians providing care in facility settings
continue to face substantial indirect costs including coding, billing,
scheduling, and administrative overhead, regardless of their employment
status. The commenters stated that the AMA's PPI survey data provides a
concrete quantification of these costs, with estimates of indirect
costs of $57 per hour for hospital-based medicine and $62 per hour for
hospital-based surgery. The commenters stated that many hospital-
employed physicians operate under arrangements where practice expense
costs are charged back to their departments, including rent or leasing
space based on square footage used, staffing costs, billing
infrastructure, and administrative support. Another commenter noted
that some independent medical groups have professional service
contracts with hospitals, rather than employment arrangements. The
commenters stated that the proposed flat 50 percent reduction to the
work RVU allocator fails to account for these varied arrangements and
represents an oversimplified approach to a complex issue. The
commenters requested that CMS focus on collecting up-to-date
information on the true cost of practicing in facility vs. non-facility
settings before assuming differences warrant a 50 percent reduction.
Response: We appreciate these comments, and we acknowledge that
practice arrangements vary significantly in current practice. Again, we
remain open to more specific data that addresses the variability, as
well as
[[Page 49295]]
feedback on how to update the valuation and payment methodologies to
better reflect the relative resources involved in furnishing the
services. In the meantime, we continue to believe the underlying
assumptions within the methodology should be reasonably grounded in the
best information available. We agree with commenters that physicians
generally incur indirect costs in the facility setting, and that is why
we retained allocating significant amounts of indirect PE RVUs per work
RVUs in the facility setting. As some commenters pointed out, in many
cases the proposed allocation may still overestimate indirect costs.
Under the current methodology, there are only two sites of service
where PE RVUs vary (nonfacility and facility). . We believe that the
proposed policy more accurately reflects indirect PE in the facility
setting compared with the previous assumption that the indirect costs
are relatively equal. With respect to comments about the PPI survey
data, as detailed in section II.B of this final rule, we are concerned
that given the low response rate of the PPI survey data, the indirect
cost estimates are not an accurate reflection of the typical indirect
PE costs faced by physicians who furnish most of their services in the
facility setting.
Comment: A commenter stated that CPT codes with bundled post-
operative visits often have follow-up visits performed in a physician
office even when surgery is performed in facility settings, and that
the proposal does not account for these indirect PEs. The commenter
also noted that CMS includes direct PE inputs for several thousand
services valued in the facility setting, and these direct costs
correlate with indirect costs, stating that the presence of these
direct costs indicate that indirect PEs are incurred for services
furnished in the facility setting.
Response: We did not propose to change the allocation of indirect
costs based on direct costs in the facility setting. Instead we
proposed that beginning in CY 2026 we would combine the direct PE
inputs with 50 percent of the work RVU, and we believe this provides a
reasonable basis on which to allocate the indirect PE for services
furnished in the facility, including those that have postoperative
visits that occur in the non-facility setting. We also note that we
retain interest in developing improved approaches to valuing and paying
for care furnished during global surgery periods, and we are
particularly interested in how to best address the lack of site of
service differential for post-operative visits under the current
construct.
Comment: Some commenters stated that the proposed reductions
threaten medical education infrastructure critical to addressing
physician shortages. The commenters indicated that many primary care
residencies, physician assistant programs, nursing education programs,
and behavioral health training sites operate in facility-affiliated
clinics and depend on current payment structures for financial
viability. The commenters expressed concern that given existing primary
care and behavioral health workforce shortages, the policy could lead
to program closures, reduced training capacity, and fewer healthcare
providers serving Medicare beneficiaries.
Response: We appreciate the concerns from commenters regarding
health care infrastructure costs. As a general matter, we believe that
the PE RVUs under the PFS are required to reflect the costs incurred by
physician and professional practices, not by larger institutions.
Comment: Several commenters recommended CMS consider exemptions for
particular services, such as for:
<bullet> Services provided by training programs, to preserve the
educational mission while still achieving the policy's intended goals.
<bullet> Specific behavioral health codes, which are critical for
developmental, neuropsychological, and chronic illness management.
<bullet> Rural physicians who split time between office and
facility settings.
<bullet> Retinal specialists requested an exception given that 76
percent of retinal specialists are in private practice.
<bullet> Hospital inpatient and observation services (CPT codes
99221-99239) and nursing facility E/M services (CPT codes 99304-99316).
Commenters specifically noted the unexpected payment differential
between E/M services provided to patients in skilled nursing facility
(which is a facility setting under the PFS) versus nursing facility
(which is a nonfacility setting under the PFS) stays.
Response: We acknowledge the comments requesting exemptions for
specific services or providers. While we have reviewed these requests,
we are not persuaded that there are exceptions to be implemented that
are consistent with the assignment of PE RVUs
[…truncated; see source link]Indexed from Federal Register on November 5, 2025.
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