[Federal Register: November 2, 1998 (Volume 63, Number 211)]
[Rules and Regulations]               
[Page 58863-58912]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02no98-17]
 
[[pp. 58863-58912]] Medicare Program; Revisions to Payment Policies and Adjustments 
to the Relative Value Units Under the Physician Fee Schedule for 
Calendar Year 1999

[[Continued from page 58862]]

[[Page 58863]]

the applicable fee schedule amount will be the amount established for 
comparable services as specified by the Secretary. Therefore, we 
revised our policy so that the existing fee schedules for prosthetic 
and orthotic devices, durable medical equipment, and supplies, and 
drugs and biologicals apply when these services are furnished by a 
CORF. We believe that these fee schedules, together with the physician 
fee schedule, will encompass all CORF services other than nursing 
services. The physician fee schedule amount applicable to services 
furnished in a nonfacility setting will apply to the services furnished 
by the CORF since no separate payment will be made for facility costs.
    To establish a fee schedule amount for nursing services delivered 
within a CORF, we created a new HCPCS code, G0128. We have defined this 
code as direct face-to-face skilled nursing services delivered to a 
CORF patient as part of a rehabilitative plan of care. It is a timed 
code and can be billed for 10-minute intervals (when the initial 
interval is longer than 5 minutes). G0128 is to be used for services 
that are not included in the work or practice expense of another 
therapy or physician service. An example might be a nurse who spends 33 
minutes instructing a patient in the proper procedure of ``in and out'' 
urethral catheterization; in this situation, 3 units of G0128 would be 
billed. We are setting the RVUs for this code at 0.26, based upon half 
the value of the lowest level physician follow-up visit, HCPCS code 
99211, in the nonfacility setting. This results in a payment that is 
slightly more than the average wage reported by the Bureau of Labor 
Statistics (BLS) for registered nurses, inflated to reflect benefits 
and overhead (using the fringe benefit and expense factor used to 
establish the salary equivalency guideline).
    Comment: One commenter supported the use of the nonfacility 
physician fee schedule for therapy services performed in an SNF and 
CORF; however, clarification was requested as to whether the facility 
or the nonfacility physician fee schedule will be used for hospital 
outpatient departments.
    Response: The physician fee schedule payment amount applicable to 
outpatient rehabilitation services furnished by hospitals is the same 
as that for SNFs, CORFs, and other outpatient rehabilitation providers. 
That is, hospitals will be paid for these services under the 
nonfacility component of the physician fee schedule.
(5) Site-of-Service Differential
    We did not propose a site-of-service differential for providers of 
outpatient rehabilitation services as suggested by some of the 
providers prior to publication of our proposed rule. That is, we did 
not propose a payment amount greater or lesser than that provided by 
the physician fee schedule for some of the types of providers or sites 
at which outpatient rehabilitation services are furnished.
    As explained in our proposed rule, the law requires that these 
services be paid the amount determined ``under the fee schedule 
established under section 1848.'' Furthermore, we believe higher 
payment amounts for certain facilities, such as CORFs or rehabilitation 
agencies, would create payment incentives that favor one site or 
setting over another. We believe the statute establishes a ``level 
playing field'' for these services. We find no directive in the 
statutory language or legislative history that we recognize higher 
costs that some providers argue might be associated with furnishing 
services in a provider setting. To the extent that CORFs or 
rehabilitation facilities provide services to patients who need 
additional care, CORFs or rehabilitation facilities may bill for 
additional, medically necessary services. For these reasons, we are not 
revising our policy to allow for a site of service adjustment or higher 
payment amount for specific settings.
    Comment: One commenter believes the work RVU should be the same 
regardless of setting; however, the commenter contends that the 
practice expense component may differ among the settings. The commenter 
states that the impact of any unique regulatory requirements among 
settings on the cost of furnishing services should be determined.
    Response: As stated above, we find no statutory or legislative 
basis for recognizing a distinct payment differential that is site 
specific. Therefore, we are not revising our policy to allow for a 
payment differential among settings.
(6) Mandatory Assignment
    Section 1834(k)(6) of the Act, as added by BBA, establishes a 
restraint on billing for outpatient rehabilitation therapy services; 
that is, this provision requires that services paid under section 
1834(k) of the Act are subject to mandatory assignment under the same 
terms applicable to practitioners under section 1842(b)(18) of the Act. 
Therefore, we have revised our policy in accordance with this provision 
to require mandatory assignment for services provided under the 
outpatient rehabilitation prospective payment system by hospitals, 
SNFs, HHAs, rehabilitation agencies, public health agencies, clinics, 
and CORFs. The mandatory assignment provision does not apply to therapy 
services furnished by a physician or ``incident to'' a physician's 
service or to services furnished by a physical therapist in private 
practice or an occupational therapist in private practice. However, 
when these services are not furnished on an assignment-related basis, 
the limiting charge applies.
2. Uniform Procedure Codes for Outpatient Rehabilitation Services
    Section 4541(a)(2) of BBA added section 1834(k)(5) to the Act. This 
new statutory provision requires that claims submitted on or after 
April 1, 1998 for outpatient physical therapy services, including 
speech language pathology services and outpatient occupational therapy 
services, include a code under a uniform coding system that identifies 
the services furnished.
    The uniform coding requirement is needed to ensure proper payment 
under the physician fee schedule. Hospitals, SNFs, HHAs (for 
individuals who are not eligible for home health services), CORFs, and 
outpatient physical therapy providers must use HCPCS codes to report 
outpatient rehabilitation services when furnished to their outpatients. 
Hospitals and SNFs that provide outpatient rehabilitation services to 
their inpatients who are entitled to benefits under Part A but who have 
exhausted their benefits for inpatient services during a spell of 
illness or to their inpatients who are not entitled to benefits under 
Part A are also required to report HCPCS codes.
    In March, 1998, we issued Program Memorandum AB-98-8 which 
describes the coding for outpatient rehabilitation services and 
identifies certain HCPCS codes available for billing by CORFs that are 
not generally rehabilitation services, including vaccinations and 
nursing services. This memorandum also specifies how these codes will 
be reported on the UB-92. We assigned the various codes to revenue 
centers, that is, physical therapy, occupational therapy, and speech-
language pathology, for purposes of applying the financial limitation 
described below. Assigning codes to revenue centers was not intended to 
limit the scope of practice or range of procedures that could be 
furnished by therapists in a particular discipline. We recognize that 
many therapy services, for example, physical therapy

[[Page 58864]]

modalities or therapy procedures as described by HCPCS codes are 
commonly delivered by both physical and occupational therapists. Other 
services may be delivered by either occupational therapists or speech-
language pathologists.
    Therefore, in July 1998, we issued PM A-98-24 which in effect 
constituted a reissuance of PM A-98-8 in its entirety. PM A-98-24 was 
intended, in part, to clarify PM AB-98-8 regarding the reporting of 
HCPCS codes for outpatient rehabilitation and CORF services and to 
instruct fiscal intermediaries to eliminate edits installed to match 
revenue centers to outpatient rehabilitation HCPCS codes in order to 
cap therapy services. HCFA did not intend for such edits to be 
installed and employed. Thus, PM A-98-24 instructed fiscal 
intermediaries to eliminate the edits for services furnished on or 
after October 1, 1998. However, in response to industry concerns, on 
August 6, 1998, we issued a memorandum to all fiscal intermediaries 
advising them to remove immediately any coding edits imposed to match 
outpatient rehabilitation HCPCS codes to revenue codes.
    Comment: We received three comments regarding PM A-98-24 issued 
July 1998. The commenters stated that confusion remains regarding the 
effective date of the memorandum. Also, they urged that we instruct 
carriers to not deny claims based on the practitioners' failure to 
comply with coding requirements until there is a clarification 
regarding the manner in which the coding requirement is to be 
implemented. One commenter recommended that fiscal intermediaries be 
required to adhere to revised PM A-98-24, effective immediately. The 
commenter contended that claims wrongly denied based on PM AB-98-8 
should be promptly paid based on the claims originally submitted by 
providers.
    Response: We apologize for the confusion. As noted above, PM A-98-
24 carried an effective date of October 1, 1998 for fiscal 
intermediaries to remove any edits installed to match revenue center to 
HCPCS coding for outpatient rehabilitation services. As also stated 
above, on August 6, 1998 we issued a subsequent memorandum to all 
intermediaries advising them to remove the edits immediately. Providers 
and practitioners were encouraged to resubmit any claims that were 
incorrectly denied due to misinterpretation of our instructions for 
billing outpatient rehabilitation services using HCPCS codes.
    Comment: We received one comment recommending that the definition 
of outpatient rehabilitation services be expanded to include payment 
for low-vision training. The commenter stated that Medicare's failure 
to cover low-vision training places beneficiaries at risk for extreme 
out-of-pocket expenditures for transportation services, home-bound 
visits, and psychological counseling.
    Response: We have not accepted the commenter's recommendation. 
Outpatient rehabilitation services are clearly defined in the statute. 
Low-vision training is not specifically mentioned in the statute, and 
we find no statutory or legislative basis for including low-vision 
training in the definition of outpatient rehabilitation services. 
Therefore, we cannot arbitrarily expand our definition of outpatient 
rehabilitation to encompass low-vision training.
    Since the statute does not specifically identify low-vision 
training as a separate Medicare benefit and does not provide a basis 
for including it under the outpatient rehabilitation benefit, carriers 
have the discretion to cover these low-vision training services if they 
determine that they meet the statutory requirements applicable to 
covered services and are determined to be medically reasonable and 
necessary.
    Comment: A commenter recommends that CPT codes 92520, 94799, and 
psychiatric therapeutic codes after 90804 be added to the list of 
outpatient rehabilitation services. The commenter stated that code 
94799 is currently recognized by Blue Cross and Blue Shield of Florida. 
The commenter also stated that, in addition to code 90804, other 
psychiatric therapeutic codes should be added for assessments and 
community resource education, referral and advocacy, family 
conferences, and home assessments.
    Response: The commenter asked that we add code 92520, laryngeal 
function studies, to our list of outpatient therapy codes. Our data 
show that this code is almost entirely billed by otolaryngologists. Our 
standard for the inclusion of diagnostic tests as outpatient 
rehabilitation services is as follows:
    <bullet> If the primary purpose of a diagnostic test, at times 
performed by therapists, is to assess the appropriateness or 
effectiveness of outpatient therapy services or to guide additional 
treatment by a physical therapist, an occupational therapist or speech-
language pathologist, then the test is considered to be outpatient 
therapy or rehabilitation services; or
    <bullet> If the primary purpose of the diagnostic test is to 
provide information on decisions for future medical or surgical 
treatment or to assess the effect of previous medical or surgical 
treatment, then the diagnostic test is not considered to be an 
outpatient therapy or rehabilitation service.
    Because the purpose of code 92520 is not clear to us and because 
our data show that it is performed overwhelmingly by otolaryngologists, 
we suggest that providers and practitioners who believe it meets the 
above criteria as an outpatient rehabilitation service provide 
information to their Medicare contractors and the contractors can 
approve it if it meets the coverage criteria of being ``medically 
necessary.'' We advised our carriers and fiscal intermediaries in PM 
AB-98-24 that they may recognize codes other than those identified in 
our instruction as outpatient rehabilitation services to the extent 
that the codes represent services that are determined to be medically 
necessary and within the scope of practice of the practitioner or 
therapist billing the service.
    The commenter asked that code 94799, unlisted pulmonary services or 
procedures, be added to the list of outpatient rehabilitation services. 
Again, we suggest that practitioners and providers that wish to use 
this code to describe an outpatient rehabilitation service discuss with 
their Medicare contractor the specific services or procedures being 
provided when this code is used. Before this code can be used, the 
Medicare contractor needs to determine whether the services are 
``medically necessary.''
    The commenter also asked that we add other psychotherapy codes from 
the family of codes that includes 90804 that is on our list of 
outpatient rehabilitation services. Clinical psychologists and clinical 
social workers who deliver services in CORFs can bill any of the 
psychotherapy codes except for the ones that involve medical evaluation 
and management. These services are billed under Part B and are 
submitted to carriers on the HCFA form 1500. Therefore, these codes 
will not be added to our list of outpatient rehabilitation services.
    Comment: One commenter recommended adding to our final rule the 
statement contained in PM A-98-24 that denotes that other codes may be 
considered to represent outpatient rehabilitation services to the 
extent that the services are determined to be medically reasonable and 
necessary and can be billed as outpatient rehabilitation services.

[[Page 58865]]

    Response: Although we have included the statement in the text in 
the regulation, we will consider other codes to be outpatient 
rehabilitation codes under the terms we have stated.
    Comment: One commenter requested that we clarify in the final rule 
that Addendum F contains the codes for reporting outpatient 
rehabilitation services.
    Response: We appreciate the suggestion. It was inaccurately 
reported in the proposed rule that Addendum E contains a listing of 
outpatient rehabilitation therapy codes. It should have read that 
Addendum F contains such a listing. We have made the appropriate 
correction in this rule.
3. Financial Limitation
    a. Overview. Outpatient rehabilitation therapy services are subject 
to annual financial limitations or caps beginning January 1, 1999. (The 
amount of the current cap is $900.) There will be a $1,500 per-
beneficiary annual limitation or cap on incurred expenses for 
outpatient physical therapy services including outpatient speech-
language pathology services. A separate $1,500 per-beneficiary 
limitation will apply on incurred expenses for outpatient occupational 
therapy services. The annual limitation does not apply to services 
furnished directly or under arrangements by a hospital to an outpatient 
or to an inpatient who is not in a covered Part A stay. The limitation 
will apply to outpatient rehabilitation services furnished by a 
separately-certified hospital-based provider, such as a hospital-based 
SNF. The limitation also applies to outpatient rehabilitation services 
furnished by a physician or nonphysician practitioner, or incident to a 
physician's professional services or to a nonphysician practitioner's 
professional services.
    As stated above, there is a single $1,500 limitation for outpatient 
physical therapy services which includes outpatient speech-language 
pathology services. As amended, section 1833(g) of the Act applies a 
single $1,500 limitation to ``physical therapy services of the type 
described in section 1861(p).'' Section 1861(p) defines outpatient 
physical therapy services and includes speech-language pathology 
services within that definition.
    Outpatient rehabilitation services are subject to a 20-percent 
coinsurance amount. Under the outpatient prospective payment system, 
the beneficiary will be responsible for 20 percent of the applicable 
fee schedule amounts. The $1,500 limitation is on incurred expenses. If 
a beneficiary has already satisfied the Part B deductible, the maximum 
amount payable by the Medicare program is $1,200, that is, 80 percent 
of $1,500. Beginning January 1, 2002, the $1,500 annual limitations or 
caps will be increased by the percentage increase in the MEI.
    In addition to outpatient physical therapy services and outpatient 
occupational therapy services (other than those provided by a 
hospital), the limitation applies to physical therapy services 
(including speech-language pathology services) and occupational therapy 
services ``of such type which are furnished by a physician or as 
incident to a physician service.'' As discussed elsewhere in this 
document, Medicare covers under certain conditions services performed 
by nurse practitioners, clinical nurse specialists, and physician 
assistants that would be physicians' services if furnished by a 
physician. We are applying the financial limitation to therapy services 
furnished by these nonphysician practitioners because such therapy 
services are by definition the same type as are furnished by 
physicians. Similarly, we have revised our policy to apply the 
financial limitation to therapy services furnished incident to these 
nonphysician practitioner's services. We have included in Addendum D a 
listing of the specific services that are subject to the limitation 
when furnished by a physician or practitioner directly or incident to 
his or her services. Such outpatient rehabilitation services included 
in Addendum D furnished either directly or incident to the services of 
a physician or practitioner are always subject to the financial 
limitation. Other services such as casting, splinting, and strapping 
may be used in the treatment of conditions (for example, fractures or 
sprains) or as part of the postsurgical treatment or medical treatment 
when no other rehabilitation services are delivered. If the services 
are delivered by a physical or occupational therapist, speech-language 
pathologist, therapy assistant or therapy aide, are part of a 
rehabilitation plan of care, or involve services included in the 
aforementioned Addendum D, then the services are subject to the cap. 
These outpatient rehabilitation services are delineated in Addendum E 
and must be identified with a discipline-specific modifier. Addendum F 
contains a listing of commonly-utilized outpatient rehabilitation 
therapy codes. Other codes may be considered for payment as outpatient 
rehabilitation services to the extent that the services are determined 
to be medically reasonable and necessary and those that can be 
performed within the scope of practice of the therapist, physician, or 
nonphysician practitioner billing the code. Payment for certain HCPCS 
codes will be made on a basis other than the physician fee schedule in 
hospital outpatient departments. Other HCPCS codes represent CORF 
services. Further, PM AB-98-63 dated October 1998 provides additional 
program instructions regarding the use of HCPCS codes for outpatient 
rehabilitation therapy services.
    With regard to ``incident to'' services, we note that section 
4541(b) of BBA amended section 1862(a) of the Act to require that 
outpatient physical therapy services (including speech-language 
pathology services) and outpatient occupational therapy services 
furnished ``incident to'' a physician's professional services meet the 
standards and conditions (other than any licensing requirement 
specified by the Secretary) that apply to therapy services furnished by 
a therapist. This provision was effective January 1, 1998 and was 
implemented through program instructions.
    The financial limitations apply only to items and services 
furnished by nonhospital providers and therapists under the outpatient 
physical therapy (including speech-language pathology) and the 
outpatient occupational therapy benefit (section 1861(s)(2)(D) of the 
Act) and therapy services furnished by physicians and nonphysician 
practitioners or incident to their services. The limitations do not 
apply to diagnostic tests covered under section 1861(s)(3) of the Act 
or to items furnished or covered under the durable medical equipment 
benefit.
    Comment: Some commenters urged us to repeal the limitation.
    Response: We have no authority to repeal the annual financial 
limitation as set forth in BBA. An annual per beneficiary limit of 
$1,500 will apply to all outpatient physical therapy services 
(including speech-language pathology services). A separate $1,500 limit 
will also apply to all occupational therapy services. As noted above 
the annual limitations do not apply to services furnished directly or 
under arrangements by a hospital to an outpatient or to an inpatient 
who is not in a covered Part A stay. This limitation applies to 
expenses incurred on or after January 1, 1999.
    Comment: Several commenters want us to delay implementing the 
financial limitation while others asked that, if we proceed with 
implementation, we clarify how we would implement it. We received one 
comment suggesting that we delay the implementation of the annual 
limitation until we develop a

[[Page 58866]]

system of tracking the aggregate amount of speech-language pathology 
expenses incurred by a beneficiary.
    Response: As previously stated, because of our efforts to become 
Y2K compliant, with the exception of qualified therapists in 
independent practice, we are not able to make the appropriate systems 
changes to fully implement the caps on a per-beneficiary basis at this 
time. Instead, we will use a transitional measure, whereby providers 
and practitioners (those not currently subject to the caps, for 
example, physicians and nonphysician practitioners) will be held 
accountable for tracking incurred expenses for each beneficiary to 
ensure they do not bill Medicare for beneficiaries that have met the 
annual $1,500 limitation at their facility for each separate 
limitation. This means that SNFs will be directly responsible for the 
billing of all outpatient rehabilitation services and the tracking of 
incurred expenses of those services when furnished to SNF residents not 
in a covered Part A stay and SNF nonresidents receiving outpatient 
rehabilitation services from the SNF.
    However, the provider and the practitioner may submit bills to 
Medicare for the sole purpose of receiving no-pay notices to bill 
Medicaid or other insurers.
    It is noted that the current annual per beneficiary financial 
limitation applied to outpatient physical therapy services including 
speech-language pathology services furnished by PTIPs is increased from 
$900 to $1,500 effective January 1, 1999 for PTPPs. In addition, the 
current annual per beneficiary financial limitation applied to 
outpatient occupational therapy services is increased from $900 to 
$1,500 effective January 1, 1999 for OTPPs. As cited, for these 
qualified therapists only, the financial limitations continue to be 
applied on an annual per beneficiary basis rather than on a per 
provider basis.
    Comment: Many commenters believed there should be three separate 
annual financial limitations, that is, one each for physical therapy, 
occupational therapy, and speech-language therapy services. They argue 
that the Congress never intended to include speech-language pathology 
services within the physical therapy cap because speech therapists have 
never been defined as independent therapists and were never subject to 
the current $900 cap.
    Response: As stated above, section 1861(p) of the Act defines the 
term outpatient physical therapy services to include speech-language 
pathology services. The language in BBA specifically makes provision 
for physical therapy services and occupational therapy services in 
applying the annual financial limitation and does not separately 
mention speech-language pathology services. It is our position that BBA 
does not include a separate cap for speech-language pathology services, 
and that there are only two financial limitations (OT and PT that 
includes speech-language therapy services).
    Comment: Two commenters oppose the imposition of the $1,500 cap 
because it is not sufficient to cover the cost of physical therapy for 
many common diagnoses or cost of care for typical rehabilitation cases. 
One of the commenters noted that MedPAC found in its June 1998 report 
to Congress that one third of the patients receiving outpatient 
rehabilitation services from rehabilitation agencies and CORFs exceeded 
either the combined $1,500 cap on outpatient physical therapy and 
speech-language pathology or the $1,500 cap on outpatient occupational 
therapy.
    Response: The commenter is correct in stating that the MedPAC's 
study of a 5-percent sample of Medicare outpatient rehabilitation 
claims for 1996 did find that about one-third of all patients receiving 
outpatient rehabilitation services from rehabilitation agencies and 
CORFs exceeded the $1,500 caps. However, the study noted that because 
most Medicare beneficiaries received the services in hospital 
outpatient departments in 1996, the percent of all patients impacted by 
the $1,500 caps is considerably less, that is, only 10 percent of all 
outpatient physical and speech therapy patients receiving services in 
hospital outpatient departments, rehabilitation agencies and CORFs and 
only 2 percent of all occupational therapy patients in those three 
settings.
    We plan to carefully study this issue. As discussed elsewhere in 
this document, BBA requires that we submit a report to the Congress by 
January 1, 2001 that recommends viable options for replacing the 
current dollar caps that take into account patient diagnosis and prior 
use of services.
    Comment: One commenter stated that the limitation should apply only 
to therapy services furnished by physical therapists and occupational 
therapists, and not to therapy services furnished by physicians. 
Another commenter contends that the cap applies solely to therapists 
and physicians furnishing outpatient rehabilitation services under a 
plan of care. Neither commenter believes that nonphysician 
practitioners should be allowed to perform therapy services. These 
commenters argue that only physical therapists or services provided 
under the supervision of a physical therapist should be reimbursed by 
Medicare. The commenters maintain that the definition of physical 
therapists as referenced in Sec. 485.705(b) and the coverage guidelines 
specified in section 2210.B of the MCM and 3101.8B of the MIM are not 
met if the services are provided by persons other than physical 
therapists. In addition, the statute does not extend the cap to 
services furnished by practitioners other than OTIPs and PTIPs.
    Response: Section 4541 of BBA provides for a prospective payment 
for outpatient rehabilitation services. The operative word in the 
statute is ``services''. Reference is made both to the payment for 
outpatient therapy services and comprehensive outpatient rehabilitation 
services on the basis of the physician fee schedule and to the 
financial limitation for all rehabilitation services. The fee schedule 
is applied to outpatient therapy or rehabilitation services without 
regard to the practitioner who furnishes the service. Physical and 
occupational therapy services furnished by physicians and certain other 
recognized practitioners are payable under the physician fee schedule. 
A nonphysician practitioner who provides services that would be 
physicians' services if furnished by a physician under a specific 
enumerated benefit in the statute would be considered as the physician 
treating the beneficiary. Thus, a nonphysician practitioner would be 
considered as the physician treating the beneficiary when he or she 
furnishes outpatient physical therapy and occupational therapy 
services. Nonphysician practitioners who meet this definition are 
physician assistants (section 1861(s)(2)(K)(I) of the Act); and nurse 
practitioners and clinical nurse specialists (sections 
1861(s)(2)(K)(ii) and 1861(s)(2)(K)(iii) of the Act), operating within 
the scope of their State licenses.
    B. Use of Modifiers to Track the Financial Limitation. We have 
established three discipline-specific modifiers for use in tracking the 
financial limitation or cap. They are listed below.

GN  Services delivered personally by a speech-language pathologist or 
under an outpatient speech-language pathology plan of care;
GO  Service delivered personally by an occupational therapist or under 
an outpatient occupational therapy plan of care; or
GP  Service delivered personally by a physical therapist or under an 
outpatient physical therapy plan of care.


[[Page 58867]]


    Reporting of these modifiers will also assist us in gathering data 
on who is providing the services, and the frequency and duration of the 
services. Many of the services, for example, physical modalities or 
therapeutic procedures as described by HCPCS codes, are commonly 
delivered by both physical and occupational therapists. Other services 
may be delivered by either occupational therapists or speech-language 
pathologists. For these services, we expect the claim to include a 
modifier that describes the type of therapist who delivered the 
service; if the service was not delivered by a therapist, then the type 
of therapy plan of care under which the service is delivered would be 
specified. If the type of therapy is not listed in the modifier field, 
the claim would be rejected and sent to the provider for resubmission.
    Comment: We received one comment that supports our proposal to use 
modifiers that will be discipline-specific to identify whether a plan 
of care is for physical therapy or occupational therapy. However, the 
commenter also favors the addition of modifiers that will allow for the 
identification of physician and nonphysician services that are provided 
under a plan of care. Claims from physicians and nonphysicians with a 
modifier would be subject to one of the caps, while claims without a 
modifier would not be subject to any cap. Another commenter stated that 
the proposed policy to reject a claim and send it to the provider for 
resubmission if the type of therapy is not listed in the modifier field 
is inappropriate and should not be adopted. The commenter contends that 
there are legitimate cases in which the codes in Addendum D will be 
reported but should not be applied against the caps, for example, if 
the services are furnished by a nonphysician practitioner or a 
physician but they are not provided under a therapy plan of care. This 
contention is also shared by another commenter who strongly opposed our 
proposal to apply services against the caps for occupational therapy 
and physical therapy including speech-language pathology services based 
strictly on an arbitrary reporting of certain CPT codes. The 
presumption with this approach is that therapy services are furnished 
whenever codes listed in Addendum D are reported
    Response: At this time, we have decided to only use the discipline-
specific modifiers listed in the response above. These modifiers will 
differentiate between either the type of therapist (physical therapist, 
occupational therapist, speech-language pathologist) personally 
providing the service or the discipline plan of care (physical, 
occupational, and speech-language pathology). For example, if modifier 
GP is used, the physical therapist must deliver personally the service 
or the service must be delivered under a physical therapy plan of care. 
Therefore, in addition to the personal provision of the therapy service 
by the physical therapist, a physician or nonphysician practitioner can 
also furnish the physical therapy service. We believe that additional 
modifiers are not needed to delineate services provided by physicians 
and nonphysician practitioners under a therapy plan of care; however, 
we believe that the commenter's statement is valid regarding the 
possible use of codes listed in Addendum D for other than therapy 
purposes, that is, not under a therapy plan of care. We are exploring 
the use of an additional modifier to indicate that the service denoted 
by the code was not provided under a therapy plan of care. By the time 
that the financial limitation or cap is fully implemented, we expect to 
have established the additional modifier. Until that modifier is in 
place, claims without a discipline-specific modifier will be returned 
for resubmission.
    Comment: A commenter stated that the cap will be difficult to track 
administratively and recommended that there be a clearer delineation of 
when services will be subject to the limit and what the controlling 
factors will be (including the type of professional delivering the 
service, whether there is a rehabilitation plan of care, and the nature 
of the service), a listing or examples of services and the 
circumstances under which they would not be included under the cap.
    Response: The commenter's request for clarification is based on a 
full implementation of the financial limitation or cap. Because of Y2K 
issues, the financial limitation or cap will not be fully implemented 
as mandated by statute effective January 1, 1999. Therefore, it is our 
intention to carefully review, consider, and address the commenter's 
concerns as we move from the transitional implementation of the cap on 
a per-provider basis to the full implementation of the cap on an annual 
per-beneficiary basis.
    Comment: One commenter stated that the mechanics of implementing 
the cap should be clarified. The commenter said that there are serious 
concerns regarding the calculation of the cap, time of billing, and 
timing of processing payments that would be fed into the database. The 
commenter is concerned about the effect of medical review, for example, 
whether payment will be reserved when a claim is filed in a timely 
manner, subjected to medical review, denied, and successfully appealed, 
and the claim was originally filed well before the cap is met. Several 
commenters were of the opinion that it is administratively difficult 
for all parties (beneficiaries, providers, and contractors) to track 
the cap even with the use of the modifiers. They want us to address 
specific issues regarding tracking and the use of modifiers before 
implementation of the cap, and to also notify beneficiaries regarding 
the tracking procedure. These specific issues include a clear 
delineation of when services are subject to the limit, what the 
controlling factors will be (including the type of professional 
delivering the service, whether there is a rehabilitation plan of care, 
and the nature of the service), a listing or examples of the services 
and the circumstances under which they would be excluded from the cap.
    Response: These are issues that will be addressed prior to the full 
implementation of the financial limitation or cap. Because there is the 
distinct possibility that systems requirements will change before such 
full implementation, it does not seem prudent at this time to detail 
the mechanics of the future implementation of the cap. However, it is 
our current thinking that these concerns will be discussed and 
clarified in companion program instructions issued to the Medicare 
carriers and fiscal intermediaries.
    Comment: A commenter stated that there should be a timely, readily 
accessible means (such as a query system) for beneficiaries and 
providers to ascertain the status of the beneficiary's outpatient 
therapy benefits.
    Response: This question relates to the full implementation of the 
financial limitation or cap on an annual per-beneficiary basis. We are 
exploring mechanisms by which both the beneficiary and the provider can 
be informed in a timely and accurate manner, the amounts that have been 
expended by the beneficiary for outpatient physical therapy services 
including speech language pathology services and for outpatient 
occupational therapy services. These methods will be discussed in any 
program memorandum or other program instruction that we determine will 
be the vehicle for the conveyance of the beneficiary cap status 
information.
    C. Treatment of Services Exceeding the Financial Limitation. As 
required by section 1833(g) of the Act, as amended by section 4541 of 
BBA, we revised our

[[Page 58868]]

policy to establish two annual per-beneficiary limits of $1,500. There 
will be (1) an annual per-beneficiary limit for all outpatient physical 
therapy services excluding hospital outpatient therapy services 
furnished to an outpatient or an inpatient who is not in a covered Part 
A stay and, (2) an annual per beneficiary limit for all outpatient 
occupational therapy services excluding hospital outpatient therapy 
services furnished to an outpatient or an inpatient who is not in a 
covered Part A stay. As stated previously, outpatient physical therapy 
services include speech-language pathology services. A provider of 
outpatient rehabilitation services with a provider agreement under 
section 1866 of the Act, as well as physicians, PTIPs and OTIPs, will 
be allowed to collect payment from a beneficiary for therapy services 
after the $1,500 limit is reached. This is consistent with current 
policy allowing PTIPs and OTIPs to collect payment from a beneficiary 
for therapy services in excess of the current $900 limit.

Required Congressional Report on Financial Limitation

    We note that a report to the Congress is due from the Secretary no 
later than January 1, 2001. This report must include recommendations on 
the establishment of a revised coverage policy of outpatient physical 
therapy services, including speech-language pathology services and 
outpatient occupational therapy services. The revised policy must be 
based on a classification of individuals by diagnosis category and 
prior use of services in both inpatient and outpatient settings. The 
report should include recommendations on how such durational limits by 
diagnostic category could be implemented in a budget-neutral manner.
    Comment: It was recommended by a commenter for the report to the 
Congress that, in addition to basing a revised policy on classification 
by diagnosis category and prior use of services, an individual's 
functional status should be a component of any system that purports to 
address a patient's need for rehabilitation.
    Response: As we develop the report to the Congress, we will 
consider the feasibility of the recommendation.
4. Qualified Therapists
    Section 1861(p) includes services furnished an individual by a 
physical therapist who meets licensing and other standards prescribed 
by the Secretary if the services meet the conditions relating to health 
and safety the Secretary finds necessary. The services must be 
furnished in the therapist's office or the individual's home. By 
regulation, we have defined therapists meeting the conditions for 
coverage of services under this provision as physical therapists in 
independent practice. The conditions for coverage are set forth in part 
486, subpart D (Conditions for coverage: Outpatient Physical Therapy 
Services Furnished by Physical Therapists in Independent Practice) and 
require that the services be provided by a therapist in independent 
practice under Sec. 410.60. Under Sec. 410.60, a therapist in 
independent practice is one who:
    <bullet> Engages in the practice of therapy on a regular basis.
    <bullet> Furnishes services on his or her own responsibility 
without the administrative and professional control of an employer.
    <bullet> Maintains at his or her own expense office space and 
equipment.
    <bullet> Furnishes services only in the office or patient's home.
    <bullet> Treats individuals who are his or her own patients and 
collects fees or other compensation for the services.
    Under Sec. 486.151 (Conditions for coverage: Supervision), all 
therapy services must be furnished under the direct supervision of a 
qualified therapist in independent practice. In other words, the 
therapist in independent practice must be on the premises whenever 
services are provided to Medicare beneficiaries, including services 
provided by a licensed physical therapist. This long-standing 
requirement has been controversial with therapists in independent 
practice. For example, a therapist in independent practice cannot have 
more than one office open for services at the same time since he or she 
could not be on both premises at once.
    We are revising our policy to replace the existing ``Conditions for 
Coverage: Outpatient Physical Therapy Services Furnished by Physical 
Therapists in Independent Practice'' (part 486, subpart D), which 
requires survey and certification, with a simplified criteria for 
physical therapists in private practice that would use a carrier 
enrollment process. The impetus for this change comes from 
congressional statements associated with the fiscal year 1997 
appropriations process. Statements in both the House and Senate 
committee reports accompanying HCFA's fiscal year 1997 appropriations 
addressed the issue of requiring that the certified physical or 
occupational therapist in independent practice directly supervise all 
services performed by his or her employees, even if those employees are 
fully-licensed therapists. The House committee report urged that we 
modify the regulations so that the certified therapist need not be on 
premises to supervise other licensed therapists. The Senate urged us to 
review this concern and recommend regulatory or instructional changes.
    We are redefining those therapists who are qualified under section 
1861(p) of the Act. That is, we would discontinue the focus of the 
regulation on their ``independent'' status (which is not statutory) and 
recognize therapists in private practice who are employed by others 
and, therefore, do not meet our current ``independent'' criteria. This 
would be consistent with health and safety concerns and would conform 
to normal private sector practice standards. The following new 
requirements replace the current ones for qualified therapists:
    <bullet> The term ``independent'' is dropped and the benefit would 
be for an individual physical therapist or occupational therapist in 
private practice.
    Private practice includes an ``individual'' whose practice is in an 
unincorporated solo practice, unincorporated partnership, or 
unincorporated group practice. Private practice also includes an 
``individual'' who is practicing therapy as an employee of one of the 
above or of a professional corporation or other incorporated therapy 
practice. However, private practice does not include individuals when 
they are working as employees of a provider. A provider as defined in 
Sec. 400.202 includes a hospital, CAH, SNF, HHA, hospice, CORF, CMHC, 
or an organization qualified under part 485, subpart H (Conditions of 
Participation for Clinics, Rehabilitation Agencies, and Public Health 
Agencies as Providers of Outpatient Physical Therapy and Speech-
Language Pathology Services), as a clinic, rehabilitation agency, or 
public health agency.
    <bullet> In implementing the statutory requirement that services be 
furnished to an individual in the therapist's office, or in the 
individual's home, ``in his office'' is defined as the location(s) 
where the practice is operated, in the State(s) where the therapist 
(and practice, if applicable) is legally authorized to furnish 
services, during the hours that the therapist engages in practice at 
that location.
    A therapist in private practice must maintain a private office, if 
services always are furnished in patients' homes. However, if services 
are furnished in private practice office space, that space would have 
to be owned, leased, or

[[Page 58869]]

rented by the practice and used for the exclusive purpose of operating 
the practice. For example, because of the statutory restriction on the 
site of services, a therapist in private practice cannot furnish 
covered services in an SNF. Therefore, if a therapist wished to locate 
his or her private office on site at a nursing facility, special care 
would need to be taken. The private office space could not be part of 
the Medicare-participating SNF's space, and the therapist's services 
could be furnished only within that private office space. Neither the 
therapist nor any assistants or aides who help furnish services could 
be employed by the SNF during the same hours that they are working in 
the private practice. Another example where special attention would be 
needed is space that generally serves other purposes and is only used 
by a therapy practice during limited hours. For example, a therapist in 
private practice may furnish aquatic therapy in a community center pool 
on Wednesday mornings. The practice would have to rent or lease the 
pool for those hours, and the use of the pool during that time would 
have to be restricted to the therapist's patients, in order to 
recognize the pool as part of the therapist's own private office during 
those hours.
    In describing other services that are specifically limited to the 
patient's home, the statute uses qualifying language. For example, the 
durable medical equipment definition in section 1861(n) of the Act 
refers to a patient's home as ``including an institution used as his 
home other than an institution that meets the requirements of 
subsection (e)(1) of this section or section 1819(a)(1).'' This 
definition of home is codified under our regulations at Sec. 410.38(b). 
The same definition always has been used in the Medicare Carriers 
Manual for purposes of covering therapists' services in a patient's 
home. We are continuing the current practice and are adopting the 
definition formally in this regulation.
    <bullet> Assistants and aides have to be personally supervised by 
the therapist and employed directly by the therapist, by the 
partnership or group to which the therapist belongs, or by the same 
private practice that employs the therapist. Personal supervision 
requires that the therapist be in the room during the performance of 
the service. Levels of supervision are defined in Sec. 410.32 of our 
regulations.
    <bullet> The therapist must be licensed or otherwise legally 
authorized to engage in private practice. We understand that all States 
license or certify physical therapists, so no alternative personnel 
qualifications need to be specified.
    <bullet> Each therapist enrolls ``as an individual'' with the 
carrier.
    There would be no survey and no certification by HCFA. The Medicare 
carrier would verify that the qualifications proposed in 
Secs. 410.59(c)(1) or 410.60(c)(1) of our regulations are met. All 
applicants for new enrollment would become subject to these new rules 
and procedures upon the effective date of the final rule. For 
transition purposes, we intend that independent therapists who are 
certified and enrolled at that time would be ``grandfathered'' 
temporarily and would become subject to the new enrollment rules and 
procedures at the time of their next regular periodic reenrollment.
    These changes would address the concern that current rules require 
each independent therapist to personally supervise services performed 
by any other licensed therapists that he or she employs. Under our 
proposal, each individual therapist in a practice could qualify to 
separately enroll, and enrolled therapists would not be required for 
purposes of Medicare to be supervised by their employer. These changes 
also address the concern that current rules prohibit an independent 
therapist from being employed by any entity. Under our proposal, a 
variety of employment situations would be permitted.
    These new requirements are established in a revised Sec. 410.60(c) 
for physical therapists. To date, the statutory requirements for 
coverage of outpatient occupational therapy services have not been 
codified. We are codifying these requirements by establishing a new 
Sec. 410.59 for outpatient occupational therapy services. The 
regulations section for outpatient occupational therapy parallels the 
Sec. 410.60 requirements for outpatient physical therapy, as revised in 
this final rule. We are also making conforming changes in Sec. 410.61 
to include occupational therapy.
    Therapists in private practice do not participate in the Medicare 
program in the same way that ``providers of services'' do. Though they 
must be approved as meeting certain requirements, unlike ``providers of 
services,'' they do not execute a formal provider agreement with the 
Secretary as described in 42 CFR part 489 (Provider Agreements and 
Supplier Approval). Like physicians, they do have the option of 
accepting a beneficiary's assignment of his or her claim for Medicare 
Part B benefits and of becoming a Medicare-participating supplier that 
agrees to accept assignment in all cases.
    Comment: One commenter strongly supports the carrier enrollment 
process for physical therapists instead of the existing conditions of 
coverage. However, the commenter wanted operational issues addressed 
such as a specification that payments will be made under the practice 
or corporation's tax ID number for services furnished by physical 
therapists in private practice who are employees of other practices or 
corporations. This is the same payment system used by a physician group 
practice, and the treating therapist's Medicare number or license 
number would be included on the bill. In addition, the commenter urged 
that the same process be used for the carrier enrollment process as for 
the current physician enrollment. Another commenter supported the 
changes for OTPPs; however, assuming that payment is made to the 
individual, the commenter inquired as to whether group numbers would be 
assigned so that payment could be issued to the group under the tax 
identification number of the business entity.
    Response: We will use the same enrollment and billing process as is 
currently used for individual physicians and physician group practices. 
This process is delineated at section 1030.7 of the Medicare Carriers 
Manual, HCFA Pub. 14-Part 4. We note that payment is not made on the 
basis of the corporate or group practice tax identification number. 
This number is just one of the data elements that can be related to the 
Medicare individual and/or group billing number.
    Comment: A commenter recommended that direct supervision of 
assistants and aides be required instead of personal supervision. The 
commenter provided that direct supervision would be consistent with 
state laws, the supervision requirements for nonphysician personnel 
performing services in a physician's office, and with the supervision 
requirements for aides and assistants of PTIPs.
    Another commenter agreed that personal supervision over therapy 
aides by a qualified occupational therapist or qualified occupational 
therapy assistant is appropriate. However, the commenter strongly 
disagreed with the proposal to require personal supervision over 
occupational therapy assistants and instead urged the adoption of a 
policy for practicing occupational therapists whereby occupational 
therapy assistants can perform covered services under the general 
supervision (that is, initial direction and periodic inspection) of a 
qualified occupational therapist. In

[[Page 58870]]

addition, the commenter thought the policy should state that either a 
qualified occupational therapist or a qualified occupational therapy 
assistant must provide personal supervision when therapy aides are used 
to furnish services.
    A commenter stated that qualified occupational therapists who are 
not Part B suppliers, but who are employed by a therapist who is 
enrolled as a Part B supplier, should not be subject to the personal 
supervision requirement. In addition, it was suggested that the 
proposed language at Sec. 410.59(c)(2) regarding supervision of 
occupational therapy services should be revised as follows:
    ``Occupational therapy services are performed by, or under the 
general supervision of, the occupational therapist in private practice. 
Services provided by therapy aides must be performed under the personal 
supervision of an occupational therapist or occupational therapy 
assistant. All services not performed personally by the therapist in 
private practice must be performed by employees of the practice, under 
the applicable level of supervision by the therapist, and included in 
the fee for the therapist's services.''
    Response: Statements contained in the House and Senate committee 
reports accompanying the 1997 appropriations recommended modifications 
in our supervision requirements for qualified therapists. As stated, 
the House committee report urged a regulatory change in the requirement 
that certified therapists be on the premises to supervise other 
licensed therapists. We were also urged by the Senate to review this 
concern and recommend regulatory or instructional changes. We have 
addressed the concern expressed in the House and Senate 1997 
appropriations committee reports and will allow certified therapists to 
be off the premises when other licensed therapists are present. 
However, we do not believe that we have the authority to modify the 
supervision requirements for therapy (physical, occupational or speech-
language pathology) assistants and aides. Therefore, we are maintaining 
our current requirement that therapy assistants and aides have to be 
personally supervised by the therapist and employed directly by the 
therapist, by the partnership or group to which the therapist belongs. 
In accordance with the aforementioned policy, there is no change in the 
proposed language found at Sec. 410.59(c)(2).
    Comment: We received one comment on our proposed qualifications for 
occupational therapists. One organization recommends that we require 
evidence of successful completion of a national certification 
examination recognized by the regulatory authority in the State of 
practice. Reasons given for the addition of this requirement are that 
practice varies by jurisdiction and unsuccessful exam candidates often 
move from State to State obtaining temporary licenses in spite of 
repeatedly failing qualifying exams. The commenter adds that the 
particular test they recommend is required in every jurisdiction.
    Response: We believe that this recommendation has merit. However, 
we believe that it requires further study and discussion to assess its 
impact before we can consider it for adoption. Therefore, we believe it 
would be more appropriate to consider this recommendation as a proposal 
for a subsequent publication rather to accept it for adoption in this 
final rule.
    Comment: One commenter supports our proposed set of changes 
addressing independent practicing occupational therapist services, but 
adds that as Medicare moves to embrace market based competition, the 
focus should be on the outcomes delivered rather than the input 
credentialing. There should be a commitment to move beyond burdensome 
input criteria that add costs and restrict competition. The commenter 
suggests that, as part of that initiative, we establish a meaningful 
time horizon for moving to outcomes-based performance measures.
    Response: This is a welcomed recommendation. In recent years, when 
revising our conditions of participation for various entities, we have 
emphasized outcomes-based measures. However, this is an area that 
requires further study in order to apply this concept to our conditions 
for occupational therapists practice.
    Comment: One commenter stated that verification should be provided 
in the final rule that section 1861(p) of the Act requires a physician 
to have services furnished by a licensed physical therapist or under 
the supervision of such a therapist when billing for physical therapist 
services incident to the physician's professional services.
    Response: Section 1861(p) of the Act does not set forth the 
requirements as specified by the commenter. As previously stated, 
section 4541(b) of the BBA 1997 amended section 1862(a) of the Act to 
require that outpatient physical therapy services (including speech-
language pathology services) and occupational therapy services 
furnished ``incident to'' a physician's professional services meet the 
standards and conditions (other than any licensing requirement 
specified by the Secretary) that apply to therapy services furnished by 
a therapist. In May 1998, we issued Transmittal No. 1606 of the 
Medicare Carriers Manual, Part 3--Claims Process which implemented this 
provision that was effective January 1, 1998. Section 2218(A) of the 
Medicare Carriers Manual requires that physical therapy services 
provided by a physician or by an incident-to employee of the physician 
in the physician's office or the beneficiary's home must be provided 
by, or under the direct supervision of, a physician (a doctor of 
medicine or osteopathy) who is legally authorized to practice physical 
therapy services by the State in which he or she performs such function 
or action.
5. Plan of Treatment
    We are proposing to revise Secs. 410.61(e), 424.24(c)(4)(i), and 
485.711(b), which concern the plan of treatment review requirements for 
outpatient rehabilitation therapy services. Section 1861(p) of the Act 
defines these therapy services, in part, as services furnished to an 
individual who is under the care of a physician and for whom a plan, 
prescribing the type, amount, and duration of therapy services that are 
to be furnished, has been established by a physician or a qualified 
therapist and is periodically reviewed by a physician.
    Currently, providers that furnish outpatient rehabilitation therapy 
services are required to have a physician review the plan of treatment 
and recertify the need for care at least every 30 days. We proposed 
revising our policy to allow the physician to review and recertify the 
required plan of treatment within the first 62 days and at least every 
31 days after the first review and recertification. The current 
requirement for the review of a plan of treatment for patients of 
physical therapists in independent practice is similar in that the 
physician must review the plan at least every 30 days. We proposed 
changing this review requirement and requiring that the physician 
review and recertify the plan of treatment within the first 62 days and 
at least every 31 days thereafter.
    We recommended these changes because it was our understanding that 
an initial 2-month (62 day) review is consistent with the usual therapy 
course of treatment. It is also consistent with our current therapy 
requirements in the home health setting. These changes were intended to 
reduce the burden on providers, patients, and physicians by eliminating 
the current requirement for an initial review within the first 30 days. 
After the first 62 days, we believed

[[Page 58871]]

that patients receiving outpatient rehabilitation services are likely 
to show significant progress that warrants subsequent reviews every 31 
days. Changes in the patient's level of function and need for continued 
therapy can be expected to occur more frequently after the first 2 
months of therapy. We believe this subsequent review schedule will help 
control potential over-utilization that results in excessive therapy to 
some Medicare patients.
    Under our proposed policy, the therapists would be required to 
immediately notify the physician of any changes in the patient's 
condition, and physicians retain the ability to review the care at 
closer intervals if necessary.
    Comment: We received comments from six outpatient rehabilitation 
associations supporting our proposal and two comments from orthopedic 
surgical associations strongly opposing it. The opposing orthopedic 
associations informed us that 62 days is not the usual course of 
treatment. They argued that every patient's need for therapy is unique 
depending on the condition. While 62 days may be appropriate for some 
back injuries, they contend it would be inappropriate for a hand, foot, 
or shoulder injury. Therapy is appropriate as long as the patient 
continues to make progress and should be discontinued when the 
patient's condition has plateaued and no further progress is being 
made. They stated this can best be determined by the referring 
physician periodically evaluating the patient's progress and recovery. 
They believe the current 30-day requirement is appropriate and should 
be maintained.
    Response: After careful review of the comments received and study 
of the issue by our medical staff, we are retaining our current 30-day 
requirement and rescind our proposal. As indicated above, our intent, 
in part, was to establish consistency with the initial review period 
for HHA therapy services. However, subsequent to our proposal we 
further learned that HHA patients may not receive the same level of 
intensity of therapy services as patients receiving them under the 
outpatient rehabilitation benefit. Our medical staff believes that 
patients in the latter group are seen more often by their therapists 
than are HHA patients. Therefore, the rate of progression between the 
two patient groups may be different and warrant a 30-day rather 62-day 
initial plan of treatment review for beneficiaries receiving outpatient 
rehabilitation services.
    Comment: We received several comments to allow nonphysician 
practioners such as nurse practitioners, physician assistants, and 
clinical nurse specialist to certify the therapy plan of care.
    Response: Because we allow nonphysician practioners, that is, nurse 
practitioners, clinical nurse specialists, and physician assistants to 
prescribe medicine, we have also decided that nonphysician practioners 
who have knowledge of the therapy case may certify therapy plans of 
treatment.
    Result of the evaluation of comments: We are adopting our proposal 
to pay all outpatient rehabilitation services and CORF services under 
the physician fee schedule. We are delaying full implementation of the 
financial limitations on outpatient rehabilitation services furnished 
by nonhospital entities due to our Y2K efforts until after January 1, 
2000. We are not adopting a site-of-service differential for outpatient 
rehabilitation providers as recommended by commenters. Regarding 
proposed qualifications for therapists, we are adopting them as 
proposed and are not accepting the recommendation that we require 
occupational therapists to provide evidence of successful completion of 
a national certification examination. We anticipate that this issue 
will be further studied and discussed in a subsequent rule. We are 
withdrawing our proposal to extend from 30 days to 60 days the time 
required for physician recertification of the plan of treatment.

D. Payment for Services of Certain Nonphysician Practitioners and 
Services Furnished Incident to Their Professional Services

    Nonphysician practitioners' services have been covered by Medicare 
since the inception of the program; originally the law did not provide 
for separate payments for these services. Coverage and payment of 
nonphysicians' services was primarily within the context of section 
1861(s)(2)(A) of the Act as implemented by section 2050 of the Medicare 
Carriers Manual, for the payment of services incident to a physician's 
professional services. In recent years, the Congress has expanded 
Medicare coverage of nonphysician practitioners' services in certain 
settings to improve beneficiary access to medical services. Separate 
Part B coverage is specifically authorized for certain nonphysician 
practitioners' services and for services and supplies furnished as 
incident to those services.
    For purposes of this rule as it applies to nonphysician 
practitioners, we define nonphysician practitioners as nurse 
practitioners, clinical nurse specialists, certified nurse-midwives, 
and physician assistants. With respect to services and supplies 
furnished as incident to a nonphysician practitioner's services, we are 
requiring that, to be covered by Medicare, the services must meet the 
longstanding requirements in section 2050 of the Medicare Carriers 
Manual applicable to services furnished as incident to the professional 
services of a physician. Therefore, we specify, in new Secs. 410.74(b), 
410.75(d), 410.76(d), and 410.77(c) that Medicare Part B covers 
services and supplies (including drugs and biologicals that cannot be 
self-administered) furnished as incident to the nonphysician's services 
only if these services and supplies would be covered if furnished by a 
physician or furnished as incident to a physician's professional 
services. In addition, Secs. 410.74(b), 410.75(d), 410.76(d), and 
410.77(c) specify the various requirements for these incidental 
services and supplies.

Coverage and Payment for Nurse Practitioners' Services Subsequent to 
BBA

    Effective for services furnished on or after January 1, 1998, 
section 4511 of BBA authorizes nurse practitioners to bill the program 
directly for services furnished in any setting, regardless of whether 
the settings are located in rural or urban areas, but only if the 
facility or other providers of services do not charge or are not paid 
any amounts with respect to the furnishing of nurse practitioners' 
services. Accordingly, a new Sec. 410.75 of this rule specifies the 
qualifications for nurse practitioners, lists the requirements for the 
professional services of a nurse practitioner and the requirements for 
services furnished incident to the professional services of a nurse 
practitioner. This new section also specifies the process that applies 
to the provision of nurse practitioners' services.
    New Secs. 405.520(a), (b), and (c) of this rule provide the general 
rule and requirements for nurse practitioners. A new paragraph (16) is 
added to Sec. 410.150(b) to authorize payment for nurse practitioners' 
services when furnished in collaboration with a physician in all 
settings located in both rural and urban areas. A new paragraph (c) is 
added to Sec. 414.56 of this rule to set forth the payment amount for 
nurse practitioner services.
    All of the independent nurse practitioners and clinical nurse 
specialists commenting on the proposed rule and all of the major 
organizations representing these nonphysician practitioners vigorously 
opposed the proposed Federal guidelines for

[[Page 58872]]

collaboration; those provisions would apply only in States with no 
collaboration requirement.
    Comment: The commenters that objected to the proposed guidelines 
for collaboration requested that we adopt a policy that strictly defers 
to State laws, rules, and regulations regarding collaboration. The 
commenters insisted that the absence of State guidelines for 
collaboration does not necessitate the intrusion of Federal guidelines. 
In fact, they claimed that where State laws or guidelines do not 
include a requirement for collaboration, or fail to provide specific 
detailed requirements for a collaborative relationship, it is not a 
matter of accident or simple omission, but of conscious State policy 
regarding professional scope of practice. In these cases, they believe 
that there should be no collaboration requirement.
    Additionally, these commenters stated that they believe that there 
is a better understanding at the State level of the practice situations 
encountered and the evolving advancements in health care issues. 
Therefore, many States have determined that this relationship is best 
defined by the professionals themselves, rather than through detailed 
statutory legislation.
    The commenters claimed that they are not aware of any substantial 
problems in interpreting or implementing the collaboration requirement 
in the 7\1/2\ years that carriers have been applying the collaboration 
requirement without the benefit of Federal rule. According to one 
commenter, currently at least 26 States have no statutory or regulatory 
requirement for collaboration as a condition that nurses must satisfy 
in order to practice, and in the 16 States that have physician 
collaboration or supervision practice requirements, none are as 
restrictive as the guidelines that we proposed.
    One of the commenters that opposed the proposed collaboration 
guidelines stated that if more detailed provisions such as these are 
imposed on nurse practitioners and clinical nurse specialists, there 
will be a cost attached to be borne by the practitioner or consumers 
through cost shifting. Another commenter expanded upon this comment by 
posing the concern about how collaboration might affect States that 
authorize nurses to practice independently. The commenter stated that 
imposition of the collaboration requirement in ``independent practice 
States'' could create a new area for potentially fraudulent or abusive 
practices. For example, a physician may refuse to provide collaboration 
in a given area or may refuse to enter into a collaboration agreement 
unless the nurse pays a fee to the physician. This practice may violate 
the anti-kickback statute.
    One commenter stated that our proposal restricted nurses to a 
collaboration arrangement with one physician, and that the State's 
nurse practice act does not restrict nurses to a collaborative practice 
arrangement with one physician. The requirement of collaboration with 
one physician raises the cost to patients, restricts access, and 
requires unnecessary, additional services. Additionally, this same 
commenter raised concerns about the phrase in the collaboration 
guidelines that states ``or as provided by other mechanisms defined by 
Federal regulations,'' because she believes that this is the first time 
this wording has appeared in the definition of collaboration and it 
appears to give unlimited authority for regulation of practice.
    One of the professional organizations representing nurse 
practitioners maintained that the proposed collaboration guidelines 
would particularly harm Medicare beneficiaries located in rural areas, 
where nurse practitioners may be the sole source of health care within 
the community. If a nurse practitioner is not able to receive payment 
for care due to the inability to locate a physician in that geographic 
area who is able to perform the functions of a collaborating physician, 
these areas may not be served at all.
    Response: Section 6114 of OBRA 1989 established the nurse 
practitioner benefit as a separate benefit under the Medicare Part B 
program and also required that nurse practitioners collaborate with a 
physician in order for their services to be covered under Medicare. 
Therefore, nurse practitioners have always been required by Medicare 
law to collaborate with a physician. The collaboration requirement is a 
specific and distinct requirement, separate from the requirement that 
these nonphysician practitioners must practice within the scope of the 
law of the State where the services are performed.
    The 1989 Omnibus Budget Reconciliation Act, adding section 
1861(aa)(6) of the Act, defined the term, ``collaboration'' as a 
process in which a nurse practitioner works with a physician to deliver 
health care services within the scope of the practitioner's 
professional expertise, with medical direction and appropriate 
supervision as provided for in jointly developed guidelines or other 
mechanisms as provided by the law of the State in which the services 
are performed. The BBA of 1997 increased payment amounts to nurse 
practitioners and expanded the settings where they can receive 
payments, but the BBA did not change the collaboration requirement. In 
the absence of State law regarding the collaborative relationship that 
nurse practitioners must share with a physician when furnishing their 
services to Medicare beneficiaries, we must implement the collaboration 
requirement as required by law.
    However, we did not intend to introduce new burdensome requirements 
to address situations where there is no State requirement for 
collaboration. Therefore we are removing the proposed definition of 
collaboration that applies to these situations and will require that, 
in the absence of State law or regulations governing collaboration 
relationships, we will require nurse practitioners and clinical nurse 
specialists to document their scope of practice and indicate the 
relationships that they have with physicians to deal with issues 
outside their scope of practice. The proposed rule was not intended to 
require that a nurse practitioner must furnish services in 
collaboration with only one physician. We fully expect that these 
nonphysician practitioners may have collaborative relationships with 
numerous physicians and will continue to do so in the future. We did 
not intend to introduce any new costs to the practices of nurse 
practitioners and clinical nurse specialists.
    Comment: Five major associations and professional organizations 
representing physicians, medical directors, and hospitals commented in 
favor of the proposed collaboration guidelines and suggested 
alternative criteria that they believed the Medicare program should use 
to determine coverage and payment for the services of nurse 
practitioners and clinical nurse specialists.
    Two of these organizations commented that ``appropriateness'' is 
the key criterion that Medicare contractors should use in determining 
whether services of these nonphysician practitioners should be covered 
under the ``reasonable and necessary'' provisions of section 
1862(a)(1)(A) of the Act. These commenters suggested that we consider 
services to be appropriate if they are furnished by qualified 
personnel; further, the commenters believed that, in the case of 
psychiatry services, these nonphysician practitioners are not qualified 
as physicians are to perform a psychiatric diagnostic interview 
examination (CPT codes 90801 and 90802), nor are they qualified to 
furnish services represented by any of the psychotherapy CPT codes

[[Page 58873]]

that include medical evaluation and management. Therefore, these 
commenters asserted, all of the pertinent sections of the regulations 
text should be revised to read that the nonphysician practitioners are 
not performing services otherwise precluded from coverage because of 
one of the statutory coverage exclusions listed under section 
1862(a)(1)(A) of the Act.
    Response: In order for any service to be covered under Medicare, it 
must be determined to be reasonable and necessary, and therefore, 
appropriate. Accordingly, we do not believe that it is necessary to 
revise the regulations text to specify that services furnished by these 
nonphysician practitioners can be covered only when they are not 
otherwise excluded from coverage under section 1861(a)(1)(A) of the 
Act. It is already stated in the proposed rule at sections 
410.74(a)(2)(iii), 410.75(c)(3), and 410.76(c)(3) that services 
performed by any of these nonphysician practitioners are not covered if 
they are otherwise excluded from coverage because of a statutory 
exclusion. Additionally, it is our understanding that some nurse 
practitioners and clinical nurse specialists specialize in mental 
health. Therefore, if State law authorizes these nonphysician 
practitioners to perform mental health services and evaluation and 
management services that would otherwise be furnished by a physician or 
incident to a physician's services, psychiatric nurse practitioners and 
clinical nurse specialists could bill for psychiatric diagnostic 
interviews and any of the psychotherapy CPT codes that include medical 
evaluation and management.
    Comment: One association representing hospitals urged us to clarify 
in the final rule all of the settings in which separate payment to 
nurse practitioners and clinical nurse specialists will not be made. 
Also, the commenter suggested clarification regarding whether Medicare 
will continue to pay hospitals for the facility component of hospital 
outpatient department services when separate payment is made to these 
nonphysician practitioners for their professional services furnished in 
hospital outpatient departments.
    Response: Payment is made to nurse practitioners and clinical nurse 
specialists for their professional services furnished in all settings, 
with the exception of RHCs and FQHCs. (The professional services of all 
practitioners are bundled in these two settings, and Medicare payment 
is made to the facility for such services under an all-inclusive 
composite rate.) However, when these nonphysician practitioners furnish 
services in hospital outpatient departments, Medicare will continue to 
make payment to the hospital outpatient department for the facility 
component of hospital outpatient department services.
    Comment: Two other organizations commented that we should require 
that the employer of a nurse practitioner or a clinical nurse 
specialist bill for his or her professional services. The commenter 
stated that technically, some nurses can practice without direct 
supervision, but not independently of the supervising physician since 
the physician must review all records within 2 weeks. The commenter 
believes that safe and high quality medical care requires that 
diagnosis, evaluation, treatment, and management decisions be made by 
physicians who directly supervise nonphysician practitioners on-site. 
The commenter argues that, if payment is made directly to the nurses, 
the physician has no way of verifying what is billed when an employer 
relationship does not exist. Also, because collaboration does not 
require that the physician be present while services are furnished, and 
it does not require a physician to make an independent evaluation of 
each patient, there is no assurance that safe, high quality services 
are being performed.
    Response: The law no longer requires that the employers of nurse 
practitioners and clinical nurse specialists bill for their services, 
as it does for physician assistants. The law does maintain the 
requirement, however, that these nonphysician practitioners must 
furnish their services in collaboration with a physician. Nurse 
practitioners and clinical nurse specialists have been educated and 
specially trained to furnish primary care and certain other services 
that have traditionally been furnished by physicians. As long as the 
services that nonphysician practitioners furnish are medically 
reasonable and necessary, meet Medicare requirements, and fall within 
the scope of services that they are licensed to perform, the Medicare 
program covers the services.
    Comment: Numerous nurse practitioners and clinical nurse 
specialists commented that Secs. 410.75(d) and 410.76(d) that pertain 
to services and supplies furnished incident to the professional 
services of a nurse practitioner or clinical nurse specialist should be 
clarified to state that these nonphysician practitioners need not be 
present in the same room where the services are being provided, but may 
be present and available in the office suite.
    Additionally, these same commenters requested the elimination of 
the list of examples of professional services performed by nurse 
practitioners and clinical nurse specialists at Sec. Sec. 410.75(e)(3) 
and 410.76(e)(3), asserting that the list is too limited, confusing, 
and ultimately unnecessary.
    Response: We agree that it may be more appropriate to include the 
list of examples of services in manual instructions to provide guidance 
to contractors to use in processing claims. Therefore, we are removing 
the listing of examples of services that can be provided by physician 
assistants at section 410.74(d)(3), nurse practitioners at section 
410.75(e)(3), and clinical nurse specialists at section 410.76(e)(3).
    Comment: One commenter suggested a language change to the 
requirement that ``incident to'' services be of a type that are 
commonly furnished in a physician's office, to also include a reference 
to the offices of other health professionals.
    Response: The ``incident to'' requirements for nonphysician 
practitioners are the same requirements that apply to physicians and 
that have been in place since the inception of the Medicare program. 
The various ``incident to'' requirements are currently interpreted at 
section 2050 of the Medicare Carriers Manual. We will not amend any of 
the ``incident to'' requirements at this time.
    Comment: A few nurses' associations commented that the proposed 
qualifications for nurse practitioners and clinical nurse specialists 
should be amended to clarify that these individuals must be licensed or 
certified by a professional association or an accrediting body that 
has, at a minimum, eligibility requirements that meet certain 
standards. One commenter stated that the accrediting body could be one 
that is recognized by us. These commenters explained that most 
organizations that certify nurses are not professional associations 
themselves; rather they are separately incorporated accrediting bodies. 
For example, the American Nurses Association does not certify nurse 
practitioners or clinical nurse specialists, but the American Nurses 
Credentialing Center (ANCC) does by utilizing standards developed by 
the nurse profession.
    Response: Currently, the qualifications for nurse practitioners at 
section 2158 of the Medicare Carriers Manual require that such an 
individual be certified as a primary care nurse practitioner by the 
American Nurses' Association or by the National Board of Pediatric 
Nurse Practitioners and Associates. (Section 2160 of the Medicare 
Carriers Manual does not contain a specific certification criteria

[[Page 58874]]

for clinical nurse specialists.) Thus, the manual recognizes the ANCC 
as an appropriate certifying body for nurse practitioners.
    Comment: One comment made was directed specifically toward the 
qualifications for nurse practitioners at Sec. 410.75(b) of the 
proposed rule. One academy representing nurse practitioners stated that 
the intent of the law is to pay nurse practitioners who are licensed in 
their States to practice as such. Therefore, the qualifications for 
nurse practitioners should be that the individual be a registered nurse 
who is authorized to practice as a nurse practitioner in accordance 
with State law. This academy believes that the inclusion of additional 
requirements will exclude some fully qualified nurse practitioners who 
are certified by national certifying bodies that recognize 
grandfathering laws in the States and by States that currently use 
program accreditation or certification rather than national 
certification in their licensing processes for nurse practitioners.
    Response: We agree with the commenter that the intent of the law is 
to pay nurse practitioners who are licensed in their States to practice 
as such. However, we believe that State licensure should not be the 
only qualification criterion that would enable nurse practitioners to 
bill the Medicare program directly for their professional services. 
Therefore, we will revise the qualification requirements to ensure that 
for Medicare purposes, appropriate individuals can bill the program for 
services furnished to Medicare beneficiaries.
    Comment: One college representing nurse practitioners raised 
concerns about the types of services for which nurse practitioners can 
bill the Medicare program. The college stated that it wishes to ensure 
that we intend to permit a nurse practitioner to bill within a group 
practice setting for the services of all other licensed health care 
professionals and technicians in that practice. The commenter stated 
that, although the proposed rule does not indicate a problem with this 
billing arrangement, it would appreciate a specific statement from us 
about the arrangement.
    Response: A nurse practitioner within a group practice setting 
would be permitted to bill the Medicare program for the services of all 
other licensed health care professionals and technicians within the 
practice, provided the services of others in the practice are furnished 
incident to the nurse practitioner's professional services and all the 
``incident to'' requirements are met.
    Comment: The college also stated that it is concerned that the 
proposed rule does not list nurse practitioners as designated providers 
of outpatient physical therapy and outpatient speech-pathology 
services. The college asks that the language of Secs. 410.60 and 410.62 
be amended to include nurse practitioners as nonphysician practitioners 
who are authorized to bill for these types of services.
    Response: Nurse practitioners, clinical nurse specialists, and 
physician assistants may order physical therapy, occupational therapy, 
and speech-language pathology services in the case where the services 
are medically reasonable and necessary and the State in which they are 
practicing authorizes them to do so. Also, these nonphysician 
practitioners may also certify and recertify the plan of treatment for 
physical therapy, occupational therapy, and speech-language pathology 
services providing they are authorized by State law to perform such 
services. Accordingly, Sec. 410.60 and 410.62 regarding physical 
therapy, occupational therapy, and speech-language pathology will be 
revised to include these nonphysician practitioners as designated 
providers of such services.
    Result of evaluation of comments: We have determined that for 
purposes of Medicare Part B payment, a nurse practitioner must--
    <bullet> Possess a master's degree in nursing;
    <bullet> Be a registered professional nurse who is authorized by 
the State in which the services are furnished, to practice as a nurse 
practitioner in accordance with State law; and
    <bullet> Be certified as a nurse practitioner by the ANCC or other 
recognized national certifying bodies that have established standards 
for nurse practitioners as stated above.
    We have removed the alternate proposed definition of collaboration 
in Secs. 410.75(c)(2)(iv) and 410.76(c)(2)(iv) of the proposed rule. 
For purposes of Medicare coverage, the collaboration requirement will 
state that nurse practitioners and clinical nurse specialists must meet 
the standards for a collaborative process, as established by the State 
in which they are practicing. In the absence of State law governing 
collaborative relationships, collaboration is a process in which these 
nonphysician practitioners have a relationship with one or more 
physicians to deliver health care services. Such collaboration is to be 
evidenced by nurse practitioners or clinical nurse specialists 
documenting their scope of practice and indicating the relationships 
that they have with physicians to deal with issues outside their scope 
of practice. Nurse practitioners and clinical nurse specialists must 
document this collaborative process with physicians. The collaborating 
physician does not need to be present with the nurse practitioner or 
clinical nurse specialist when the services are furnished or to make an 
independent evaluation of each patient who is seen by the nurse 
practitioner or clinical nurse specialist.
    Also, we are deleting the proposed listing of examples of services 
that can be provided by physician assistants, nurse practitioners and 
clinical nurse specialists.

Coverage and Payment for Clinical Nurse Specialists' Services 
Subsequent to BBA

    Effective for services furnished on or after January 1, 1998, 
section 4511 of BBA authorizes clinical nurse specialists to bill the 
program directly for services furnished in any setting, regardless of 
whether the settings are located in rural or urban areas, but only if 
the facility or other providers of services do not charge or are not 
paid any amounts with respect to the furnishing of nurse practitioners' 
services. A new Sec. 410.76(e) of this rule sets forth this provision.
    The new Sec. 410.76(b) sets forth new qualifications for clinical 
nurse specialists. Section 410.76(c) describes the conditions of 
coverage for clinical nurse specialists' services, defines the 
collaboration process, and paragraph (d) lists the requirements for 
services furnished incident to the professional services of a clinical 
nurse specialist.
    New Sec. Sec. 405.520(a), (b), and (c) of this rule provide the 
general rule, requirements, and civil monetary penalties for clinical 
nurse specialists. A new paragraph (c) is added to Sec. 414.56 of this 
rule to set forth the payment amounts for clinical nurse specialists' 
services.
    Comment: Numerous nurses associations commented specifically about 
the qualifications for clinical nurse specialists at Sec. 410.76(b) of 
the proposed rule. They suggested that the qualifications for clinical 
nurse specialists be amended to require that a clinical nurse 
specialist be an individual who is a registered nurse currently 
licensed to practice as in the State in which he or she practices and 
have a master's degree in a defined clinical area of nursing from an 
accredited educational institution. The commenters emphasized that 
there is no need to provide for an exception as included in the 
proposed qualifications

[[Page 58875]]

for clinical nurse specialists, because the nursing profession has long 
held consensus that clinical nurse specialists be required to have a 
master's degree. Additionally, they believed that the definition of a 
clinical nurse specialist under the BBA makes it clear that a clinical 
nurse specialist must hold a master's degree. Furthermore, they stated 
that the proposed exception requirement contains erroneous information 
about the educational focus of clinical nurse specialist programs that 
may be preparatory both for primary care and specialty care.
    Response: Prior to the BBA, section 2160 of the Medicare Carriers 
Manual required that a clinical nurse specialist had to satisfy the 
applicable requirements for a clinical nurse specialist in the State in 
which the services are performed. In the absence of State requirements, 
Medicare contractors had the discretion to determine whether an 
individual's qualifications warranted Medicare payment for clinical 
nurse specialist services. However, the BBA, which established 
qualifications for clinical nurse specialists, defines a clinical nurse 
specialist as an individual who is a registered nurse and is licensed 
to practice nursing in the State in which the services are performed 
and holds a master's degree in a defined clinical area of nursing from 
an accredited educational institution. Therefore, we will implement the 
BBA qualifications for clinical nurse specialists without an exception 
for clinical nurse specialists who do not possess a master's degree.
    Comment: One independently practicing clinical nurse specialist 
argued that access to psychiatric clinical nurse specialists, in 
particular, is being denied even though they are the only mental health 
providers, other than psychiatrists, whose education, experience, and 
legal scope of practice include the management of co-morbid medical and 
psychiatric illness. Psychiatric clinical nurse specialists also 
provide services that include patient and family education to manage 
symptoms of illness and medications, evaluation and management of side 
effects, identification of adverse reactions, and evaluation of 
effectiveness of medications and psychotherapy. The commenter explained 
that all clinical nurse specialists in psychiatric nursing hold 
master's or doctoral degrees; have completed 2-years post-graduate, 
supervised, clinical experience; have passed a national board 
certification exam; and are required to obtain 75 hours of continuing 
education credit every 5 years. The commenter concluded that 
psychiatric clinical nurse specialists are the only group of mental 
health providers whose practice is being restricted.
    Response: Psychotherapy services are listed in the AMA's CPT coding 
book as ``physician services''. Nurse practitioners and clinical nurse 
specialists are authorized by the Medicare program to bill for services 
that would otherwise be furnished by a physician or incident to a 
physician's services. Accordingly, it is appropriate for the Medicare 
program to pay these nonphysician practitioners who have the specific 
training mentioned for psychotherapy services that are determined to be 
medically reasonable and necessary.
    Result of evaluation of comments: We have determined that for 
purposes of Medicare Part B payment, a clinical nurse specialist must--
    <bullet> Be a registered nurse who is currently licensed to 
practice in the State where he or she practices and be authorized to 
perform the services of a clinical nurse specialist in accordance with 
State law;
    <bullet> Have a master's degree in a defined clinical area of 
nursing from an accredited educational institution; and
    <bullet> Be certified as a clinical nurse specialist by the 
American Nurses Credentialing Center.

Coverage and Payment for Certified Nurse-Midwives' Services

    Section 13554 of OBRA 1993 (Pub. L. 103-66) amended section 
1861(gg)(2) of the Act to revise the definition of certified nurse-
midwife. The revision eliminated a limitation on coverage and included, 
as covered services, those services furnished by certified nurse-
midwives outside the maternity cycle. This change was made effective 
for services furnished on or after January 1, 1994.
    A new Sec. 410.77 of this rule lists the qualifications for 
certified nurse-midwives and provides the conditions for coverage of 
certified nurse-midwives' services. Paragraph (d) of Sec. 410.77 lists 
the coverage requirements for the professional services of certified 
nurse-midwives, while paragraph (c) lists the requirements for services 
furnished incident to the professional services of a certified nurse-
midwife.
    The comments that we received from a major college representing 
certified nurse-midwives mainly addressed the proposed qualifications 
for these individuals.
    Comment: The commenter urged that the qualifications for certified 
nurse-midwives be revised to read that the individual must--
    (1) Be legally authorized to practice as a certified nurse-midwife 
under State law or regulations;
    (2) Have successfully completed a program of study and clinical 
experience accredited by an accrediting body approved by the U.S. 
Department of Education; and
    (3) Be currently certified as a nurse-midwife by the American 
College of Nurse-Midwives or by the American College of Nurse-Midwives 
Certification Council.
    The college believed that these revised qualifications at 
Sec. 410.77(a) would eliminate the possibility of individuals being 
able to practice as certified nurse-midwives in the Medicare program 
without having to take and pass appropriate certification examinations 
that are explicitly linked to a demonstrated mastery of the ``core 
competencies'' for basic nurse-midwife practice. These revised 
qualifications would, the commenter stated, also assure greater 
uniformity of quality and competency among certified nurse-midwives who 
wish to be paid by Medicare for services that they provide to Medicare 
patients.
    Response: Section 1861(gg)(2) of the Act states that the term, 
``certified nurse-midwife'' means a registered nurse who has 
successfully completed a program of study and clinical experience 
meeting guidelines prescribed by the Secretary, or has been certified 
by an organization recognized by the Secretary. Accordingly, we are 
implementing qualifications for certified nurse-midwives that implement 
these statutory requirements.
    Comment: The other comment that the college representing certified 
nurse-midwives made was directed toward the criteria for determining 
payment to certified nurse-midwives for their professional services. 
The college stated that Sec. 410.77(d)(1) should clarify that, while 
supervision of nonphysician staff by a nurse-midwife does not 
constitute a professional service, the service provided by the 
nonphysician may be paid to the certified nurse-midwife if it meets the 
requirements of a service incident to his or her service.
    Additionally, the college suggested that Sec. 410.77(d)(3) be 
revised to state that Medicare will pay a certified nurse-midwife for 
all services that he or she is legally authorized under State law or 
regulations to furnish as a certified nurse-midwife in the State, if 
those services are also covered services under the Medicare program. 
The college suggested this change because it maintains that certified 
nurse-midwives are qualified to perform ``other services'' that might 
not be interpreted to include

[[Page 58876]]

newborn care or certain primary care services, or primary care case 
management in a managed care context, and certain States license them 
to perform these ``other services.''
    Response: The requirements pertaining to services furnished 
incident to the professional services of a certified nurse-midwife are 
listed separately at Sec. 410.77(c) of the proposed rule. We do not 
want to confuse the requirements for the professional services of 
certified nurse-midwives with the requirements that pertain to services 
furnished incident to the professional services of certified nurse 
midwives.
    Section 1861(gg)(1) defines the term, ``certified nurse-midwife 
services'' as services furnished by a certified nurse-midwife and 
services and supplies furnished as an incident to the nurse-midwife's 
service which the certified nurse-midwife is legally authorized to 
perform under State law as would otherwise be covered if furnished by a 
physician or as an incident to a physicians' service. Therefore, we 
agree with the statement made by the commenter that coverage of the 
professional services of certified nurse-midwives are not restricted to 
newborn care, certain primary care services, or primary care case 
management services if State law authorizes them to furnish ``other 
services.''
    Result of Evaluation of Comments: We have determined that for 
purposes of Medicare Part B payment, a nurse-midwife must--
    <bullet> Be a registered nurse who is legally authorized to 
practice as a nurse-midwife in the State where services are performed;
    <bullet> Have successfully completed a program of study and 
clinical experience for nurse-midwives that is accredited by an 
accrediting body approved by the U.S. Department of Education; and
    <bullet> Be certified as a nurse-midwife by the American College of 
Nurse-Midwives or the American College of Nurse-Midwives Certification 
Council. The Secretary reserves the right to determine that these 
accrediting bodies' standards are no longer sufficient for qualifying 
nurse midwives for Medicare Part B payment.
    Also, a nurse-midwife may provide services that he or she is 
legally authorized to perform under State law as a nurse-midwife, if 
the services would otherwise be covered by the Medicare program when 
furnished by a physician or incident to a physicians' professional 
services.

Coverage and Payment for Physician Assistants' Services Subsequent to 
BBA

    Effective for services furnished on or after January 1, 1998, the 
majority of the conditions for coverage of physician assistants' 
services as indicated by new Secs. 410.74(a) and (b) remain unchanged 
with the exception of the condition for coverage of physician 
assistants' services furnished in certain areas and settings. Section 
4512 of BBA removes the restrictions on the sites in which physician 
assistants may furnish their professional services, regardless of 
whether the settings are located in rural or urban areas. Physician 
assistants are authorized to furnish their professional services as 
independent nonphysician practitioners to practically all providers of 
services and suppliers of services, provided the facility or other 
provider of services do not charge or is not paid any amounts with 
respect to the furnishing of physician assistants' professional 
services. Accordingly, separate payment may be made for physician 
assistants' services in all settings, except in RHCs and FQHCs; 
physician assistant services are included as RHC and FQHC services for 
which Medicare payment is made based on an all-inclusive payment rate 
that the program makes to these facilities.
    In new Sec. 410.74(c), we proposed to amend the qualifications for 
physician assistants to recognize certification of physician assistants 
by the National Board of Certification of Orthopedic Physician 
Assistants. These qualifications would also have recognized academic 
programs for physician assistants that are accredited by either the 
Commission on Accreditation of Allied Health Education Programs or the 
American Society of Orthopedic Physician Assistants.
    Additionally, effective January 1, 1998, physician assistants have 
the option of furnishing services under a different employment 
arrangement with a physician. They can furnish services as employees of 
a physician under a W-2 form employment arrangement or they can furnish 
services as an independent contractor to a physician and receive a 1099 
form. Under either arrangement, the employer of the physician assistant 
must bill the program for physician assistants' services as required 
under Sec. 410.150(b)(15). Moreover, when an individual furnishes 
services ``incident to'' the professional services of a physician 
assistant, these ancillary services must meet the requirements under 
Sec. 410.74(a)(2)(vi)(B).
    The Medicare payment amount for a physician assistant's 
professional services as of January 1, 1998, as stated in new paragraph 
(d) of Sec. 414.52, remains at 80 percent of the lesser of either the 
actual charge or 85 percent of the physician fee schedule amount for 
professional services. Also, new Sec. 405.520 provides the general 
rule, requirements, and civil monetary penalties for physician 
assistants who furnish services under the Medicare program.
    We received a total of 140 comments on the proposed physician 
assistant qualifications. Half of all of the commenters strongly 
opposed the inclusion of orthopedic physician assistants (OPAs) under 
the qualifications for physician assistants. The others commenting on 
the inclusion of OPAs applauded and supported their inclusion and 
suggested a few minor changes to the qualifications overall.
    Comment: The commenters who strongly opposed the proposed physician 
assistant qualifications included professional organizations, 
individual physician assistants, State level professional societies and 
academies, congressional representatives, educational institutions, 
hospitals, and a board of medical examiners. The commenters stated 
overwhelmingly that the proposed qualifications for physician 
assistants inappropriately included orthopedic physician assistants and 
that orthopedic physician assistants are not physician assistants even 
if the acronyms (PA and OPA) appear to be similar. The majority of 
commenters who opposed the inclusion of OPAs noted that they would not 
object, however, if the Congress implemented a Medicare benefit that 
recognizes orthopedic physician assistants as separate independent 
nonphysician practitioners, and, in that case, there should be a 
payment differential in the amounts of payment made to physician 
assistants and orthopedic physician assistants that would reflect a 
higher payment to PAs because they have a greater career investment, 
patient care responsibility, and higher malpractice insurance costs 
than OPAs.
    The commenters stated that PAs and OPAs do not receive the same 
education and training, accreditation, certification, or State 
licensure, and their continuing medical education requirements are not 
similar. These commenters stated that the curricula for the physician 
assistant educational programs reveal that these programs emphasized 
primary care involving diagnosis and treatment of five major clinical 
disciplines (medicine, surgery, pediatrics, psychiatry, and 
obstetrics), as well as pharmacology. The training period for

[[Page 58877]]

PAs lasts anywhere from 24 to 28 months. The orthopedic educational 
programs train technical assistants to assist orthopedic surgeons, with 
an emphasis on orthopedic disease and injury, management of equipment 
and supplies, operating room techniques, cast application and removal, 
office procedures, and orientation to prosthetics and orthotics. The 
training period for OPAs lasted for no more than 24 months.
    The commenters asserted that the Commission on Accreditation of 
Allied Health Education Programs (CAAHEP) must accredit all physician 
assistant educational programs. CAAHEP is a national independent 
accrediting agency that is recognized by the U.S. Department of 
Education and sponsored by medical, allied health, and educational 
organizations. However, there are currently no existing OPA programs to 
be accredited. The AMA accredited eight orthopedic physician assistant 
educational programs from 1969 to 1974. Accreditation ceased in 1974 
when the American Academy of Orthopedic Surgeons withdrew sponsorship 
of the accreditation process.
    The commenters stated that PAs are required to take and pass a 
national examination after graduation from a physician assistant 
educational program that is certified by the National Council on 
Certification of Physician Assistants (NCCPA). The NCCPA national 
certification examination is open only to those individuals who have 
graduated from accredited physician assistant educational programs. The 
NCCPA, which provides the certified national examination, is an 
independent organization whose governing board has representatives from 
the American Medical Association, American Hospital Association, 
American Academy of Family Physicians, American Academy of Pediatrics, 
American College of Physicians, American College of Surgeons, National 
Medical Association, Association of American Medical Schools, 
Federation of State Medical Boards, U.S. Department of Defense, 
Association of Physician Assistant Programs, and the American Academy 
of Physician Assistants. The NCCPA also includes three public members.
    OPAs who have had on-the-job training or other mid-level 
paraprofessionals who challenge the exam and have had on-the-job 
training may take the examination for OPAs that is certified by the 
National Board on Certification for Orthopedic Physician Assistants 
(NBCOPA). The NBCOPA certification examination is an open examination 
and is currently reached through the Professional Testing Corporation, 
a for-profit business that administers tests for various organizations. 
The NBCOPA is comprised of six members of the American Society of 
Orthopedic Physician Assistants (ASOPA), the orthopedic physician 
assistant professional society, and an unspecified number of advisory 
members who are presumably non-voting physicians and educators. There 
is no organized medical group that sponsors or oversees the national 
certification examination for OPAs other than ASOPA.
    The commenters emphasized that all States except Mississippi 
license and regulate PAs. Forty-three States, the District of Columbia, 
and Guam have enacted laws to authorize PAs to prescribe medicine. 
Thirty-three States authorize PAs to write prescriptions for controlled 
medications. Conversely, only Tennessee specifically licenses OPAs. 
Tennessee's licensure of OPAs is, however, separate from its licensure 
of PAs. California and New York have laws referencing OPAs, but the 
laws refer to OPAs as distinct from PAs. California refers to OPAs who 
successfully completed training as OPAs from an approved California 
orthopedic physician assistant educational program in any year between 
1971 to 1974 to perform only those orthopedic medical tasks that a 
physician and surgeon may delegate. New York defines the qualifications 
for PAs in terms broad enough to include OPAs. The New York State 
regulations do not limit the acceptable examination to the NCCPA 
certification examination. Therefore, the NBCOPA certification 
examination could be considered to adequately assess entry level skills 
for the physician assistant profession. None of the other States, 
however, recognize OPAs, and none of the States specifically grant OPAs 
prescribing privileges.
    Additionally, the commenters explained that PAs are required to log 
100-hours of continuing medical education over a 2-year cycle and to 
take a recertification exam every 6 years to maintain certification as 
PAs. On the other hand, OPAs are required to complete 120 hours of 
continuing medical education every 4-years or retake the initial NBCOPA 
certification examination to maintain certification as OPAs.
    The professional organizations representing PAs and numerous 
independent PAs and congressional representatives argued that the 
proposed changes to the PA qualifications run counter to our twin goals 
of controlling costs to the Medicare program and maintaining the 
quality of services furnished to Medicare beneficiaries. There are 
approximately 49,000 surgical technologists and 3,000 registered nurse 
first assistants and an uncounted number of unlicensed medical school 
graduates (for example, from other countries). These individuals could 
potentially qualify as PAs under the proposed qualifications by getting 
the requisite orthopedic work experience and passing the orthopedic 
physician assistant examination that is certified by NBCOPA. Thus, the 
number of individuals who could qualify for payment under the PA 
benefit ultimately is substantial.
    Additionally, these commenters argued that the proposal to include 
OPAs as PAs runs counter to congressional intent because the BBA, which 
amends coverage payment for PAs, does not include any mention of OPAs. 
They state that the debate on the BBA provisions for physician 
assistants, nurse practitioners, and clinical nurse specialists did not 
include any discussion of orthopedic physician assistants or any other 
types of physician extenders, nor did the Congressional Budget Office 
consider orthopedic physician assistants or other types of specialty 
physician extenders when projecting the costs of physician assistant 
services under the BBA. Furthermore, these commenters stated that the 
primary sponsors of the 1977 Rural Health Clinic Services Act 
acknowledged the educational preparation of PAs to provide a wide range 
of primary care services to Medicare beneficiaries living in areas 
experiencing a shortage of primary care physicians. While orthopedic 
technicians may provide valuable, specialized services in assisting 
orthopedic surgeons, they do not have an educational background in 
primary care. Consequently, they are not qualified to provide the wide 
range of primary care services that the Congress anticipated when it 
recognized the need to cover and pay for the services of PAs under 
Medicare.
    Finally, the commenters urged us to require that, in order for an 
individual to qualify as a PA under Medicare, he or she must (1) 
possess State approval to practice as a PA, and (2) demonstrate either 
graduation from a physician assistant educational program accredited by 
CAAHEP or certification by NCCPA.
    The commenters who supported the inclusion of OPAs under the 
physician assistant benefit were represented by a national society and 
academy, orthopedic surgeons, independent orthopedic physician 
assistants,

[[Page 58878]]

hospitals, universities, and organizations that provide orthopedic 
surgical services. The national society representing OPAs declared that 
our clarification of the PA qualifications does not relate to payment 
because orthopedic surgeons are already paid for many services provided 
by OPAs incident to their professional services. Rather, it believes 
that the clarification is about recognition of OPAs.
    The national academy representing orthopedic surgeons, numerous 
independent orthopedic surgeons, and OPAs stated that OPAs are 
specially trained to assist orthopedic surgeons in surgical procedures 
and other services involving the total care of patients with orthopedic 
conditions of the anatomy and pathophysiology of the musculoskeletal 
organ system. Commenters state that OPAs receive extensive training 
that includes rotations in general medicine and surgery, history and 
physical assessment, and pharmacology. Additionally, they say, OPAs are 
trained to obtain medical histories, perform physical examinations, 
assist the physician in developing and implementing patient management 
plans, perform common laboratory, radiologic, and other routine 
diagnostic procedures, and provide injections, immunizations, suturing 
and wound care, among other services. Other services that these groups 
have stated that OPAs may perform include the application, fabrication 
and removal of casts, splints, braces and orthopedic hardware, emergent 
care of trauma patients, pre- and post-operative care, and serving as 
first and second assistants to orthopedic surgeons for all procedures. 
A few commenters noted that the only orthopedic experience that the 
primary care physician assistants have is received during a 6-week 
rotation within the 4-year primary care educational program.
    Many orthopedic surgeons and others stated that the specialty 
training that OPAs receive has enabled them to become extremely 
valuable to their practices freeing up orthopedic surgeons to perform 
other tasks. Also, some commenters stated that they have found PAs and 
OPAs to be equally competent and in some cases, OPAs have proven to be 
more competent than PAs. Therefore, OPAs are very quickly becoming an 
integral part of their patient care teams. A professional organization 
commented that the inclusion of OPAs under the PA benefit should not 
result in exorbitant costs to the Medicare program because there are 
only approximately 1,000 OPAs who could meet the proposed PA 
qualifications. Also, when Tennessee established State licensure for 
OPAs, the State Comptroller's office found that there was an increase 
in State revenues from fees collected and a slight, but not 
significant, increase in State expenditures for administering the 
program.
    The national society representing OPAs suggested specific language 
be added to the proposed PA qualifications to require formal education 
programs for OPAs.
    Response: After reviewing more closely information about the 
distinctions between PAs and OPAs, and after reviewing the comments 
that we received on the proposal to include OPAs as PAs, we have 
determined that it would not be appropriate to treat OPAs in the same 
way as PAs. There are substantial differences in education and 
training, certification examinations, accreditation of educational 
programs, and State licensure and regulation of PAs and OPAs. 
Additionally, we believe that the 1977 Rural Health Clinic Services 
Act, which first recognized and paid for the services of PAs under Part 
B of the Medicare program, would have specifically recognized OPAs as 
within its scope if it intended to do so. We also believe that a 
significant number of individuals, exceeding the approximately 1,000 
currently practicing OPAs, could qualify as PAs under the proposed rule 
because the national certification examination for OPAs is currently 
open to other mid-level nonphysician practitioners who challenge the 
examination and have had on-the-job training.
    Comment: We did not specifically solicit public comment in the 
proposed rule on the BBA provision that authorized PAs to provide 
services under an arrangement as independent contractors, in addition 
to performing services as an employee of entities or individuals such 
as a physician, medical group, professional corporation, hospital, 
skilled nursing facility, or nursing facility. However, we discussed, 
in the background section of the proposed rule, that effective January 
1, 1998, PAs have the option of furnishing services under an 
independent contractor arrangement. Under either arrangement, we 
explained that the employer of the PA must bill the program for 
services furnished by the PA. As a result of this discussion, one 
commenter stated that, generally, PAs have been under the direction of 
a physician, and they have not been viewed as independent contractors. 
Therefore, the commenter emphasized that clarification is needed about 
PAs performing in an independent contractor employment relationship.
    Response: Regardless of whether a PA performs services under an 
employment relationship or under an independent contractor 
relationship, the Medicare statute requires that he or she furnish 
services under the general supervision of a physician, and the employer 
of the PA must always bill for the services furnished.
    However, just as we adopt the Internal Revenue Service's definition 
of an employer/employee employment relationship, we also adopt the 
Internal Revenue Service's definition of an independent contractor 
relationship.
    Some of the distinctions between an employer/employee and an 
independent contractor relationship are that, under an independent 
contractor relationship, the employer does not generally have to 
withhold or pay any taxes on payments to independent contractors and 
the employer has virtually no behavioral or financial control over the 
independent contractor. That is, under an independent contractor 
relationship, the independent contractor works autonomously without any 
instructions from his or her employer about when, where, and how to 
work. The contractor is engaged to perform services for a specific 
project or period of time, for which he or she is paid at the 
completion of the project. Independent contractors can make a profit or 
loss. The services that the independent contractor performs may not be 
a key aspect of the employer's regular business and, therefore, an 
independent contractor may have a significant investment in the 
facilities he or she uses in performing services for the employer. 
Additionally, the employer of an independent contractor may not provide 
employee-type benefits such as insurance, a pension plan, vacation pay, 
or sick pay.
    Result of evaluation of comments: We have determined that for 
purposes of Medicare Part B payment, a physician assistant is an 
individual who--
    <bullet> Has graduated from a physician assistant educational 
program that is accredited by the National Commission on Accreditation 
of Allied Health Education Programs;
    <bullet> Has passed the national certification examination that is 
certified by the National Commission on Certification of Physician 
Assistants; and
    <bullet> Is licensed by the State to practice as a physician 
assistant.

[[Page 58879]]

E. Payment for Teleconsultations in Rural Health Professional Shortage 
Areas

    In section 4206 of BBA, the Congress required that, not later than 
January 1, 1999, Medicare Part B pay for professional consultations by 
a physician via interactive telecommunications systems 
(teleconsultations).
    Under section 4206(a) of BBA, payment may be made under Part B, 
provided the teleconsultation service is furnished to a beneficiary who 
resides in a county in a rural area designated as a Health Professional 
Shortage Area (HPSA). This payment is notwithstanding that the 
individual physician or practitioner providing the professional 
consultation is not at the same location as the physician or 
practitioner furnishing the service to that beneficiary. (For the 
purposes of convenience, in this section the term ``practitioner'' is 
used to mean physicians and practitioners as specified.)
    Section 4206(b) of BBA also required that the Secretary establish a 
methodology for determining the amount of payments made for a 
teleconsultation within the following parameters:
    <bullet> The payment is to be shared between the referring 
practitioner and the consulting practitioner.
    <bullet> The amount of the payment is not to exceed the current fee 
schedule amount that would be paid to the consulting practitioner.
    <bullet> The payment is not to include any reimbursement for any 
telephone line charges or any facility fees, and a beneficiary may not 
be billed for these charges or fees.
    <bullet> The payment is to be subject to the coinsurance and 
deductible requirements under section 1833 (a)(1) and (b) of the Act.
    <bullet> The payment differential of section 1848(a)(3) of the Act 
is to be applied to services furnished by nonparticipating physicians.
    <bullet> The provisions of sections 1848(g) and 1842(b)(18) of the 
Act are to apply.
    <bullet> Further, payment for the consultation service is to be 
increased annually by the update factor for physicians' services 
determined under section 1848(d) of the Act.
    In addition, the statute directs that, in establishing the 
methodology for determining the amount of payment, the Secretary take 
into account the findings of the report required by section 192 of the 
Health Insurance Portability and Accountability Act of 1996 (Public Law 
104-191), the findings of the report required by section 4206(c) of 
BBA, and any other findings related to clinical efficacy and cost-
effectiveness of telemedicine applications.

Provisions of HCFA-1906-P

    On June 22, 1998, we published a proposed rule titled ``Payment for 
Teleconsultations in Rural Health Professional Shortage Areas'' (HCFA-
1906-P) (63 FR 33882) that would implement the provisions of section 
4206 of the BBA addressing Medicare reimbursement for telehealth 
services.

Regulatory Provisions

    In proposed Sec. 410.75(a)(1), we required that as a condition for 
Medicare Part B payment for a teleconsultation, the referring and the 
consulting practitioner be any of the following:
    <bullet> A physician as described in existing Sec. 410.20.
    <bullet> A physician assistant as defined in existing Sec. 491.2.
    <bullet> A nurse practitioner as defined in existing Sec. 491.2.
    <bullet> A clinical nurse specialist as described in existing 
Sec. 424.11(e)(6).
    <bullet> A certified registered nurse anesthetist or 
anesthesiologist's assistant as defined in existing Sec. 410.69.
    <bullet> A certified nurse-midwife as defined in existing 
Sec. 405.2401.
    <bullet> A clinical social worker as defined in section 1861(hh)(1) 
of the Act.
    <bullet> A clinical psychologist as described in existing 
Sec. 417.416(d)(2).
    We required, in proposed Sec. 410.75(a)(2), that teleconsultation 
services be furnished to a beneficiary residing in a rural area as 
defined in section 1886(d)(2)(D) of the Act that is designated as an 
HPSA under section 332(a)(1)(A) of the Public Health Service Act. For 
purposes of this requirement, the beneficiary is deemed to be residing 
in such an area if the teleconsultation presentation takes place in 
such an area.
    In proposed Secs. 410.75(a)(3) through 410.75(a)(5) we specified 
further that teleconsultations must meet the following requirements in 
order to be covered by Medicare Part B:
    <bullet> The medical examination of the beneficiary must be under 
the control of the consultant practitioner.
    <bullet> The consultation must involve the participation of the 
referring practitioner, as appropriate to the medical needs of the 
patient, and as needed to provide information to and at the direction 
of the consultant.
    <bullet> The consultation results must be in a written report that 
is furnished to the referring practitioner.
    We defined ``interactive telecommunications systems'' in paragraph 
(b) of proposed Sec. 410.75, as multimedia communications equipment 
that includes, at a minimum, audio-video equipment permitting two-way, 
real-time consultation among the patient, consulting practitioner, and 
referring practitioner as appropriate to the medical needs of the 
patient and as needed to provide information to and at the direction of 
the consulting practitioner. Telephones, facsimile machines, and 
electronic mail systems do not meet the definition of interactive 
telecommunications systems.

Payment Provisions

    Proposed regulatory provisions: We proposed adding Sec. 414.62 
(Payment for consultations via interactive telecommunication systems) 
to our regulations.
    We specified, in paragraph (a) of proposed Sec. 414.62, that 
Medicare total payments for a teleconsultation may not exceed the 
current fee schedule amount for the service when furnished by the 
consulting practitioner. We further specified that the payment (1) may 
not include any reimbursement for any telephone line charges or any 
facility fees, and (2) is subject to the coinsurance and deductible 
requirements of section 1833(a)(1) and (b) of the Act. We also 
specified in paragraph (b) that the payment differential of section 
1848(a)(3) of the Act applies to services furnished by nonparticipating 
physicians.
    In paragraph (c) of proposed Sec. 414.62, we provided that payment 
to nonphysician practitioners is made only on an assignment-related 
basis. Paragraph (d) provided that only the consultant practitioner may 
bill for the consultation, and paragraph (e) required the consultant 
practitioner to provide the referring practitioner 25 percent of any 
payments, including any applicable deductible or coinsurance amounts, 
he or she received for the consultation.
    Paragraph (f) specified that a practitioner may be subject to the 
sanctions provided for in 42 CFR chapter V, parts 1001, 1002, and 1103 
if he or she (1) knowingly and willfully bills or collects for services 
in violation of the limitations of proposed Sec. 414.62 on a repeated 
basis, or (2) fails to timely correct excess charges by reducing the 
actual charge billed for the service to an amount that does not exceed 
the limiting charge or fails to timely refund excess collections.

Analysis of and Response to Public Comments to HCFA-1906-P Eligibility 
Provisions

    Comment: Most commenters applauded HCFA's decision to include

[[Page 58880]]

both partial and full county geographic HPSAs when determining 
eligibility. However, a few commenters believed we should not limit 
eligibility to rural HPSAs. One commenter stated that the proposed 
eligibility criteria discriminated against elderly persons living in 
other remote areas. Another commenter suggested that travel time or 
distance to the specialist, not the availability of primary care 
physicians in the community, are the most important criteria for 
elderly patients in need of specialty consultation.
    Response: BBA limits eligibility for teleconsultation to rural 
areas as defined by section 1886(d)(2)(D) of the Act designated as an 
HPSA as defined by section 332(A)(1)(a) of the Public Health Service 
Act. This section of the Public Health Service Act defines an HPSA as 
an area that the Secretary determines has a shortage of health 
professionals and is not reasonably accessible to an adequately 
serviced area.
    We believe that, it is likely that in an area where sources of 
primary care are a considerable distance and travel time away, the same 
would be true for specialty care. In any event, we do not have the 
authority to expand eligibility for teleconsultation beyond what is 
specified by BBA.
    Comment: One commenter questioned whether psychiatric, dental, and 
facility HPSAs are eligible for teleconsultation.
    Response: As discussed above, HPSA eligibility is limited to 
eligibility under section 332(a)(1)(A) of the Public Health Service 
Act. This section of the law references geographic HPSAs only.

Coverage Provisions

    Comment: Many commenters requested that we include payment for the 
use of store-and-forward technology within the scope of coverage of 
this provision. Commenters believed that, for many specialties, store-
and-forward technology provided the same information that would be 
provided in a live consultation.
    For instance, several commenters recommended that we broaden the 
definition of a consultation to allow stored full-motion video exams or 
other representations to substitute for the presence of the patient. 
Other commenters recommended payment for store-and-forward applications 
such as dermatology photos and orthopedic digital x-rays.
    Other justifications for coverage of store-and-forward technology 
included lack of infrastructure and scheduling difficulties. A few 
commenters mentioned congressional interest in providing coverage and 
payment for the use of store-and-forward technology in providing a 
consultation.
    Response: We believe that a teleconsultation is a different method 
of delivering a consultation service. To that end, we view a 
teleconsultation as an interactive patient encounter that must meet the 
criteria for a given consultation service included in the American 
Medical Association's (AMA) Current Procedure Terminology.
    In the proposed rule, we specified that the minimum technology 
necessary to deliver a consultation must include interactive audio and 
video equipment permitting two-way real-time communication between the 
beneficiary, consulting practitioner, and referring practitioner as 
appropriate. For Medicare payment to occur, the patient must be 
present, and the telecommunications technology must allow the 
consulting practitioner to conduct a medical examination of the 
patient.
    The telecommunications requirements do not mandate full motion 
video. If the telecommunications technology permits two-way interactive 
audio and video communication allowing the consulting practitioner to 
conduct a medical exam, Medicare would make payment for a 
teleconsultation.
    These requirements would not prohibit the use of higher end store-
and-forward technology in which less than full motion video is 
sufficient to perform an interactive examination at the control of the 
consulting practitioner. When performed in real-time, with the patient 
present, store-and-forward may allow the consultant physician to 
control the examination by requesting additional, real-time pictures of 
the patient that are transmitted immediately to the online consultant.
    Traditional store-and-forward technology in which an examination, 
diagnostic test, or procedure is filmed and later transmitted can be 
used in conjunction with the interactive (via audio-video technology) 
examination to facilitate the consultant's decision making. However, 
for Medicare payment to occur, the patient must be present in real-
time.
    We do not propose to make separate payment provisions for the 
review of medical records via telecommunications in this final rule. 
BBA gives payment authority for consultation via telecommunications 
with a physician or practitioner described in section 1842(b)(18)(C) of 
the Act, furnishing a service for which payment may be made under 
Medicare. Medicare currently does not make separate payment for the 
review and interpretation of medical records.
    Separate payment for traditional store-and-forward applications may 
be appropriate for many forms of diagnostic testing including 
radiology, electrocardiogram, and electroencephalogram interpretations, 
as well as imaging studies such as magnetic resonance imaging and 
ultrasound. Medicare currently allows coverage and payment for medical 
services delivered via telecommunications systems that do not require a 
face-to-face ``hands on'' encounter. Section 2020(A) of the Medicare 
Carriers Manual addresses this issue and lists radiology, 
electrocardiogram, and electroencephalogram interpretations as examples 
of such services.
    Review of dermatology photos would not be considered a 
consultation. We believe that this would be a new service for which 
payment could not currently be made under Medicare. BBA limits the 
scope of coverage to professional consultations for which payment may 
be made under Medicare.
    Comment: Many commenters believed that we should be more stringent 
regarding practitioners who can be consultants. For instance, a number 
of commenters believed that a certified registered nurse anesthetist, 
anesthesiologist assistant, clinical psychologist, or clinical social 
worker should not be eligible to be a consulting practitioner because 
Medicare does not make payment for consultations provided by these 
practitioners. Additionally, commenters stated that consultation is 
beyond the scope of practice for these practitioners.
    Response: In the proposed rule for teleconsultation we specified 
that all practitioners described in section 1842(b)(18)(C) of the Act 
qualify to be a consulting and a referring practitioner. These 
practitioners include: a physician, physician assistant, nurse 
practitioner, clinical nurse specialist, certified registered nurse 
anesthetist, anesthesiologist assistant, certified nurse midwife, 
clinical psychologist, and clinical social worker.
    After further review of this proposal, we have determined that 
allowing clinical psychologists, clinical social workers, certified 
nurse anesthetists, and anesthesiologist assistants to provide a 
teleconsultation is inconsistent with the Medicare benefit.
    We believe that a professional consultation delivered via 
telecommunications is a method of delivering a consultation service, 
rather than a new service. For instance, BBA section 4206(a) states 
that ``payment

[[Page 58881]]

shall be made for professional consultations via telecommunications 
systems with a physician or practitioner described in section 
1842(b)(18)(C) of the Act furnishing a service for which payment may be 
made * * * '' Moreover, section 4206(b) of BBA states ``the amount of 
such payment shall not be greater than the current fee schedule of the 
consulting physician or practitioner.''
    Under existing Medicare policy, clinical psychologists, clinical 
social workers, certified registered nurse anesthetists, and 
anesthesiologist assistants cannot bill, nor receive payment, for 
consultation services under Medicare. Therefore, these particular 
practitioners are prohibited from billing for a teleconsultation 
because, under the Medicare program, no payment would be made for a 
consultation service provided by these practitioners.
    In addition, we have reviewed our proposed policy which allowed 
certified registered nurse anesthetists and anesthesiologist assistants 
to refer Medicare beneficiaries for teleconsultation. After review, we 
have decided to omit these practitioners as eligible to refer patients 
for teleconsultation. Section 1861(bb) of the Social Security Act 
defines services provided by these practitioners as anesthesia services 
and related care. Currently, our view is that the nature of these 
services is such that certified registered nurse anesthetists and 
anesthesiologist assistants would not request a consultation as defined 
by the Physicians' Current Procedure Terminology. Thus, we are 
excluding certified registered nurse anesthetists and anesthesiologist 
assistants from the list of referring practitioners. We invite specific 
comments regarding this issue.
    To implement this policy change, we are omitting clinical 
psychologists, clinical social workers, certified nurse anesthetists, 
and anesthesiologist assistants from being consulting practitioners as 
follows at redesignated Sec. 410.78(a)(1):

    (1) The consulting practitioner is any of the following:
    (i) A physician as described in Sec. 410.20.
    (ii) A physician assistant as defined in Sec. 410.74.
    (iii) A nurse practitioner as defined in Sec. 410.75.
    (iv) A clinical nurse specialist as defined in Sec. 410.76.
    (v) A nurse-midwife as defined in Sec. 410.77.

    Additionally, a new section is added to omit certified nurse 
anesthetists and anesthesiologist assistants as referring practitioners 
as follows at redesignated Sec. 410.78(a)(2):

    (2) The referring practitioner is any of the following:
    (i) A physician as described in Sec. 410.20.
    (ii) A physician assistant as defined in Sec. 410.74.
    (iii) A nurse practitioner as defined in Sec. 410.75.
    (iv) A clinical nurse specialist as defined in Sec. 410.76.
    (v) A nurse-midwife as defined in Sec. 410.77.
    (vi) A clinical psychologist as described at Sec. 410.71.
    (vii) A clinical social worker as described in section 410.73.

    Comment: We received a number of comments regarding the referring 
practitioner participation requirements. Several commenters believed 
that requiring the participation of the referring practitioner as a 
condition of payment is unreasonable. They believed this responsibility 
can usually be delegated to a midlevel practitioner or, in some cases, 
no presenting practitioner. Commenters made the case that the referring 
practitioner does not travel to the consultant's office for a 
traditional consultation and therefore should not be required to 
participate in a teleconsultation.
    Response: We have reviewed our proposed policy requiring the 
participation of the actual referring practitioner as appropriate to 
the medical needs of the patient. After review we have decided to amend 
this policy to allow all practitioners listed as referring 
practitioners in this rule to be eligible to present a Medicare 
beneficiary for teleconsultation. However, if the practitioner is not 
the actual referring practitioner, he or she must be an employee of the 
referring practitioner.
    Hence, if a primary care physician determines that a specialty 
consultation is necessary, he or she could delegate the presentation of 
the beneficiary to an eligible referring practitioner (i.e., nurse 
practitioner, physician assistant, nurse midwife, clinical nurse 
specialist, clinical psychologist, or clinical social worker) who is an 
employee.
    We clarify, that for circumstances where the condition of the 
patient may not medically require the participation of a presenting 
practitioner, we would not require the participation of a presenting 
practitioner as a condition of payment for the teleconsultation.
    When no practitioner is present with the patient, the consultant 
will continue to share 25 percent of total payments with the referring 
practitioner. As discussed in the payment provision section of this 
document, the 25-percent allocation is intended to reflect the average 
amount of new work performed by the referring practitioner over many 
teleconsultations. However, because of the potential for fraud or 
abusive practices in these situations where the referring practitioner 
is not present with the patient, HCFA in consultation with the Office 
of the Inspector General will monitor these services in our review of 
the Medicare teleconsultation benefit.
    To execute this policy in this final rule, proposed 
Sec. 410.75(a)(5), redesignated as Sec. 410.78(a)(5), specifies that as 
a condition of payment, the teleconsultation involves the participation 
of the referring practitioner or a practitioner described in section 
1842(b)(18)(C) of the Act (other than a certified registered nurse 
anesthetist or anesthesiologist assistant) who is an employee of the 
referring practitioner, as appropriate to the medical needs of the 
beneficiary and to provide information to and at the direction of the 
consulting practitioner.
    Comment: Several commenters requested clarification regarding the 
availability of the referring practitioner while the teleconsultation 
takes place.
    Response: A practitioner who is eligible to be a referring 
practitioner, as described in redesignated Sec. 410.78(a)(2) (formerly 
Sec. 410.75(a)(2)), is required to be present in the office suite or 
hospital wing and available to participate in the teleconsultation as 
necessary. We do not mandate that a practitioner be present in the room 
while the teleconsultation is taking place.
    As discussed earlier in this document, a presenting practitioner's 
participation is required as appropriate to the medical needs of the 
beneficiary and to provide information at the direction of the 
consulting practitioner. However, if the medical needs of the 
beneficiary require the participation of a presenting medical 
professional, that professional must be a practitioner described in 
redesignated Sec. 410.78(a)(2).
    Comment: A few commenters requested clarification regarding whether 
the referring practitioner may bill for other services on the same day 
that the teleconsultation takes place. A suggestion was made that a 
referring practitioner should be permitted to bill for a primary care 
visit on the same day as a teleconsultation if the primary care visit 
is the basis of the consultation or for a medical problem unrelated to 
the consultation.
    Response: On the day the teleconsultation occurs, the referring 
practitioner may bill for the office, outpatient, or inpatient visit 
that preceded the need for a consultation. Additionally, the referring 
practitioner could bill for other services as ordered by the 
consultant, or for services unrelated to the medical problem for which 
a consultation was requested.

[[Page 58882]]

However, the referring practitioner is prohibited from billing for a 
second visit for his or her role in presenting the patient at the time 
of teleconsultation. The consulting practitioner is responsible for 
billing Medicare for the consultation service.
    Comment: Many commenters suggested an expansion in the scope of 
coverage beyond consultation services including speech pathology, 
occupational therapy, diabetic self management, psychotherapy, office 
and other outpatient visits for new and established patients, nursing 
facility services, and patient education and diagnostic interviews. 
Additionally, the nature of the comments indicated a belief that 
consultation can only be requested for a limited number of conditions 
or specialties and that a consultation service can only be provided 
once per patient.
    Response: Section 4206(a) of BBA limits the scope of coverage to 
professional consultation for which payment is currently made under 
Medicare. We believe that a consultation is a specific service that 
meets the criteria specified for a consultation service in the AMA 1998 
Current Procedure Terminology. BBA does not give authority to cover 
services beyond consultation under this provision.
    We clarify that a consultation can be requested by a physician or 
practitioner for many medical specialties including, but not limited 
to: cardiology, pulmonary, neurology, dermatology, gastrology, and 
psychiatry. Additionally, the scope of coverage for teleconsultation is 
not limited to the initial request for consultation from the referring 
practitioner. If an additional request for consultation regarding the 
same or new problem is received from the attending practitioner and 
documented in the medical records, another teleconsultation may be 
billed.
    Comment: Two commenters requested clarification of whether a 
physician assistant is eligible to be a consultant under this 
provision.
    Response: A physician assistant, as defined in existing 
Sec. 410.74, is eligible to bill for a teleconsultation.
    Comment: A number of commenters believed that, in many cases, a 
registered nurse, or other medical professional, is qualified to 
present the patient to the consultant. One commenter believed that 
patient care has never suffered when a medical professional not 
recognized as a Medicare practitioner is used to present the patient 
and only a small percentage of cases actually require a physician, 
nurse practitioner, or physician assistant to be present for the 
teleconsultation.
    Response: Section 4206(a) of BBA specifies that the individual 
physician or practitioner providing the professional consultation does 
not have to be at the same location as the physician or practitioner 
furnishing the service to the beneficiary. We believe this language is 
limiting and requires that a practitioner, as recognized under section 
1842(b)(18)(C) of the Act, must be present with the patient during the 
teleconsultation. Since the same phrase describes the medical 
professional at both ends of the teleconsultation, we believe that it 
would be difficult to interpret the phrase to have one meaning for 
purposes of identifying the consultant and a different meaning for 
purposes of identifying who may be physically with the patient. 
Therefore, registered nurses, and other medical professionals not 
recognized as practitioners under section 1842(b)(18)(C) cannot act as 
presenters during teleconsultations.
    Comment: A few commenters believed that the range of medical 
professionals eligible to provide a teleconsultation should be expanded 
beyond what is allowed by BBA. Suggestions included physical 
therapists, respiratory therapists, and occupational therapists. 
Commenters stated that outpatient rehabilitation following a stroke or 
other disorder is less expensive and better than prolonged inpatient 
care. Other commenters suggested that nurse specialists and registered 
nurses be allowed to provide a consultation service. Commenters stated 
that nurses provide education to patients without the presence of a 
physician or other practitioner.
    Response: BBA limits the medical professionals who may be 
consultants to physicians or practitioners described in section 
1842(b)(18)(C) of the Act. These practitioners include a clinical nurse 
specialist as described in Sec. 410.76; however, nurses who are not 
recognized as practitioners under section 1842(b)(18)(C) of the Act are 
not eligible to provide a teleconsultation. This section of the law 
does not include physical therapists, respiratory therapists, and 
occupational therapists. We have no authority to expand the statutory 
definition.
    Comment: One commenter stated that a certain State law requires the 
referring practitioner to have the ultimate authority over the care of 
the patient. The commenter believed that this requirement conflicts 
with our proposed rule which specifies that the examination be at the 
control of the consulting practitioner.
    Response: We clarify that the language at proposed 
Sec. 410.75(a)(4), redesignated in this final rule as 
Sec. 410.78(a)(4), ``The medical examination of the beneficiary is 
under the control of the consultant practitioner,'' does not mean that 
the referring practitioner relinquishes the overall responsibility for 
a beneficiary's care. The intent of this requirement is to clarify that 
the consulting practitioner is conducting a real-time examination with 
the patient present, rather than reviewing a prior examination, 
diagnostic test, or procedure prepared in advance by the referring 
practitioner.

Payment and Billing Provisions

    Comment: One commenter believed that the discussion of general 
Medicare payment policy is unclear. The commenter specifically 
questioned the applicability of coinsurance.
    Response: Generally, under Medicare part B, Medicare pays 80 
percent of the lower of the actual charge or appropriate fee schedule 
amount, presuming the beneficiary has met his or her Medicare part B 
deductible. Under the Medicare program and for purposes of this 
provision, the maximum Medicare payment for a teleconsultation provided 
by a participating physician would be based on 80 percent of the 
physician fee schedule, presuming that the deductible had been met. For 
all other eligible consulting practitioners, the maximum Medicare 
payment amount would be 80 percent of 85 percent of the physician fee 
schedule. The beneficiary would be responsible for 20 percent of the 
appropriate payment amount.
    An example of this formula using $100 as the Medicare physician fee 
schedule amount is provided below.
    Payment for a teleconsultation when a participating physician is 
the consultant:
    <bullet> Medicare Physician Fee Schedule: $100.
    <bullet> Max. Medicare Payment Amount (80% of $100): $80.
    <bullet> Coinsurance (20% of $100): $20.
    <bullet> Total Payment Amount: $100.
    Payment for a teleconsultation when an eligible non-physician 
practitioner is the consultant: 
    <bullet> Medicare Physician Fee Schedule: $100.
    <bullet> Practitioners Respective Percentage of the Physicians Fee 
Schedule and Resulting Non-Physician Fee Schedule Amount (85% of $100): 
$85.
    <bullet> Max. Medicare Payment Amount (80% of $85): $68.
    <bullet> Coinsurance (20% of $85): $17.
    <bullet> Total Payment Amount: $85.

[[Page 58883]]

    Comment: One commenter questioned whether Medigap, Medicaid, and 
other supplemental insurance will pay the 20-percent coinsurance for 
teleconsultations.
    Response: Medicare Supplemental Insurance (MSI) will pay the 20-
percent coinsurance for covered teleconsultations. MSI coverage 
including Medigap, Medicaid, or employer plans have been standardized 
across the country. All MSI plans provide what are known as ``basic 
benefits,'' which are defined to include Medicare Part B coinsurance 
for covered services (20 percent of the Medicare-approved amount). 
Teleconsultation is a consultation service delivered via 
telecommunications systems and is covered under Medicare in rural HPSAs 
effective January 1, 1999.
    Comment: We received a number of comments regarding the proposed 
payment allocation in which the consultant would receive 75 percent and 
the referring practitioner would receive 25 percent of the consulting 
practitioners fee schedule. Several recommendations were made to vary 
the distribution of payment based on the work performed by each 
practitioner. A few commenters suggested that if it is not medically 
necessary for a presenting practitioner to participate in the 
teleconsultation, the consultant should receive 100 percent of the 
payment. Other commenters suggested that the payment allocation be 
determined by the practitioners involved.
    Response: We recognize that the level of involvement of the 
presenting practitioner will vary from case to case, and our model for 
payment allocation reflects this belief. In determining the payment 
allocation, we developed a model simulating the combined intensity 
level for both the referring and consulting practitioners by using 
relative value units (RVUs) applicable to consultation services and 
primary care visits (primary care visits were used as proxy for the 
role of a presenting practitioner during a teleconsultation).
    The model reflects that some consultations will require more 
preparation and medical expertise from the presenting practitioner. For 
instance, in the first scenario we used the full primary care RVUs. In 
the second scenario we reduced the work component by 50 percent to 
reflect that some consultations will require less new work from the 
presenting practitioner.
    The consultation service and primary care visit RVUs were 
calculated as a percentage of the combined total and resulted in a 75-
percent payment to the consulting practitioner and 25-percent payment 
to the referring practitioner. This percentage allocation is intended 
to reflect the average level of new work performed by each practitioner 
over the course of various teleconsultations. It would not be practical 
for us to develop varying fee amounts for the referring practitioner's 
role in presenting the patient given our lack of program experience 
with teleconsultation. However, we are not eliminating the possibility 
of making changes to the allocation methodology if program experience 
demonstrates that a modification is warranted.
    We considered making a single payment to the consulting 
practitioner without specifying the amount to be shared with the 
referring practitioner, however we wished to avoid raising issues of 
prohibitions against ``fee splitting.'' For more information on the 
payment allocation see page 33886 of the June 22, 1998 proposed rule.
    Comment: A few commenters believed that the regulation should 
specify the consequences in the event that a consultant fails to share 
payment in a timely fashion. A suggestion was made to amend the 
regulation to require the consultant to share payment within 30 days of 
receipt from the Medicare carrier. The commenter also requested that, 
in the event of untimely sharing of payment, the referring practitioner 
have the right to contact the consultant's Medicare carrier directly 
for the required percent of payment.
    Response: We are not mandating or imposing time limits or dictating 
how sharing of payments should occur. We believe the specific details 
of how the payment should be shared, including the appropriate time 
frame, should be up to the practitioners involved. We believe that 
specifying a time frame in which sharing must occur, would impose an 
unnecessary burden on the consulting practitioner.
    Comment: One commenter stated that the proposed rule is unclear 
regarding when the consulting practitioner should share 25 percent of 
the total payment with the referring practitioner. Specifically, the 
commenter provided two examples of how payment could possibly be 
shared. The first example involved sharing Medicare and coinsurance 
payments separately (upon the receipt by the consultant), while the 
second example involved sharing 25 percent of the total fee schedule 
amount before coinsurance was received by the consulting practitioner. 
The commenter believed that the amount of payment allocation changes 
depending on when sharing occurs.
    Response: The consulting practitioner is responsible for billing 
Medicare for the consultation service and sharing 25 percent of total 
payments received with the referring practitioner. Whether the 
consulting practitioner shares payments as he or she receives them, 
waits until all payments are received, or shares the Medicare and 
coinsurance payments up-front, the total payment amount allocated to 
each practitioner remains the same. We are not imposing further 
guidelines on the sharing arrangement between the two practitioners.
    Comment: Several commenters questioned whether our proposed payment 
methodology of making a single payment to the consultant and requiring 
him or her to share payment violates section 1877 of the Act. This 
section provides penalties for certain prohibited referrals. A few 
commenters questioned the applicability of State laws that prohibit fee 
splitting.
    Response: The payment provisions for teleconsultation specify that 
the consulting practitioner must submit the claim for the consultation 
service and must share 25 percent of total payment with the referring 
practitioner. Given that we require the sharing of payments and 
predetermine by law the payment amount allocated to the referring 
practitioner, we believe that our regulation does not constitute a 
prohibited compensation arrangement between the consulting and 
referring practitioners. We do not regard the consulting practitioner 
as actually making a payment to the referring practitioner, but rather 
acting as a ``conduit'' to pass a portion of the Medicare payment on. 
Therefore, we believe that physicians and practitioners, under our 
payment policy, are not in violation of the Act. For more discussion 
regarding the bundled payment approach see page 33887 of the June 22, 
1998 proposed rule.
    Comment: A few commenters questioned how this payment sharing 
arrangement is treated for tax purposes and whether requiring the 
consultant to share payment is in conflict with the tax laws.
    Response: HCFA does not give tax advice. However, we believe that 
what the commenter presents as a tax problem is merely a matter of 
bookkeeping. We note that the law requires the sharing of payment, and 
the regulation requires the consultant to give 25 percent of the 
payment received to the referring practitioner. We do not believe that 
the consultant would ever account for the portion of the Medicare 
payment for which he serves as a ``conduit'' as income of his or her 
own. Each practitioner should consult his or her own tax adviser for 
specific

[[Page 58884]]

information about his own bookkeeping practices.
    Comment: Many commenters believed that it will be an administrative 
burden for the consultant to share payments with the referring 
practitioner. We received suggestions for two alternative billing 
proposals. The first alternative proposal maintained the single bill 
approach, but required us to issue separate checks to the consulting 
and referring practitioner from the same claim form. The second 
alternative proposal required the submission of separate claims from 
the consulting and referring practitioner with HCFA issuing separate 
checks.
    Response: We understand the commenters' concern regarding the 
additional administrative requirements placed on the consulting 
practitioner. As a result of public comment, we examined the 
possibility of issuing two separate checks from the same claim form. 
Under this approach, we would pay the consultant 75 percent of the 
appropriate fee schedule amount and the referring practitioner would be 
paid 25 percent based upon the claim submitted by the consultant. 
However, this option could not be implemented to meet the January 1, 
1999, effective date of this provision as mandated by section 4206 of 
BBA. For instance, the Medicare claims processing system is currently 
designed to accept only one ``pay to'' personal identification number 
(PIN) per claim on the electronic claim record and the HCFA-1500 paper 
claim fields that are used as the source for generating a check to a 
practitioner.
    Currently there is only one scenario in which two checks can be 
issued from one claim form. That situation occurs when a beneficiary 
overpays his or her deductible and/or coinsurance on an assigned claim. 
In this case, one check is issued to the provider and a second check is 
issued to the beneficiary reflecting the amount the beneficiary 
overpaid. It is possible to issue two checks in this one instance 
because there is only one personal identification number.
    Additionally, the Medicare claims processing system is designed to 
accommodate only one provider signature per claim. As such, if the 
consulting practitioner bills on behalf of the referring practitioner, 
we would not have a valid claim from the referring practitioner upon 
which to base payment and issue a check.
    Another administrative difficulty concerns the possibility that the 
consulting and referring practitioners may be located in different 
carrier jurisdictions. This would make it difficult for one carrier to 
make separate payments to both practitioners. This option may be more 
feasible once national practitioner identification numbers are 
implemented as mandated by the Health Insurance Portability and 
Accountability Act of 1996.
    When developing the proposed rule we considered requiring each 
practitioner to submit a separate claim. This alternative was rejected 
due to the administrative difficulties in linking claims to assure that 
the payment ceiling as allowed by section 4206 of BBA is not exceeded. 
Total payment could exceed what the consultant would have otherwise 
received if the presenting practitioner were to submit a claim for a 
consultation at a higher intensity level than the consultant. The task 
of linking claims becomes increasingly difficult if two carriers are 
involved because the practitioners' locations fall within separate 
carrier jurisdictions. The systems modifications necessary to 
accommodate separate claims could not have been implemented by the 
January 1, 1999, effective date as mandated by BBA.
    Although the final rule requires the consulting practitioner to 
submit a claim for the teleconsultation and share payment with the 
referring practitioner, we are not foreclosing the possibility of 
making changes to this policy in the future.
    Comment: One commenter had concerns regarding language in the 
proposed rule that stated that the teleconsultation transfers the 
patient to the consulting practitioner. The commenter believed that we 
should clarify that this statement was made only for administrative 
requirements of the physician fee schedule and that we did not intend 
it as a comment on the scope of medical practice.
    Response: Our determination of the consultant's location as the 
site of service is for Medicare payment purposes only. Given that BBA 
allows payment up to the consultant's current fee schedule, we believe 
that it is appropriate to use the Geographic Practice Cost Index (GPCI) 
relevant to the location of the consulting practitioner, rather than 
the GPCI applicable to the referring practitioner. We did not intend to 
make a comment regarding the scope of medical practice.

Coding Provisions

    Comment: The majority of commenters were strongly in favor of using 
a modifier to identify a consultation delivered via telecommunications 
systems. A few commenters suggested new codes to identify a 
teleconsultation. One commenter stated that modifiers are not always 
handled correctly by the Medicare carriers and that separate codes 
would offer the most reliable way of identifying services subject to 
their own payment rules.
    Response: Using a modifier to identify a consultation delivered via 
telecommunications conforms with our view that a teleconsultation is a 
method of delivering a consultation service, rather than a new service. 
We considered developing a separate coding structure for 
teleconsultation, however, we rejected this option because we believe 
that new codes would be administratively cumbersome for the medical 
community and the Medicare program. We believe it will be easier for 
practitioners to use a single modifier rather than an entirely new set 
of codes.

Issues Not Addressed in the Proposed Rule

    Comment: One commenter asked whether we plan to evaluate the impact 
of this rule on beneficiaries, providers, other payers, or Medicare. 
The commenter further stated that data has been limited from the 
current teleconsultation demonstration project.
    Response: We believe that it would be beneficial to evaluate the 
impact of expanding eligibility for teleconsultation beyond the 
existing demonstration sites. We plan to evaluate program data 
resulting from this provision, such as utilization patterns, service 
intensity, and the type of practitioners providing a teleconsultation.
    Comment: A few commenters suggested we provide clarification 
regarding both intra- and inter-state scope of practice and licensure 
issues. One commenter expressed concern that the proposed rule may 
unintentionally involve us in State-based scope of practice and 
recommended that we clarify that midlevel practitioners are prohibited 
from operating outside the licensed health professionals scope of 
practice in their State.
    Response: BBA specifies that a nonphysician practitioner may refer 
a beneficiary for consultation. We clarify that midlevel practitioners 
would need to meet the governing requirements of the State in which 
they are licensed. Therefore, if the law of the State in which they are 
licensed would prohibit a midlevel practitioner (for example, a nurse 
practitioner or a physician assistant) from referring a patient for 
consultation, the practitioner could not refer a patient for 
teleconsultation. Likewise, if the law of the State in which the 
teleconsultation occurs prohibits a nonphysician from providing a 
consultation service, the

[[Page 58885]]

practitioner could not provide a teleconsultation under Medicare. 
Moreover, if State law precludes an out-of-State practitioner from 
delivering a teleconsultation, Medicare would not pay for that 
consultation.
    Comment: One commenter believed that this rule would disadvantage 
specialists located in a rural HPSA by drawing patients to specialists 
outside of the local area. The commenter stated that managed care 
organizations may possibly be able to negotiate a better price from 
consultants outside the community and believed we should develop 
safeguards to prohibit such possibilities.
    Response: We believe this comment is beyond the scope of this 
provision as authorized by BBA. BBA provides for payment of 
teleconsultation when the requirements of this benefit are met. 
However, HCFA is not authorized by the law to direct physicians and 
other medical practitioners to a specific consultant.
    Comment: A few commenters suggested that we consider guidelines 
regarding beneficiary consent and safeguards for confidentiality.
    Response: We agree that the beneficiary should be thoroughly 
informed regarding the nature of a teleconsultation and that 
confidentiality of medical records is of great concern. However, we 
assume that practitioners are already cognizant of their responsibility 
to obtain patients' informed consent and to protect patients' medical 
records. Therefore, we are not establishing guidelines regarding 
beneficiary consent or confidentiality at this time. We invite specific 
comments regarding this issue.
    We recognize that this rule is a first step in refining face-to-
face ``hands on'' requirements for a medical service under Medicare to 
reflect a telemedicine service. We are not eliminating the possibility 
of the development of modifications to Medicare telemedicine coverage 
and payment policies as the law permits and as more program experience 
in this area is obtained.
    To that end, we intend to explore several issues, including: (1) 
The use of store and forward technologies as a method for delivering 
medical services; (2) the use of registered nurses and other medical 
professionals not recognized as a practitioner under the 
teleconsultation provision to present the patient to the consulting 
practitioner; and (3) the appropriateness of current consultation codes 
for reporting consultations delivered via communications systems.
    In a year we will send recommendations to Congress regarding these 
issues along with any necessary legislative changes.

Clarifications and Modifications

Teleconsultation in Rural Health Clinics
    As a result of further analysis and evaluation, we have decided to 
clarify payment policy for teleconsultations provided in a Rural Health 
Clinic (RHC).
    We believe that Congress did not intend to include 
teleconsultation, as provided for by BBA, as part of the RHC benefit. 
Section 4206(a) of BBA specifies that Medicare payment shall be made 
for a professional consultation delivered via telecommunications with a 
physician as defined in section 1861(r) of the Social Security Act or 
practitioner as defined by section 1842(b)(18)(C) of the Act. Services 
furnished by an RHC are treated as ``RHC services'' and lose their 
identity as physicians' services or services of other practitioners.
    Moreover, section 4206(b) of BBA instructs us to create a system of 
payment for teleconsultation that requires that payment be shared 
between the referring and consulting professionals, precludes payment 
for any sort of capital or facility fees, and applies the mandatory 
claims submission and limiting charge provisions of section 1848(g) of 
the Social Security Act. The method of payment for teleconsultation 
services under this benefit is not congruent with the method of payment 
for services under the RHC benefit. Under the RHC benefit, payment is 
made on the basis of an all-inclusive rate per visit (see 42 CFR 
405.2462). These provisions are another indication that we should not 
include teleconsultation services furnished by physicians in RHCs as 
RHC services for which we make payment to the RHC.
    While, some argument could be made that Congress simply did not 
intend for teleconsultation services ever to be paid for under section 
4206 if they are furnished within the confines of an RHC, this would be 
an unusual conclusion since section 4206 specifically provides payment 
for consultation services in rural areas similar to those areas 
serviced by RHCs that may lack sufficient specialists to provide 
necessary beneficiary care.
    Since Congress did not address how we should treat the services of 
physicians and other practitioners providing teleconsultation in RHCs, 
we are interpreting the law to permit practitioners in RHCs to bill for 
teleconsultation as do other practitioners. The law and the legislative 
history indicate that the intent of the teleconsultation benefit was to 
expand services to beneficiaries in rural areas. The same intent 
informs the RHC benefit, so we believe it would be anomalous to read 
the teleconsultation benefit as being unavailable to rural 
beneficiaries who receive a teleconsultation in an RHC.
    Section 402 of the RHC manual (HCFA Pub. 27) describes ``services 
furnished by RHCs . . . which are not RHC/FQHC services.'' These 
services include durable medical equipment, ambulance services, 
diagnostic tests (``unless an interpretation of the test is provided by 
the RHC/FQHC physician''), prosthetic devices, braces, and artificial 
limbs. Thus, services created by other benefit provisions and not 
explicitly enumerated as part of the RHC benefit have been paid not 
under the RHC benefit (even if furnished in an RHC), but rather under 
the appropriate authority in section 1833 of the Act. We believe that 
it is consistent with this policy to pay for teleconsultations under 
the authority of section 4206 of BBA, not as an RHC service.
    Therefore, consulting practitioners providing a teleconsultation in 
an RHC setting will be paid according to the payment methodology 
specified in this final rule. A teleconsultation would not generate an 
RHC visit and would not be paid for under the all-inclusive rate 
methodology. For instance, the consulting practitioner providing a 
teleconsultation in an RHC would bill the applicable Medicare carrier 
using his or her own identification number rather than the 
identification number of the RHC. Payment would be based on the 
consultant's fee schedule amount and he or she would be required to 
share 25 percent of total payments with the referring practitioner.
    When a practitioner in an RHC refers a Medicare beneficiary for a 
teleconsultation, he or she will receive 25 percent of the approved 
Medicare consultation fee schedule. An RHC visit would not be billed by 
either the referring or consulting practitioner for the 
teleconsultation. However, the referring practitioner could bill for 
the initial visit which prompted the need for a consultation as an RHC 
visit.

    Note: These requirements would also apply to Federally Qualified 
Health Centers located in a rural HPSA.
Result of Evaluation of Comments
    <bullet> Eligibility for Teleconsultation--Medicare beneficiaries 
residing in rural HPSAs are eligible to receive teleconsultation 
services. This final rule stipulates the use of the site of 
presentation (patient location) as a proxy for beneficiary residence. 
However, if a beneficiary can

[[Page 58886]]

demonstrate that he or she resides in a rural HPSA, Medicare would make 
payment regardless of the site of consultation. Eligibility for 
teleconsultation includes both full and partial county HPSAs designated 
by section 332(a)(1)(A) of the Public Health Service Act.
    <bullet> Scope of Coverage--Covered services include initial, 
follow-up, or confirming consultations in hospitals, outpatient 
facilities, or medical offices delivered via interactive audio and 
video telecommunications systems (CPT codes 99241-99245, 99251-99255, 
99261-99263, and 99271-99275).
    <bullet> Practitioners eligible to be consulting and referring 
practitioners--Clinical psychologists, clinical social workers, 
certified registered nurse anesthetists, and anesthesiologist 
assistants do not provide for consultation services payable under 
Medicare and therefore cannot provide a teleconsultation under this 
provision. Additionally, certified nurse anesthetists and 
anesthesiologist assistants are not eligible to be referring 
practitioners for a teleconsultation. Practitioners who may provide 
teleconsultations include the following: physicians, physician 
assistants, nurse practitioners, clinical nurse specialists, and nurse-
midwives. Practitioners who may refer patients for teleconsultation 
include the following: physicians, physician assistants, nurse 
practitioners, clinical nurse specialists, nurse-midwives, clinical 
psychologists, and clinical social workers.
    <bullet> Conditions of Payment--The patient must be present at the 
time of consultation, the medical examination of the patient must be 
under the control of the consulting practitioner, and the consultation 
must take place via an interactive audio and video telecommunications 
system. Interactive telecommunications systems must be multi-media 
communications that, at a minimum, include audio and video equipment 
permitting real-time consultation among the patient, consulting 
practitioner, and referring practitioner (as appropriate). Telephones, 
facsimile machines, and electronic mail systems do not meet the 
requirements of interactive telecommunications systems.
    <bullet> We amended the proposed rule to allow another practitioner 
who can be a referring practitioner under this provision to present the 
patient to the consultant provided that he or she is an employee of the 
actual referring practitioner.
    <bullet> Registered nurses and other medical professionals not 
included within the definition of a practitioner in section 
1842(b)(18)(C) of the Act are not permitted to act as presenters during 
teleconsultations.
    <bullet> Medicare Payment Policy--A single payment will be made to 
the consulting practitioner. The amount will be equal the consultant's 
current fee schedule payment for a face-to-face patient consultation. 
The statute requires that the fee be shared by the referring and 
consulting practitioners. This final rule implements this requirement 
by providing that the consulting practitioner receive 75 percent, and 
the referring practitioner 25 percent, of the consulting practitioner's 
Medicare fee. The patient continues to be responsible for the 20 
percent Medicare coinsurance.
    <bullet> Billing for Teleconsultation--The consulting practitioner 
will submit one claim for the consultation service and will provide the 
referring practitioner with 25 percent of any payment, including any 
deductible or coinsurance received for the consultation. A coding 
modifier will be used to identify the claim as a teleconsultation. The 
referring practitioner cannot submit a Medicare claim for the 
teleconsultation.

IV. Refinement of Relative Value Units for Calendar Year 1999 and 
Responses to Public Comments on Interim Relative Value Units for 
1998

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

    Section IV.B. of this final rule describes the methodology used to 
review the comments received on the RVUs for physician work and the 
process used to establish RVUs for new and revised CPT codes. Changes 
to codes on the physician fee schedule reflected in Addendum B are 
effective for services furnished beginning January 1, 1999.

B. Process for Establishing Work Relative Value Units for the 1999 
Physician Fee Schedule

    Our October 31, 1997 final rule on the 1998 physician fee schedule 
(62 FR 59048) announced the final RVUs for Medicare payment for 
existing procedure codes under the physician fee schedule and interim 
RVUs for new and revised codes. The RVUs contained in the rule apply to 
physicians' services furnished beginning January 1, 1998. We announced 
that we considered the RVUs for the interim codes to be subject to 
public comment under the annual refinement process. In this section, we 
summarize the refinements to the interim work RVUs that have occurred 
since publication of the October 1998 final rule and our establishment 
of the work RVUs for new and revised codes for the 1999 physician fee 
schedule.

Work Relative Value Unit Refinements of Interim and Related Relative 
Value Units (Includes Table 4--Work Relative Value Unit Refinements of 
1998 Interim and Related Relative Value Units)

    Although the RVUs in the October 1997 final rule were used to 
calculate 1998 payment amounts, we considered the RVUs for the new or 
revised codes to be interim. We accepted comments for a period of 60 
days. We received comments from approximately 8 specialty societies on 
approximately 34 CPT codes with interim RVUs. Only comments received on 
codes listed in Addendum C of the October 1997 final rule were 
considered this year.
    Due to the content of the comments received, we did not convene 
multi-specialty refinement panels (see the November 22, 1996 final rule 
on the physician fee schedule (61 FR 59536) for a detailed explanation 
of the refinement of CPT codes with interim RVUs). Instead, 
determinations were made by HCFA medical officers in conjunction with 
our carrier medical directors.

Table 4--Work Relative Value Unit Refinements of 1998 Interim and 
Related Relative Value Units

    Table 4 lists the interim and related codes reviewed during the 
1998 refinement process described in this section. This table includes 
the following information:
    <bullet> CPT Code. This is the CPT code for a service.
    <bullet> Description. This is an abbreviated version of the 
narrative description of the code.
    <bullet> 1998 Work RVU. The work RVUs that appeared in the October 
1997 rule are shown for each reviewed code.
    <bullet> Requested Work RVU. This column identifies the work RVUs 
requested by commenters.
    <bullet> 1999 Work RVU. This column contains the final RVUs for 
physician work.
    The new values emerged from analysis of the specialty society's 
written comments on the 1998 interim valued CPT codes.

[[Page 58887]]



         Table 4.--Work Relative Value Unit Refinements of 1998 Interim and Related Relative Value Units
----------------------------------------------------------------------------------------------------------------
                                                                            1998 work    Requested    1999 work
  CPT               MOD                          Description                   RVU        work RVU       RVU
----------------------------------------------------------------------------------------------------------------
11055..  .........................  Paring or cutting of nails...........         0.27         0.43         0.27
11056..  .........................  Paring or cutting of nails...........         0.39         0.61         0.39
11057..  .........................  Paring or cutting of nails...........         0.50         0.79         0.50
11719..  .........................  Paring or cutting of nails...........         0.11         0.17         0.11
17003..  .........................  Destruction of lesions...............         0.15         0.18         0.15
17004..  .........................  Destruction of lesions...............         2.79         3.05         2.79
90804..  .........................  Psytx, office (20-30)................         1.11         1.30         1.21
90805..  .........................  Psytx, office (20-30) w/e&m..........         1.47         1.47         1.37
90806..  .........................  Psytx, office (45-50)................         1.73         1.99         1.86
90807..  .........................  Psytx, office (45-50) w/e&m..........         2.00         2.16         2.02
90808..  .........................  Psytx, office (75-80)................         2.76         2.99         2.79
90809..  .........................  Psytx, office (75-80) w/e&m..........         3.15         3.16         2.95
90810..  .........................  Intac psytx, office (20-30)..........         1.19         1.42         1.32
90811..  .........................  Intac psytx, off 20-30 w/e&m.........         1.58         1.59         1.48
90812..  .........................  Intac psytx, office (45-50)..........         1.86         2.11         1.97
90813..  .........................  Intac psytx, off 45-50 w/e&m.........         2.15         2.28         2.13
90814..  .........................  Intac psytx, office (75-80)..........         2.97         3.11         2.90
90815..  .........................  Intac psytx, off 75-80 w/e&m.........         3.39         3.28         3.06
90816..  .........................  Psytx, hosp (20-30)..................         1.24         1.34         1.25
90817..  .........................  Psytx, hosp (20-30) w/e&m............         1.65         1.51         1.41
90818..  .........................  Psytx, hosp (45-50)..................         1.94         2.03         1.89
90819..  .........................  Psytx, hosp (45-50) w/e&m............         2.24         2.20         2.05
90821..  .........................  Psytx, hosp (75-80)..................         3.09         3.03         2.83
90822..  .........................  Psytx, hosp (75-80) w/e&m............         3.53         3.20         2.99
90823..  .........................  Intac psytx, hosp (20-30)............         1.33         1.46         1.36
90824..  .........................  Intac psytx, hsp 20-30 w/e&m.........         1.77         1.63         1.52
90826..  .........................  Intac psytx, hosp (45-50)............         2.08         2.15         2.01
90827..  .........................  Intac psytx, hsp 45-50 w/e&m.........         2.41         2.32         2.16
90828..  .........................  Intac psytx, hosp (75-80)............         3.32         3.15         2.94
90829..  .........................  Intac psytx, hsp 75-80 w/e&m.........         3.80         3.32         3.10
99343..  .........................  Home care visits.....................         2.27       No Rec         2.27
99345..  .........................  Home care visits.....................         3.79       No Rec         3.79
99348..  .........................  Home care visits.....................         1.26       No Rec         1.26
99350..  .........................  Home care visits.....................         3.03       No Rec         3.03
----------------------------------------------------------------------------------------------------------------
* All CPT and descriptors copyright 1998 American Medical Association.

Paring or cutting of nails (CPT codes 11055 through 11057 and 11719)

    Comment: A commenter disagreed with our decision to decrease the 
RUC-recommended RVUs for this family of codes. (``RUC'' refers to the 
American Medical Association's Specialty Society Relative Value Scale 
Update Committee.) They believed our budget-neutral approach decreased 
the recommended RUC work RVUs by too large a factor. (See the section 
on the establishment of interim work Value Units for a brief discussion 
of the budget-neutral approach.)
    Response: We disagree with the commenter's view that the RUC 
recommendations were decreased by too large a factor. CPT codes 11055 
through 11057 can be performed in conjunction with CPT code 11719. The 
methodology that was used accounts for these combinations. Therefore, 
the 1998 interim work RVUs will be made final for this series of CPT 
codes. The final work RVUs, effective January 1, 1999, will be as 
follows: CPT code 11055 (0.27), CPT code 11056 (0.39), CPT code 11057 
(0.50), and CPT code 11719 (0.11).

Destruction of lesions (CPT codes 17003 and 17004)

    Comment: A commenter disagreed with our decision to accept the RUC 
recommendations for CPT codes 17003 and 17004. The commenter believed 
that the work RVUs associated with these codes were decreased by the 
RUC without any rationale.
    Response: We disagree with the commenter's belief that we should 
not have accepted the RUC recommendation for CPT codes 17003 and 17004. 
The RUC determined the work RVUs for these two codes by crosswalking 
the utilization of existing procedure codes (which were to be deleted 
for CPT 1998) into these two new CPT codes for the same services. 
Compliance with our guidelines for budget neutrality resulted in the 
reduction of the society's recommended work RVUs by the RUC. Therefore, 
the 1998 interim RVUs for CPT codes 17003 and 17004 will be made final. 
The final work RVUs, effective January 1, 1999, will be as follows: CPT 
code 17003 (0.15) and CPT code 17004 (2.79).

Psychotherapy (CPT codes 90804 through 90829)

    Comment: In May of 1997, the RUC recommended that HCFA-assigned 
RVUs for the 24 HCPCS psychotherapy codes be crosswalked to the 1998 
CPT codes. The RUC also recommended that the work RVUs remain interim 
until such time as a survey is conducted by each of the professions 
that furnish the services.
    Response: We received recommendations that were based upon the 
cooperative efforts of the American Academy of Child and Adolescent 
Psychiatry, The American Nurses Association, the American Psychiatric 
Association, the American Psychological Association, and the National 
Association of Social Workers. The RUC accepted these recommendations.
    The cooperative effort by the referenced specialties used frequency 
estimations to maintain budget neutrality within the family of new CPT 
codes. Based upon actual 1997

[[Page 58888]]

frequencies, the recommended work RVUs are not budget-neutral. We will 
retain the relative relationships that were recommended but will attain 
budget neutrality by applying a uniform 6.7 percent reduction across 
all of the codes. The final 1999 work RVUs will be as follows:

         Table 5.--Psychotherapy (CPT Codes 90804 through 90829)
------------------------------------------------------------------------
  CPT                                                         1999 work
  code                       Descriptor                          RVUs
------------------------------------------------------------------------
90804..  Psytx, office (20-30).............................         1.21
90805..  Psytx, office (20-30) w/e&m.......................         1.37
90806..  Psytx, office (45-50).............................         1.86
90807..  Psytx, office (45-50) w/e&m.......................         2.02
90808..  Psytx, office (75-80).............................         2.79
90809..  Psytx, office (75-80) w/e&m.......................         2.95
90810..  Intac psytx, office (20-30).......................         1.32
90811..  Intac psytx, off 20-30 w/e&m......................         1.48
90812..  Intac psytx, office (45-50).......................         1.97
90813..  Intac psytx, off 45-50 w/e&m......................         2.13
90814..  Intac psytx, office (75-80).......................         2.90
90815..  Intac psytx, off 75-80 w/e&m......................         3.06
90816..  Psytx, hosp (20-30)...............................         1.25
90817..  Psytx, hosp (20-30) w/e&m.........................         1.41
90818..  Psytx, hosp (45-50)...............................         1.89
90819..  Psytx, hosp (45-50) w/e&m.........................         2.05
90821..  Psytx, hosp (75-80)...............................         2.83
90822..  Psytx, hosp (75-80) w/e&m.........................         2.99
90823..  Intac psytx, hosp (20-30).........................         1.36
90824..  Intac psytx, hsp 20-30 w/e&m......................         1.52
90826..  Intac psytx, hosp (45-50).........................         2.01
90827..  Intac psytx, hsp 45-50 w/e&m......................         2.16
90828..  Intac psytx, hosp (75-80).........................         2.94
90829..  Intac psytx, hsp 75-80 w/e&m......................         3.10
------------------------------------------------------------------------

Home care visits (CPT codes 99341 through 99350)

    Comment: A commenter suggested that, when we increased the RUC's 
work RVU recommendations by a uniform 10 percent intensity factor, we 
used incorrect base intra-service time. The commenter believed the RUC 
survey of intra-service time was more accurate than the typical time 
agreed to by CPT.
    Response: We maintain that the correct intra-service times were 
used and thus will finalize these interim valued codes for home visits. 
Effective January 1, 1999, the final work RVUs for the home care visit 
codes will be as follows: CPT code 99341 (1.01), CPT code 99342 (1.52), 
CPT code 99343 (2.27), CPT code 99344 (3.03), CPT code 99345 (3.79), 
CPT code 99347 (0.76), CPT code 99348 (1.26), CPT code 99349 (2.02), 
and CPT code 99350 (3.03).

Establishment of Interim Work Relative Value Units for New and Revised 
Physicians' Current Procedural Terminology Codes and New HCFA Common 
Procedure Coding System Codes for 1999 Methodology (Includes Table 6--
American Medical Association Specialty Society Relative Value Update 
Committee and Health Care Professionals Advisory Committee 
Recommendations and HCFA's Decisions for New and Revised 1999 CPT 
Codes)

    One aspect of establishing work RVUs for 1999 was related to the 
assignment of interim work RVUs for all new and revised CPT codes. As 
described in our November 25, 1992 notice on the 1993 fee schedule (57 
FR 55938) and in section III.B. of our November 26, 1996 final rule (61 
FR 59505 through 59506), we established a process, based on 
recommendations received from the AMA's RUC, for establishing interim 
RVUs for new and revised codes.
    We received work RVU recommendations for approximately 70 new and 
revised codes from the RUC. Physician panels consisting of carrier 
medical directors and our staff reviewed the RUC recommendations by 
comparing them to our reference set or to other comparable services on 
the physician fee schedule for which work RVUs had been established 
previously, or to both of these criteria. The panels also considered 
the relationships among the new and revised codes for which we received 
RUC recommendations. We agreed with the majority of those relationships 
reflected in the RUC values. In some cases, when we agreed with the RUC 
relationships, we revised the work RVUs recommended by the RUC to 
achieve work neutrality within families of codes. That is, the work 
RVUs have been adjusted so that the sum of the new or revised work RVUs 
(weighted by projected frequency of use) for a family of codes will be 
the same as the sum of the current work RVUs (weighted by their current 
frequency of use). For approximately 93 percent of the RUC 
recommendations, proposed work RVUs were accepted or increased, and, 
for approximately 7 percent, work RVUs were decreased.
    We received only one recommendation from the Health Care 
Professionals Advisory Committee (HCPAC) for a new code for which the 
RUC did not provide a recommendation. This HCPAC recommendation was 
accepted.
    There were also 10 CPT codes for which we did not receive a RUC 
recommendation. After review of these codes by HCFA medical officers, 
we established interim work RVUs for 8 of these codes and identified 
the remaining 2 CPT codes as carrier-priced for 1999.
    Table 6 is a listing of those codes that will be new or revised in 
1999 as well as their associated work RVUs. This table includes the 
following information:
    <bullet> A ``#'' identifies a new code for 1999.
    <bullet> CPT code. This is the CPT code for a service.
    <bullet> Modifier. A ``26'' in this column indicates that the work 
RVUs are for the professional component of the code.
    <bullet> Description. This is an abbreviated version of the 
narrative description of the code.
    <bullet> RUC recommendations. This column identifies the work RVUs 
recommended by the RUC.
    <bullet> HCPAC recommendations. This column identifies work RVUs 
recommended by the HCPAC.
    <bullet> HCFA decision. This column indicates whether we agreed 
with the RUC recommendation (``agree''); we established work RVUs that 
are higher than the RUC recommendation (``increase''); or we 
established work RVUs that were less than the RUC recommendation 
(``decrease''). Codes for which we did not accept the RUC 
recommendation are discussed in greater detail following Table 6 below. 
An ``(a)'' indicates that no RUC recommendation was provided. A 
discussion follows the table.
    <bullet> HCFA work RVUs. This column contains the RVUs for 
physician work based on our reviews of the RUC recommendations. The 
RVUs shown for global surgical services have not been adjusted to 
account for the 1998 increases for work RVUs in evaluation and 
management services.
    1999 work RVUs. This column contains the 1999 RVUs for physician 
work. The RVUs shown for global surgical services have been adjusted to 
account for the 1998 increases for work RVUs in evaluation and 
management.
    This table includes only those codes that were reviewed by the full 
RUC or for which we received a recommendation from the HCPAC.

[[Page 58889]]



    Table 6.--American Medical Association Specialty Society Relative Value Update Committee and Health Care
    Professionals Advisory Committee Recommendations and HCFA's Decisions for New and Revised 1999 CPT Codes
----------------------------------------------------------------------------------------------------------------
                                                 RUC            HCPAC                       NCFA Work  1998 Work
 CPT * code     MOD        Description     recommendation  recommendation   HCFA decision      RVU        RVU
----------------------------------------------------------------------------------------------------------------
15000......  .........  Skin graft                   4.00  ..............  Agree..........       4.00       4.00
                         procedure.
15001#.....  .........  Skin graft                   1.00  ..............  Agree..........       1.00       1.00
                         procedure.
15100......  .........  Skin split graft             9.05  ..............  Agree..........       9.05       9.05
                         procedure.
15101......  .........  Skin split graft             1.72  ..............  Agree..........       1.72       1.72
                         procedure.
15120......  .........  Skin split graft             9.83  ..............  Agree..........       9.83       9.83
                         procedure.
15121......  .........  Skin split graft             2.67  ..............  Agree..........       2.67       2.67
                         procedure.
15350......  .........  Skin homograft               4.00  ..............  Agree..........       4.00       4.00
                         procedure.
15351#.....  .........  Skin homograft               1.00  ..............  Agree..........       1.00       1.00
                         procedure.
15400......  .........  Skin heterograft             4.00  ..............  Agree..........       4.00       4.00
                         procedure.
15401#.....  .........  Skin heterograft             1.00  ..............  Agree..........       1.00       1.00
                         procedure.
19364......  .........  Breast                      41.00  ..............  Agree..........      41.00      41.00
                         reconstruction.
27347#.....  .........  Excision tendon              5.78  ..............  Agree..........       5.78       5.78
                         sheath.
28289#.....  .........  Hallux rigidus               7.04  ..............  Agree..........       7.04       7.04
                         correction.
31622......  .........  Bronchoscopic      ..............  ..............  (a)............       2.67       2.67
                         procedures.
31623#.....  .........  Bronchoscopic      ..............  ..............  (a)............       3.07       3.07
                         procedures.
31624#.....  .........  Bronchoscopic      ..............  ..............  (a)............       3.11       3.11
                         procedures.
31643#.....  .........  Bronchoscopy for             3.50  ..............  Agree..........       3.50       3.50
                         brachytherapy.
32001#.....  .........  Bronchoscopic      ..............  ..............  (a)............       5.71       5.71
                         procedures.
33975......  .........  Ventricular                 21.60  ..............  Agree..........      21.60      21.60
                         assist devices.
33976......  .........  Ventricular                 29.10  ..............  Agree..........      29.10      29.10
                         assist devices.
35500#.....  .........  Bypass grafts....  ..............  ..............  (a)............    carrier    carrier
35681......  .........  Bypass grafts....            3.93  ..............  Decrease.......       1.60       1.60
35682#.....  .........  Bypass grafts....            7.20  ..............  Agree..........       4.80       4.80
35683#.....  .........  Bypass grafts....            8.50  ..............  Agree..........       6.10       6.10
35875......  .........  Thrombectomy of             10.13  ..............  Agree..........      10.13      10.13
                         grafts.
35876......  .........  Thrombectomy of             17.00  ..............  Agree..........      17.00      17.00
                         grafts.
36823#.....  .........  Arteriovenous             carrier  ..............  Agree..........    carrier    carrier
                         Chemo.
36831#.....  .........  Thrombectomy of              8.00  ..............  Agree..........       8.00       8.00
                         grafts.
36832......  .........  Thrombectomy of             10.50  ..............  Agree..........      10.50      10.50
                         grafts.
36833#.....  .........  Thrombectomy of             11.95  ..............  Agree..........      11.95      11.95
                         grafts.
36860......  .........  Thrombectomy of              2.01  ..............  Agree..........       2.01       2.01
                         grafts.
38792#.....  .........  Sentinel node      ..............  ..............  (a)............    carrier    carrier
                         biopsy.
45126#.....  .........  Pelvic                      38.39  ..............  Agree..........      38.39      38.39
                         exenteration.
56321#.....  .........  Laparoscopic              carrier  ..............  Agree..........    carrier    carrier
                         adrenalectomy.
57106#.....  .........  Radical                      6.36  ..............  Agree..........       6.36       6.36
                         vaginectomy.
57107#.....  .........  Radical                     23.00  ..............  Agree..........      23.00      23.00
                         vaginectomy.
57109#.....  .........  Radical                     27.00  ..............  Agree..........      27.00      27.00
                         vaginectomy.
57110......  .........  Radical                     14.29  ..............  Agree..........      14.29      14.29
                         vaginectomy.
57111#.....  .........  Radical                     27.00  ..............  Agree..........      27.00      27.00
                         vaginectomy.
57112#.....  .........  Radical                     29.00  ..............  Agree..........      29.00      29.00
                         vaginectomy.
67208......  .........  Destruction of               6.70  ..............  Agree..........       6.70       6.70
                         choroid lesion.
67210......  .........  Destruction of               8.82  ..............  Agree..........       8.82       8.82
                         choroid lesion.
67220#.....  .........  Destruction of              13.13  ..............  Agree..........      13.13      13.13
                         choroid lesion.
67320......  .........  Strabimus surgery            4.33  ..............  Agree..........       4.33       4.33
67331......  .........  Strabimus surgery            4.06  ..............  Agree..........       4.06       4.06
67332......  .........  Strabimus surgery            4.49  ..............  Agree..........       4.49       4.49
67334......  .........  Strabimus surgery            3.98  ..............  Agree..........       3.98       3.98
67335......  .........  Strabimus surgery            2.49  ..............  Agree..........       2.49       2.49
67340......  .........  Strabimus surgery            4.93  ..............  Agree..........       4.93       4.93
69990#.....  .........  Microsurgery.....  ..............  ..............  (a)............       3.46       3.46
73560......  26.......  Radiological                 0.17  ..............  Agree..........       0.17       0.17
                         examination,
                         knee.
73562......  26.......  Radiological                 0.18  ..............  Agree..........       0.18       0.18
                         examination,
                         knee.
73564......  26.......  Radiological                 0.22  ..............  Agree..........       0.22       0.22
                         examination,
                         knee.
76006#.....  .........  Stress views.....            0.41  ..............  Agree..........       0.41       0.41
76977#.....  26.......  Bone density.....  ..............  ..............  (a)............       0.22       0.22
78020#.....  .........  Thyroid carcinoma            0.67  ..............  Decrease.......       0.60       0.60
                         metastases.
78205......  26.......  Liver imaging....            0.71  ..............  Agree..........       0.71       0.71
78206#.....  26.......  Liver imaging....            0.96  ..............  Agree..........       0.96       0.96
78472......  26.......  Cardiac blood                0.98  ..............  Agree..........       0.98       0.98
                         pool imaging.
78494#.....  26.......  Cardiac blood                1.19  ..............  Agree..........       1.19       1.19
                         pool imaging.
78496#.....  26.......  Cardiac blood                0.50  ..............  Agree..........       0.50       0.50
                         pool imaging.
78588#.....  26.......  Pulmonary                    1.09  ..............  Agree..........       1.09       1.09
                         perfusion
                         imaging.
88291#.....  26.......  Cytogenetic                  0.52  ..............  Agree..........       0.52       0.52
                         studies.
92135#.....  26.......  Confocal Scanning            0.35  ..............  Agree..........       0.35       0.35
93571#.....  26.......  IV distal blood              2.99  ..............  Decrease.......       1.80       1.80
                         velocity measure.
93572#.....  26.......  IV distal blood              1.70  ..............  Decrease.......       1.44       1.44
                         velocity measure.
94014#.....  26.......  Pulmonary                    0.52  ..............  Agree..........       0.52       0.52
                         function.

[[Page 58890]]

94016#.....  .........  Pulmonary                    0.52  ..............  Agree..........       0.52       0.52
                         function.
94060......  26.......  Pulmonary                    0.31  ..............  Agree..........       0.31       0.31
                         function.
94620......  26.......  Pulmonary          ..............  ..............  (a)............       0.88       0.88
                         function.
94621#.....  26.......  Pulmonary          ..............  ..............  (a)............       0.88       0.88
                         function.
95920......  26.......  Neurotransmitter             2.11  ..............  Agree..........       2.11       2.11
                         analysis.
95970#.....  .........  Neurotransmitter             0.45  ..............  Agree..........       0.45       0.45
                         analysis.
95971#.....  .........  Neurotransmitter             0.78  ..............  Agree..........       0.78       0.78
                         analysis.
95972#.....  .........  Neurotransmitter             1.50  ..............  Agree..........       1.50       1.50
                         analysis.
95973#.....  .........  Neurotransmitter             0.92  ..............  Agree..........       0.92       0.92
                         analysis.
95974#.....  .........  Neurotransmitter             3.00  ..............  Agree..........       3.00       3.00
                         analysis.
95975#.....  .........  Neurotransmitter             1.70  ..............  Agree..........       1.70       1.70
                         analysis.
97140#.....  .........  Manual therapy               0.45  ..............  Decrease.......       0.43       0.43
                         techniques.
99298#.....  .........  Neonatal care....            2.75  ..............  Agree..........       2.75       2.75
----------------------------------------------------------------------------------------------------------------
<SUP>a No RUC recommendation provided.
# New Codes.
* All numeric HCPCS CPT Copyright 1997 American Medical Association.

Discussion of Codes for Which the RUC Recommendations Were Not Accepted

    The following is a summary of our rationale for not accepting 
particular recommendations. It is arranged by type of service in CPT 
code order. This summary refers only to work RVUs. Furthermore, the 
RVUs in the following discussion have not been adjusted by the budget-
neutrality adjustment factor.

Bypass grafts (CPT code 35681).

    We received RUC recommendations for three of the four add-on codes 
(codes that may be billed only in conjunction with selected primary 
procedure codes) related to composite bypass grafts. We rejected the 
RUC recommendation of 3.93 work RVUs for CPT code 35681 (Bypass graft, 
composite, prosthetic and vein). These work RVUs were suggested during 
the 5-year review of work RVUs at a time when this family of composite 
codes had not been established. The recommendation was based on the 
assumption that the work could be estimated at 12 percent of an 
independent procedure, CPT code 35102. We believe that a more 
appropriate evaluation is based on the work involved in anastomosing 
the vein and prosthetic grafts, which we estimate at 1.60 work RVUs. 
Effective January 1, 1999, CPT code 35681 will be valued at 1.60 work 
RVUs.

Thyroid carcinoma metastases uptake (CPT code 78020)

    We received a RUC recommendation of 0.67 for CPT code 78020. The 
survey data indicated that CPT code 78020 was previously reported with 
unlisted CPT code 78099. The survey estimated that CPT code 78020 will 
be billed approximately 15 percent of the time CPT code 78018 is 
billed. CPT code 78099 was only billed 61 times in 1997, while the 
projected utilization of CPT code 78020 for 1999 is approximately 575 
claims annually. To retain budget neutrality within this family of 
codes, the total work RVUs that will be paid in 1999 were scaled to 
what would have been paid in 1999 if CPT code 78020 had not been 
established. This results in work RVUs of 0.60 for CPT code 78020 and 
0.86 for CPT code 78018.

Intravascular distal blood flow velocity measurements (CPT code 93571 
and 93572)

    The RUC recommended work RVUs of 2.99 and 1.70, respectively, for 
CPT codes 93571 and 93572. The RUC recommendation was constructed based 
upon a building block approach. Our analysis of this approach raised 
concerns about the inclusion of certain items in the building block for 
each respective code. We chose to value these procedures based upon 
analogous CPT codes 92978 (IV ultrasound) and 92979 (IV ultrasound, 
each additional vessel) for which the RUC time estimates were 
identical. For this reason, we assigned 1.80 work RVUs to CPT code 
93571 and 1.44 work RVUs to CPT code 93572.

Physical medicine and rehabilitation (CPT code 97140) CPT code 97140 
(RUC-recommended work RVU=0.45 replaces CPT codes 97122, 97250, 97260, 
97261, and 97265.)

    To retain budget neutrality within this family of codes, the total 
work RVUs that will be paid in 1999 were scaled to the total work RVUs 
that would have been paid if CPT code 97140 had not been established. 
This results in work RVUs of 0.43 for CPT code 97140.

V. Physician Fee Schedule Update and Conversion Factor for Calendar 
Year 1999

    The 1999 physician fee schedule conversion factor is $34.7315.
    In accordance with section 1848(d)(1)(D) of the Act, as amended by 
section 4504 of the BBA 1997, the separate conversion factor for 
anesthesia services for a year shall be equal to 46 percent of the 
single conversion factor for other physicians' services, except as 
adjusted for changes in work, practice expense, or malpractice relative 
value units. This calculation yields a 1999 anesthesia conversion 
factor of $17.24.
    The specific calculations to determine the conversion factor for 
physicians' services for calendar year 1999 are explained below.

Detail on Calculation of the Calendar Year 1999 Physician Fee Schedule 
Update and the 1999 Conversion Factor

Physician Fee Schedule Update and Conversion Factor
    The conversion factor is affected by section 1848(c)(2)(B)(ii)(II) 
of the Act, which requires that changes to the relative value units of 
the Medicare physician fee schedule not cause expenditures to increase 
or decrease by more than $20 million from the amount of expenditures 
that would have been made if such adjustments had not been made. We 
implement this requirement through a uniform budget-neutrality 
adjustment to the conversion factor.

[[Page 58891]]

    The conversion factor is also affected by the elimination of the 
separate 0.917 budget-neutrality adjustment to the work relative value 
units. This adjustment and its elimination are described in the October 
31, 1997 final rule.
    The conversion factor is further affected by adjustments made to 
the practice expense and malpractice relative value units to ensure 
that the percentages of fee schedule allowed charges for work, practice 
expense, and malpractice premiums equal the new percentages that those 
categories represent in the revised Medicare Economic Index (MEI) 
weights.
    Taking all of these factors into account, as well as the percent 
change in the MEI and Sustainable Growth Rate (SGR) adjustments 
described below, the 1999 conversion factor is calculated as follows:
1998 Conversion Factor: 36.6873
1999 Update: 2.3%
Other 1999 Factors: -7.45944%
1999 Conversion Factor: 34.7315

    The 2.3 percent 1999 update is calculated as follows:
MEI: 2.3%
SGR adjustment: 0.0%
1999 Update: 2.3%

    The -7.45944 percent adjustment for other factors is calculated as 
follows:
Elimination of the separate work adjuster: -8.30%
Adjustment to match MEI weights: 1.20%
Volume and Intensity adjustment: -0.28%
Other 1999 factors: -7.45944%

    Note that the elimination of the separate work adjuster and the 
adjustment to match the MEI weights does not affect aggregate Medicare 
payments because offsetting changes have been made to the practice 
expense and malpractice relative value units. As described earlier, the 
volume-and-intensity adjustment does not affect aggregate payments 
because our actuaries assume an offsetting increase in the volume and 
intensity of services provided in 1999.
    The MEI and the SGR adjustments are described below.

The Percentage Change in the Medicare Economic Index

    The MEI measures the weighted-average annual price change for 
various inputs needed to produce physicians' services. The MEI is a 
fixed-weight input price index, with an adjustment for the change in 
economy-wide labor productivity. This index, which has 1996 base 
weights, is comprised of two broad categories: (1) physician's own 
time, and (2) physician's practice expense.
    The physician's own time component represents the net income 
portion of business receipts and primarily reflects the input of the 
physician's own time into the production of physicians' services in 
physicians' offices. This category consists of two subcomponents: wages 
and salaries and fringe benefits. These components are adjusted by the 
10-year moving average annual percent change in output per man-hour for 
the nonfarm business sector to eliminate double counting for 
productivity growth in physicians' offices and the general economy.
    The physician's practice expense category represents the rate of 
price growth in nonphysician inputs to the production of services in 
physicians' offices. This category consists of wages and salaries and 
fringe benefits for nonphysician staff and other nonlabor inputs. Like 
physician's own time, the nonphysician staff categories are adjusted 
for productivity using the 10-year moving average annual percent change 
in output per man-hour for the nonfarm business sector. The physician's 
practice expense component also includes the following categories of 
nonlabor inputs: office expense, medical materials and supplies, 
professional liability insurance, medical equipment, professional car, 
and other expense. The table below presents a listing of the MEI cost 
categories with associated weights and percent changes for price 
proxies for the 1999 update. The calendar year 1999 MEI is 2.3 percent.

  Increase in the Medicare Economic Index Update for Calendar Year 1999
                                   \1\
------------------------------------------------------------------------
                                                               CY 1999
                                                    1996       percent
                                                weights \2\    changes
------------------------------------------------------------------------
Medicare Economic Index Total.................        100.0          2.3
    1. Physician's Own Time \3\ \4\...........         54.5          2.6
        a. Wages and Salaries: Average hourly
         earnings private nonfarm, net of
         productivity.........................         44.2          2.9
        b. Fringe Benefits: Employment Cost
         Index, benefits, private nonfarm, net
         of productivity......................         10.3          1.2
    2. Physician's Practice Expense \3\.......         45.5          2.1
        a. Nonphysician Employee Compensation.         16.8          2.4
            1. Wages and Salaries: Employment
             Cost Index, wages and salaries,
             weighted by occupation, net of
             productivity.....................         12.4          2.7
            2. Fringe Benefits: Employment
             Cost Index, fringe benefits,
             white collar, net of productivity          4.4          1.5
        b. Office Expense: Consumer Price
         Index for Urban Consumers (CPI-U),
         housing..............................         11.6          2.3
        c. Medical Materials and Supplies:
         Producer Price Index (PPI), ethical
         drugs/PPI, surgical appliances and
         supplies/CPI-U, medical equipment and
         supplies (equally weighted)..........          4.5          4.3
        d. Professional Liability Insurance:
         HCFA professional liability insurance
         survey \5\...........................          3.2         -0.8
        e. Medical Equipment: PPI, medical
         instruments and equipment............          1.9         -1.1
        f. Other Professional Expense.........          7.6          1.7
            1. Professional Car: CPI-U,
             private transportation...........          1.3         -1.1
            2. Other: CPI-U, all items less
             food and energy..................          6.3          2.2
Addendum:
    Productivity: 10-year moving average of
     output per man-hour, nonfarm business
     sector...................................          n/a          1.1
    Physician's Own Time, not productivity
     adjusted.................................         54.5          3.7
            Wages and salaries, not
             productivity adjusted............         44.2          4.0
            Fringe benefits, not productivity
             adjusted.........................         10.3          2.3
    Nonphysician Employee Compensation, not
     productivity adjusted....................         16.8          3.5
            Wages and salaries, not
             productivity adjusted............         12.4          3.8
            Fringe benefits, not productivity
             adjusted.........................          4.4          2.6
------------------------------------------------------------------------
\1\ The rates of change are for the 12-month period ending June 30,
  1998, which is the period used for computing the calendar year 1999
  update. The price proxy values are based upon the latest available
  Bureau of Labor Statistics data as of September 15, 1998.

[[Page 58892]]

\2\ The weights shown for the MEI components are the 1996 base-year
  weights, which may not sum to subtotals or totals because of rounding.
  The MEI is a fixed-weight, Laspeyres-type input price index whose
  category weights indicate the distribution of expenditures among the
  inputs to physicians' services for calendar year 1996. To determine
  the MEI level for a given year, the price proxy level for each
  component is multiplied by its 1996 weight. The sum of these products
  (weights multiplied by the price index levels) over all cost
  categories yields the composite MEI level for a given year. The annual
  percent change in the MEI levels is an estimate of price change over
  time for a fixed market basket of inputs to physicians' services.
\3\ The Physician's Own Time and Nonphysician Employee Compensation
  category price measures include an adjustment for productivity. The
  price measure for each category is divided by the 10-year moving
  average of output per man-hour in the nonfarm business sector. For
  example, the wages and salaries component of Physician's Own Time is
  calculated by dividing the rate of growth in average hourly earnings
  by the 10-year moving average rate of growth of output per man-hour
  for the nonfarm business sector. Dividing one plus the decimal form of
  the percent change in the average hourly earnings (1+.040=1.040 by one
  plus the decimal form of the percent change in the 10-year moving
  average of labor productivity (1+.011=1.011) equals one plus the
  change in average hourly earnings net of the change in output per man
  hour (1.040/1.011=1.029). All Physician's Own Time and Nonphysician
  Employee Compensation categories are adjusted in this way. Due to a
  higher level of precision the computer calculated quotient may differ
  from the quotient calculated from rounded individual percent changes.
\4\ The average hourly earnings proxy, the Employment Cost Index
  proxies, as well as the CPI-U, housing and CPI-U, private
  transportation are published in the Current Labor Statistics Section
  of the Bureau of Labor Statistics' Monthly Labor Review. The remaining
  CPIs and PPIs in the revised index can be obtained from the Bureau of
  Labor Statistics' CPI Detailed Report or Producer Price Indexes.
\5\ Derived from a HCFA survey of several major insurers (the latest
  available historical percent change data are for calendar year 1997).
  This is consistent with prior computations of the professional
  liability insurance component of the MEI.
n/a Productivity is factored into the MEI compensation categories as an
  adjustment to the price variables; therefore, no explicit weight
  exists for productivity in the MEI.

Medicare Performance Relative to the SGR

Medicare Sustainable Growth Rate
    Section 1848(f) of the Act, as amended by section 4503 of the BBA 
1997, replaces the volume performance standard with a sustainable 
growth (SGR) standard. It specifies the formula for establishing yearly 
SGR targets for physicians' services under Medicare. The use of SGR 
targets is intended to control the actual growth in Medicare 
expenditures for physicians' services.
    The SGR targets are not limits on expenditures. Payments for 
services are not withheld if the SGR target is exceeded. Rather, the 
appropriate fee schedule update, as specified in section 1848(d)(3)(A) 
of the Act, is adjusted to reflect the success or failure in meeting 
the SGR target.
    As provided in section 4502 of the BBA 1997, the update to the 
conversion factor is established to match spending under the SGR. The 
law refers to this update as the update adjustment factor. The amended 
section 1848(d)(3)of the Act now states that:

    the `update adjustment factor' for a year is equal (as estimated 
by the Secretary) to--
(i) the difference between (I) the sum of the allowed expenditures 
for physicians' services (as determined under subparagraph (C)) for 
the period beginning April 1, 1997, and ending on March 31 of the 
year involved, and (II) the amount of the actual expenditures for 
physicians' services furnished during the period beginning April 1, 
1997, and ending on March 31 of the preceding year; divided by--
    (ii) the actual expenditures for physicians' services for the 
12-month period ending on March 31 of the preceding year, increased 
by the sustainable growth rate under subsection (f) for the fiscal 
year which begins during such 12-month period.

    The result is a 0.0 percent adjustment for 1999. The allowed 
expenditures for physicians' services are calculated based upon the 
1998 and 1999 SGR derivations as detailed in the October 31, 1997 final 
rule and the Notice announcing the Sustainable Growth Rate found in 
this edition of the Federal Register, respectively.

VI. Provisions of the Final Rule

    The provisions of this final rule restate the provisions of the 
June 5, 1998, proposed rule except as noted elsewhere in this preamble. 
Following is a highlight of the changes made:
    For our proposal relating to the medical direction of anesthesia 
services (Sec. 415.110), we have decided to retain the current 
requirements (that is, requirements (i) and (ii), and (iv) through 
(vii)) and make only one technical revision in requirement (iii). The 
technical revision pertains to the requirement that the physician 
participate in the most demanding procedures in the anesthesia plan, 
including induction and emergence.
    For our proposal relating to nonphysician practitioners, following 
is a highlight of the changes to the proposed rule:
    <bullet> Proposed Secs. 410.75(c) and 410.76(c) are revised to 
remove the alternate proposed definition of collaboration. For purposes 
of Medicare coverage, the collaboration requirement will state that 
these nonphysician practitioners must meet the standards for a 
collaborative relationship, as established by the State in which they 
are practicing. In the absence of State law or regulations governing 
collaborative relationships, these nonphysician practitioners must 
document their scope of practice and indicate the relationships that 
they have with physicians to deal with issues outside their expertise.
    <bullet> In proposed Secs. 410.74(d) and 410.75(e) we deleted the 
proposed listing of examples of services that can be provided by 
physician assistants, nurse practitioners and clinical nurse 
specialists.
    <bullet> Proposed Sec. 410.76(b) is revised to implement the 
qualifications for clinical nurse specialist as established by the BBA 
without the proposed exception for those clinical nurse specialist that 
do not possess a master's degree.
    <bullet> Proposed Sec. 410.77(a) is revised to state that a nurse-
midwife must--
    + Be a registered nurse who is currently licensed to practice as a 
nurse-midwife in the State where services are performed;
    + Have successfully completed an accredited program of study and 
clinical experience for nurse-midwives as specified by the State; or
    + Be certified as a nurse-midwife by the American College of Nurse-
Midwives or the American College of Nurse-Midwives Certification 
Council.
    <bullet> Proposed Sec. 410.74(c) is revised to state that a 
physician assistant is an individual who--
    + Has graduated from a physician assistant educational program that 
is accredited by the National Commission on Accreditation on Allied 
Health Education Programs;
    + Has passed the national certification examination that is 
certified by the National Commission on Certification of Physician 
Assistants; and
    + Is licensed by the State to practice as a physician assistant.
    This final rule also restates the provisions of teleconsultations 
in rural health professional shortage areas proposed rule published on 
June 22, 1998, at 63 FR 33890, that provided for payment for 
consultations via telecommunications systems in rural HPSAs, with 
changes. The changes listed below have been discussed elsewhere in this 
preamble. Following is a highlight of the changes to the proposed rule:
    <bullet> Proposed Sec. 410.75(a)(1) is revised to omit clinical 
psychologists, clinical social workers, certified nurse

[[Page 58893]]

anesthetists, and anesthesiologist assistants from the list of 
practitioners who may be consulting practitioners and the section is 
redesignated as Sec. 410.78(a)(1).
    <bullet> The definition of referring practitioners at proposed 
Sec. 410.75(a)(2) is revised to omit certified registered nurse 
anesthetists and anesthesiologist assistants, and is redesignated as 
Sec. 410.78(a)(2).
    <bullet> Proposed Sec. 410.75(a)(5) is redesignated as 
Sec. 410.78(a)(5) and specifies that as a condition of payment, the 
teleconsultation involves the participation of the referring 
practitioner or a practitioner described in section 1842(b)(18)(C) of 
the Act (other than a certified registered nurse anesthetist or 
anesthesiologist assistant) who is an employee of the referring 
practitioner, as appropriate to the medical needs of the beneficiary 
and to provide information to and at the direction of the consulting 
practitioner.
    <bullet> The definition at proposed Sec. 410.75(b) is revised to 
reflect the above changes and is redesignated as Sec. 410.78(b).
    <bullet> For clarification purposes, we are referencing different 
definition citations for non-physician practitioners than those 
provided in the proposed rule. The definitions of physician assistants, 
nurse practitioners, clinical nurse specialists, nurse-midwives, 
clinical social workers, and clinical psychologists have been 
reassigned to Sec. 410.74(a)(2), Sec. 410.75(b), Sec. 410.76(b), 
Sec. 410.77(a), Sec. 410.73(a), and Sec. 410.71(d), respectively.

VII. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), agencies are 
required to provide a 60-day notice in the Federal Register and solicit 
public comment before a collection of information requirement is 
submitted to the Office of Management and Budget (OMB) for review and 
approval. In order to fairly evaluate whether an information collection 
should be approved by OMB, section 3506(c)(2)(A) of the PRA requires 
that we solicit comment on the following issues:
    Whether the information collection is necessary and useful to carry 
out the proper functions of the agency;
    The accuracy of the agency's estimate of the information collection 
burden;
    The quality, utility, and clarity of the information to be 
collected; and
    Recommendations to minimize the information collection burden on 
the affected public, including automated collection techniques.
    Based on a public comment, this rule modifies a regulatory 
requirement creating an additional information collection requirement 
(ICR) which was not reflected in the proposed rule that was published 
on June 5, 1998, at 63 FR 30818. (The PRA package associated with the 
proposed rule is: OMB No. 0938-0730, HCFA-R-0234, with an expiration 
date of August 31, 2001.) Therefore, to ensure that all of the 
requirements in this rule can be implemented concurrently, we are 
requesting emergency OMB review of the additional ICR referenced in 
this final rule. In compliance with section 3506(c)(2)(A) of the PRA of 
1995, we are submitting to OMB the following requirement for emergency 
review. We are requesting an emergency review because the collection of 
this information is needed before the expiration of the normal time 
limits specified by OMB's regulations at 5 CFR 1320. This ensures 
compliance with the Balanced Budget Act of 1997 (BBA) which requires us 
to revise our payment policy for nonphysician practitioners, for 
outpatient rehabilitation services, and for drugs and biologicals not 
paid on a cost or prospective payment basis.
    We cannot reasonably comply with normal clearance procedures in 
order to implement the renewal and early termination of the opt-out 
requirement described below. Physicians and practitioners must notify 
carriers of their intent to terminate opt-out in accordance with the 
BBA.
    We are requesting OMB review and approval of this collection within 
11 working days from the date of publication of this regulation, with a 
180-day approval period. Written comments and recommendations will be 
accepted from the public if received by the individuals designated 
below within 10 working days from the date of publication of this 
regulation.
    During this 180-day period, we will publish a separate Federal 
Register notice announcing the initiation of an extensive 60-day agency 
review and public comment period on this requirement. We will submit 
the requirement for OMB review and an extension of this emergency 
approval.
    Therefore, we are soliciting public comment on this issue for the 
information collection requirement discussed below.

Sec. 405.445  Renewal and early termination of opt-out

    Section 405.445(d) states that a physician or practitioner who has 
completed opt-out on or before January 1, 1999 may terminate opt-out 
during the 90 days following January 1, 1999 if he or she notifies all 
carriers to whom he or she would otherwise submit claims of the intent 
to terminate opt-out and complies with paragraphs (b)(3) and (4) of 
this section. Paragraph (c) of this section applies in those cases.
    The burden associated with this requirement is time and effort for 
the physician or practitioner to notify all carriers to whom he or she 
would otherwise submit claims of the intent to terminate opt-out. There 
is a one-time opportunity for physicians and practitioners who opted-
out in 1998 to re-enter the program. Afterwards, physicians and 
practitioners may re-enter the program annually. It is estimated that 
it will take 30 physicians or practitioners 15 minutes each to notify 
their carriers for a total of 8 hours. We estimate the average 
annualized three year burden estimate to be 11 hours. (Year 1--1998 and 
1999 16 hours, Year 2--2000 8 hours, Year 3--2001 8 hours for a total 
of 32 hours/3 years = 11 hours per year)
    We have submitted a copy of this final rule with comment to OMB for 
its review of the ICR described above. This requirement is not 
effective until they have been approved by OMB.
    If you comment on any of this information collection and record 
keeping requirement, please mail copies directly to the following:

Health Care Financing Administration, Office of Information Services, 
Security and Standards Group, Division of HCFA Enterprise Standards, 
Room N2-14-26, 7500 Security Boulevard, Baltimore, MD 21244-1850, 
Attn.: Louis Blank, HCFA-1006-FC.
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn.: Allison Herron Eydt, HCFA Desk Officer.

VIII. Regulatory Impact Analysis

    We have examined the impacts of this final rule as required by 
Executive Order 12866, the Unfunded Mandates Act of 1995, and the 
Regulatory Flexibility Act (RFA) (Public Law 96-354). Executive Order 
12866 directs agencies to assess all costs and benefits of available 
regulatory alternatives and, when regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). A regulatory impact analysis (RIA) must be 
prepared for major rules with economically significant effects ($100 
million or more annually).

[[Page 58894]]

    This final rule is expected to have varying effects on the 
distribution of Medicare physicians' payments and services. With few 
exceptions, we expect that the impact will be limited.
    The Unfunded Mandates Reform Act of 1995 also requires (in section 
202) that agencies prepare an assessment of anticipated costs and 
benefits before proposing any rule that may result in an annual 
expenditure by State, local, or tribal governments, in the aggregate, 
or by the private sector, of $100 million. This final rule will have no 
consequential effect on State, local, or tribal governments. We believe 
the private sector cost of this rule falls below these thresholds as 
well.

A. Regulatory Flexibility Act

    Consistent with the provisions of the Regulatory Flexibility Act, 
we analyze options for regulatory relief for small businesses and other 
small entities. We prepare a Regulatory Flexibility Analysis (RFA) 
unless we certify that a rule would not have a significant economic 
impact on a substantial number of small entities. The RFA is to include 
a justification of why action is being taken, the kinds and number of 
small entities the final rule would affect, and an explanation of any 
considered meaningful options that achieve the objectives and would 
lessen any significant adverse economic impact on the small entities.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 604 of the Regulatory Flexibility Act. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 50 beds.
    For purposes of the RFA, all physicians are considered to be small 
entities. There are about 700,000 physicians and other practitioners 
who receive Medicare payment under the physician fee schedule. Thus, we 
have prepared the following analysis, which, together with the rest of 
this preamble, meets all three assessment requirements. It explains the 
rationale for and purposes of the rule, details the costs and benefits 
of the rule, analyzes alternatives, and presents the measures we 
propose to minimize the burden on small entities.

B. Resource-Based Practice Expense Relative Value Units

    Our methodology for implementing resource-based practice expense 
RVUs for each physician's service considers the staff, equipment, and 
supplies used in the provision of various medical and surgical services 
in various settings, including those that cannot be attributed to 
specific procedures. We are required to begin the transition to the new 
practice expense RVUs on January 1, 1999.
    By law, the conversion to a resource-based determination for the 
payment of physicians' practice expenses must be budget neutral. In 
other words, the total Medicare expenditures for calendar year 1999 
must be the same as the amount that would have been paid under the 
prior method of paying practice expenses.
    As we indicated in the proposed rule, each year since the fee 
schedule has been implemented, our actuaries have determined any 
adjustments needed to meet this requirement. A key component of the 
actuarial determination of budget neutrality involves estimating any 
impact of changes in the volume and intensity of physicians' services 
provided to Medicare beneficiaries as a result of the proposed changes.
    We indicated in the proposed rule that, in estimating the impacts 
of proposed changes under the physician fee schedule on the volume and 
intensity of services, the actuaries have historically used a model 
that assumes that 50 percent of the change in net revenue for a 
practice would be recouped. This does not mean that payments are 
reduced by 50 percent. In fact, payments have typically been reduced 
only a few percent or less. The actuaries also assume that there is no 
offsetting reduction in volume and intensity for physicians whose 
Medicare revenue increases.
    As we indicated in the proposed rule, our actuaries have reviewed 
the literature and conducted data analysis of the volume-and-intensity 
response. In the proposed rule, we indicated that for the purpose of 
establishing budget neutrality for the physicians' practice expense 
determination, the actuaries will use a model that assumes a 30 percent 
volume-and-intensity response to price reductions but no reduction in 
volume and intensity in response to a price increase. There were some 
inadvertent delays in making our actuary's analysis of the volume-and-
intensity response available on our homepage (www.hcfa.gov), but it is 
now available there.
    Comment: Most commenters were pleased that the volume-and-intensity 
response was lowered, but opposed use of any volume-and-intensity 
offset. Many groups recommended that to the extent that any adjustments 
are necessary, they could be made within the framework of the SGR 
system. Some groups stated that their specialty or particular services 
should be exempt from the application of a volume-and-intensity 
adjustment.
    Response: Our actuaries have reviewed the issue but believe that 
their review of the literature and their own analysis presents a 
convincing case as to the need for them to utilize a model that 
incorporates a volume-and-intensity response to price reductions. We 
cannot apply a volume-and-intensity adjustment that exempts certain 
procedures because the response could occur for other procedures 
furnished by a physician. Similarly, we cannot exempt certain 
specialties from application of the adjustment because physicians of 
all specialties have some discretion as to the nature and extent of 
services furnished. We do not believe that we can use the SGR mechanism 
alone, without the adjustment for volume and intensity for 1999, 
because any SGR adjustment would be in the future and the actuaries 
would not determine us to be in compliance with the statutory budget-
neutrality requirement for 1999. To the extent that the volume-and-
intensity response does not occur, the SGR system enacted as part of 
the BBA 1997 will return the volume-and-intensity adjustment in the 
form of higher future updates to the Medicare physician fee schedule 
conversion factor.
    Using the revised actuarial model, achieving budget neutrality for 
the practice expense per hour method would require lowering physicians' 
payments in calendar year 1999 by 0.28 percent (1.12 percent cumulative 
from 1999 to 2002). The 0.28 percent volume-and-intensity adjustment 
results in a reduction in the 1999 physician fee schedule CF of $0.10.
    Table 7, ``Impact on Total Allowed Charges by Specialty of the 
Resource-Based Practice Expense Relative Value Units under the Practice 
Expense per Hour'' shows the change in Medicare physician fees 
resulting from the practice expense per hour methodology discussed 
earlier in this final rule. In order to isolate the change in fees 
resulting from the resource-based methodology, this analysis assumes 
the same mix of services is furnished under the new and old practice 
expense payment systems and does not include the effects of the annual 
updates to the Medicare physician fee schedule conversion factor. The 
impact of the changes on the total revenue (Medicare and non-Medicare) 
for a given specialty is less than the impact displayed in

[[Page 58895]]

Table 7 since physicians furnish services to both Medicare and non-
Medicare patients.
    For example, Table 7 shows that when the resource-based system is 
fully phased-in, general surgery will experience a 7 percent decrease 
in Medicare revenues relative to the current practice expense system 
and family practice will experience a 7 percent increase.
    The magnitude of the Medicare impact depends generally on the mix 
of services the specialty provides and the sites where the services are 
performed. In general, those specialties that furnish more office-based 
services are expected to experience larger increases in Medicare 
payments than specialties that provide fewer office-based services. 
Table 7 also includes the impact of the volume-and-intensity 
adjustments to the conversion factor discussed above, but does not 
include the impact of the volume response on revenues.

 Table 7.--Impact on Total Allowed Charges by Specialty of the Resource-
 Based Practice Expense Relative Value Units under the Practice Expense
                    per Hour Method (percent change)
------------------------------------------------------------------------
                                           Allowed
                                           charges    Impact  Cumulative
                Specialty                    (in       per      4-year
                                          billions)    year     impact
------------------------------------------------------------------------
M.D./D.O. Physicians:
Anesthesiology..........................       1.6         0          0
Cardiac Surgery.........................       0.3        -3        -12
Cardiology..............................       3.8        -2         -9
Clinics.................................       1.6        -1         -3
Dermatology.............................       1.0         5         20
Emergency Medicine......................       0.9        -3        -10
Family Practice.........................       2.7         2          7
Gastro- enterology......................       1.2        -4        -15
General Practice........................       1.0         1          4
General Surgery.........................       2.0        -2         -7
Hematology/Oncology.....................       0.5         2          6
Internal Medicine.......................       6.0         0          2
Nephrology..............................       0.9        -2         -7
Neurology...............................       0.7         0         -1
Neurosurgery............................       0.3        -3        -11
Obstetrics/Gynecology...................       0.4         1          4
Ophthalmology...........................       3.3         1          4
Orthopedic Surgery......................       2.0         0         -1
Other Physician *.......................       1.1         0          1
Otolaryngology..........................       0.5         2          9
Pathology...............................       0.5        -3        -13
Plastic Surgery.........................       0.2         1          2
Psychiatry..............................       1.1         0          1
Pulmonary...............................       1.0        -1         -4
Radiation Oncology......................       0.6        -2         -6
Radiology...............................       2.9        -3        -10
Rheumatology............................       0.2         4         16
Thoracic Surgery........................       0.6        -3        -12
Urology.................................       1.1         1          5
Vascular Surgery........................       0.3        -3        -11
Others:
Chiropractic............................       0.4        -2         -8
Nonphysician Practitioner...............       0.8         0          2
Optometry...............................       0.3         6         27
Podiatry................................       0.9         2          9
Suppliers...............................       0.5        -2         -6
------------------------------------------------------------------------
* Other physician includes allergy/immunology, oral surgery, physical
  medicine and rehabilitation, pediatrics, critical care, and
  hematology.

    Table 8 below compares the impact of the resource-based practice 
expense methodology described in this final rule with the impacts 
published in the June 5, 1998 proposed rule. Differences reflect the 
net effect of the changes described earlier in the section ``Results of 
the Evaluation of Comments.'' In general, the changes with the greatest 
impact were the creation of a separate pool for services with work 
relative value units equal to zero and the use of the Medicare 
conversion factor in the indirect cost pool allocation.

Table 8.--Comparison of the Impact on Total Allowed Charges by Specialty
  of the Resource-Based Practice Expense Relative Value Units under the
 Practice Expense per Hour Methodology with the Impacts from the June 5,
                           1998 Proposed Rule
------------------------------------------------------------------------
                                                   Proposed
                                                     rule       Current
                    Specialty                     cumulative  cumulative
                                                    4-year      4-year
                                                    impact      impact
------------------------------------------------------------------------
M.D./D.O. Physicians:
  Anesthesiology................................           2           0
  Cardiac Surgery...............................         -14         -12
  Cardiology....................................         -13          -9
  Clinics.......................................          -3          -3
  Dermatology...................................          27          20
  Emergency Medicine............................         -13         -10
  Family Practice...............................           6           7
  Gastroenterology..............................         -14         -15
  General Practice..............................           3           4
  General Surgery...............................          -6          -7
  Hematology/Oncology...........................           2           6
  Internal Medicine.............................           1           2
  Nephrology....................................          -5          -7
  Neurology.....................................           0          -1
  Neurosurgery..................................         -10         -11
  Obstetrics/Gynecology.........................           5           4
  Ophthalmology.................................          11           4
  Orthopedic Surgery............................          -1          -1
  Other Physician*..............................           0           1
  Otolaryngology................................           6           9
  Pathology.....................................         -10         -13
  Plastic Surgery...............................           5           2
  Psychiatry....................................           4           1
  Pulmonary.....................................          -3          -4
  Radiation Oncology............................         -13          -6
  Radiology.....................................         -13         -10
  Rheumatology..................................          15          16
  Thoracic Surgery..............................         -13         -12
  Urology.......................................           7           5
  Vascular Surgery..............................         -12         -11
Others:
  Chiropractic..................................          -2          -8
  Nonphysician Practitioner.....................          -1           2
  Optometry.....................................          36          27
  Podiatry......................................           5           9
  Suppliers.....................................         -18          -6
------------------------------------------------------------------------
* Other physician includes allergy/immunology, oral surgery, physical
  medicine and rehabilitation, pediatrics, critical care, and
  hematology.

    For certain high volume procedures, Table 9, ``Total Payment for 
Selected Procedures,'' shows the percentage change between the current 
1998 payments (calculated using the 1998 relative value units, 1998 
site-of-service policy, and the 1998 conversion factor) and the fully 
phased-in resource-based practice expense payments (calculated using 
the full resource-based practice expense relative value units, the 1999 
work and malpractice relative value units, and the 1999 Medicare 
conversion factor).

BILLING CODE 4120-01-P

[[Page 58896]]

[GRAPHIC] [TIFF OMITTED] TR02NO98.274



[[Page 58897]]

[GRAPHIC] [TIFF OMITTED] TR02NO98.275



BILLING CODE 4120-01-C

[[Page 58898]]

    Table 10 below displays the impact of the practice expense per hour 
methodology by Medicare payment locality, including the volume-and-
intensity increase and corresponding conversion factor adjustment 
discussed earlier. This analysis does not include the effects of the 
annual updates to the Medicare physician fee schedule conversion 
factor.

   Table 10.--Impact of Practice Expense per Hour Methodology on Total
          Allowed Charges by Medicare Locality (percent change)
------------------------------------------------------------------------
                                                              Cumulative
           Locality                   State          Impact    four year
                                                    per year    impact
------------------------------------------------------------------------
All...........................  Alaska...........        0.1         0.5
All...........................  Alabama..........       -0.2        -0.8
All...........................  Arkansas.........       -0.2        -0.9
All...........................  Arizona..........        0.2         1.0
Anaheim/Santa Ana.............  California.......        0.6         2.5
Los Angeles...................  California.......        0.5         2.1
Marin/Napa/Solano.............  California.......        0.6         2.4
Oakland/Berkley...............  California.......        0.3         1.1
Rest of California............  California.......        0.3         1.4
San Francisco.................  California.......        0.6         2.3
San Mateo.....................  California.......        0.4         1.5
Santa Clara...................  California.......        0.2         0.8
Ventura.......................  California.......        0.4         1.5
All...........................  Colorado.........        0.1         0.4
All...........................  Connecticut......        0.1         0.6
All...........................  District of              0.1         0.3
                                 Columbia.
All...........................  Delaware.........        0.0         0.1
Ft Lauderdale.................  Florida..........        0.6         2.6
Miami.........................  Florida..........        0.1         0.5
Rest of Florida...............  Florida..........        0.1         0.5
Atlanta.......................  Georgia..........       -0.1        -0.3
Rest of Georgia...............  Georgia..........       -0.1         0.5
All...........................  Hawaii...........        0.6         2.4
All...........................  Iowa.............       -0.2        -0.8
All...........................  Idaho............        0.0         0.1
Chicago.......................  Illinois.........       -0.2        -1.0
East St Louis.................  Illinois.........       -0.1        -0.5
Rest of Illinois..............  Illinois.........       -0.2        -0.7
Suburban Chicago..............  Illinois.........       -0.1        -0.4
All...........................  Indiana..........       -0.4        -1.5
All...........................  Kansas...........       -0.2        -0.8
All...........................  Kentucky.........       -0.3        -1.1
New Orleans...................  Louisiana........       -0.3        -1.2
Rest of Louisiana.............  Louisiana........       -0.3        -1.3
Boston........................  Massachusetts....       -0.3        -1.1
Rest of Massachusetts.........  Massachusetts....        0.1         0.6
Balto/Surr Ctys...............  Maryland.........       -0.3        -1.2
Rest of Maryland..............  Maryland.........       -0.2        -0.6
Rest of Maine.................  Maine............       -0.1        -0.4
Southern Maine................  Maine............       -0.1        -0.2
Detroit.......................  Michigan.........       -0.2        -0.8
Rest of Michigan..............  Michigan.........       -0.2        -0.9
All...........................  Minnesota........       -0.1        -0.4
Metro Kansas City.............  Missouri.........       -0.7        -2.7
Rest of Missouri..............  Missouri.........       -0.2        -0.8
Rest of Missouri..............  Missouri.........        0.1         0.2
St Louis......................  Missouri.........       -0.4        -1.6
All...........................  Mississippi......       -0.5        -1.8
All...........................  Montana..........        0.1         0.3
All...........................  North Carolina...       -0.1        -0.3
All...........................  North Dakota.....       -0.3        -1.1
All...........................  Nebraska.........       -0.2        -0.8
All...........................  New Hampshire....        0.0        -0.2
Northern New Jersey...........  New Jersey.......        0.0         0.0
Rest of New Jersey............  New Jersey.......        0.1         0.5
All...........................  New Mexico.......        0.2         0.8
All...........................  Nevada...........        0.0        -0.1
Manhattan.....................  New York.........        0.4         1.5
NYC Suburbs/LI................  New York.........        0.3         1.3
NYC Suburbs/Poughk............  New York.........        0.3         1.2
Queens........................  New York.........        0.7         2.8
Rest of New York..............  New York.........       -0.1        -0.2
All...........................  Ohio.............       -0.3        -1.2
All...........................  Oklahoma.........       -0.2        -0.7

[[Page 58899]]

Portland......................  Oregon...........        0.1         0.2
Rest of Oregon................  Oregon...........        0.4         1.5
Philadelphia..................  Pennsylvania.....       -0.1        -0.4
Rest of Pennsylvania..........  Pennsylvania.....       -0.1        -0.3
All...........................  Puerto Rico......        1.0         3.9
All...........................  Rhode Island.....        0.2         0.6
All...........................  South Carolina...        0.0        -0.2
All...........................  South Dakota.....       -0.4        -1.5
All...........................  Tennessee........       -0.3        -1.3
Austin........................  Texas............       -0.3        -1.0
Beaumont......................  Texas............       -0.6        -2.5
Brazoria......................  Texas............        0.4         1.7
Dallas........................  Texas............       -0.2        -0.8
Fort Worth....................  Texas............        0.0         0.0
Galveston.....................  Texas............       -0.4        -1.5
Houston.......................  Texas............       -0.4        -1.8
Rest of Texas.................  Texas............       -0.1        -0.4
All...........................  Utah.............        0.0         0.2
All...........................  Virginia.........        0.0        -0.1
All...........................  Virgin Islands...        0.6         2.5
All...........................  Vermont..........        0.2         0.9
Rest of Washington............  Washington.......        0.3         1.2
Seattle (King Co).............  Washington.......        0.0         0.0
All...........................  Wisconsin........       -0.2        -1.0
All...........................  West Virginia....       -0.2        -0.8
All...........................  Wyoming..........        0.3         1.0
------------------------------------------------------------------------

C. Medical Direction for Anesthesia Services

    For our proposal relating to the medical direction of anesthesia 
services (Sec. 415.110), we have decided to retain the current 
requirements (that is, requirements (i) and (ii), and (iv)) and make 
only one technical revision in requirement (iii). The technical 
revision pertains to the requirement that the physician participate in 
the most demanding procedures in the anesthesia plan, including, 
induction and emergence.

D. Separate Payment for a Physician's Interpretation of an Abnormal 
Papanicolaou Smear

    We are allowing separate payment for a physician's interpretation 
of a Pap smear to any patient (that is, hospital or nonhospital 
patient) as long as--(1) The laboratory's screening personnel suspect 
an abnormality; and (2) the physician reviews and interprets the pap 
smear. Currently, separate payment to a physician is limited to a Pap 
smear interpretation that is abnormal and is furnished to a hospital 
inpatient. We estimate that there would be a $10 million increase in 
payments under the physician fee schedule for this change in payment 
for Pap smear interpretations for FY 1999.

E. Rebasing and Revising the Medicare Economic Index

    There is negligible impact on Medicare expenditures as a result of 
this change.

F. Payment for Nurse Midwives' Services

    The provision for nurse midwives' services will place into 
regulations text a provision of OBRA 1993 that eliminates the 
limitation on coverage of services furnished outside the maternity 
cycle by nurse midwives. This provision has been implemented previously 
through program instructions; therefore, this change in the regulations 
text will have no impact.

G. BBA Provisions Included in This Final Rule

    The following five provisions of BBA 1997 are implemented in this 
final rule. This final rule conforms the regulations text to BBA 1997 
provisions. Table 11 below provides the cost and savings estimates (in 
millions of dollars) for the Medicare program for these provisions for 
the fiscal years shown:

      Table 11.--Cost and Savings Estimates for BBA 1997 Provisions
                              [In millions]
------------------------------------------------------------------------
Provision
 section        Subject        1999     2000     2001     2002     2003
------------------------------------------------------------------------
4206.....  Teleconsultation
            s..............       20       40       55       70       90
4511.....  Nurse
            practitioners
            and Clinical
            Nurse
            Specialists....      290      330      370      440      490
4512.....  Physician
            Assistants.....       60       60       70       90      100
4541.....  Outpatient
            Rehabilitation.     -130     -190     -200     -230     -250
4556.....  Drugs...........      -60      -70      -70      -80      -80
------------------------------------------------------------------------


[[Page 58900]]

Payment for Services of Certain Nonphysician Practitioners and 
Services Furnished Incident to Their Professional Services

    Sections 4511 and 4512 of BBA 1997 provide for the expanded 
coverage of nurse practitioner, clinical nurse specialist, and 
physician assistant services. This provision is self-implementing. This 
final rule changes the regulations text to conform to the BBA 1997 
provisions. We are clarifying the following two existing issues 
unrelated to the BBA 1997 provisions for nonphysician practitioners:
    <bullet> Definition of physician collaboration for nurse 
practitioners.
    <bullet> The impact of the BBA 1997 provisions is shown in Table 11 
(a combination of sections 4511 and 4512 of BBA 1997). The proposals 
being made final in this rule will have negligible budgetary impact.

Payment for Outpatient Rehabilitation Services

    Sections 4541(a)(2) and 4541(a)(3) of BBA 1997 change the payment 
of outpatient rehabilitation services from cost-based to a payment 
system based on the physician fee schedule. The regulatory changes are 
to conform our regulations to the provisions of the BBA 1997.
    In addition to the changes directed by the statute, the following 
changes are being made in this rule to furnish information for 
identification of the outpatient rehabilitation services and for 
administrative purposes:
    <bullet> Specifying HCPCS as the coding system for rehabilitation 
services since it is used by the fee schedule in section 1848 of the 
Act.
    <bullet> Providing for discipline-specific modifiers to be used in 
coding services.
    <bullet> Providing for a code for nursing services performed in 
CORFs.
    These administrative changes will have a negligible impact.
    Section 4541(c) of BBA 1997 applies an annual per beneficiary limit 
of $1,500 to all outpatient physical therapy services (including 
speech-language pathology services) except for services furnished by a 
hospital outpatient department. A separate $1,500 limit also applies to 
all outpatient occupational therapy services except for services 
furnished by hospital outpatient departments. Therapy services 
furnished incident to a physician's professional services are also 
subject to these limits. The changes in this rule conform the 
regulations to the BBA 1997 provisions. The delay in full 
implementation, however, is discussed below.
    There are several different types of providers that will be 
affected by this BBA 1997 provision. The largest providers are SNFs, 
outpatient rehabilitation facilities, and hospital outpatient 
departments. There are about 15,000 SNFs, 2,500 outpatient 
rehabilitation facilities, and about 5,600 outpatient hospital 
facilities. We determined that the services that would be affected by 
these changes account for about 15 percent of Medicare Part B payments 
to facilities.
    We estimate that these providers as well as other providers and 
practitioners of outpatient therapy services will experience a 
reduction in revenue both because of the movement from cost 
reimbursement to fee schedule payments and because of the $1,500 
limits. The impact of the provisions on individual providers, however, 
cannot be estimated for a variety of reasons. First, since 
reimbursement has historically been based on cost for most providers, 
we do not have coded information on individual services per beneficiary 
at individual providers. Second, with respect to the impact of the 
$1,500 limit, the extent to which a provider will receive a payment 
from another source to substitute for Medicare's payment is unknown. 
For example, if a beneficiary reaches the $1,500 limit, Medicare will 
no longer pay, but payment may be received from another source, such as 
a Medigap insurer, a retiree health plan, or the beneficiary.
    The $1,500 limits will reduce the amount of therapy services paid 
for by Medicare. The patients most affected are likely to be those with 
diagnoses such as stroke, certain fractures, and amputation, where the 
number of therapy visits needed by a patient may exceed those that can 
be reimbursed by Medicare under the statutory limits. Services not paid 
for by Medicare, however, may be paid for by other payers.
    As explained in the preamble, the $1,500 limits will not be fully 
implemented until sometime in 2000 due to the necessity to devote 
resources to Y2K compliance activities. Until that time, the limits 
will be implemented partially on a per-provider basis whereby each 
provider will be held accountable for tracking expenses for each 
beneficiary and not billing Medicare for beneficiaries that have met 
the limit at their facility. Implementing the provision in this fashion 
should lessen the impact on both beneficiaries and providers until full 
implementation occurs.

Impact on Small Rural Hospitals

    We realize that the provision to move from cost reimbursement to a 
fee schedule may have an impact on small rural hospitals; however, we 
have been unable to assess this impact because we do not have the data 
to make this analysis. Also, data that would identify the extent to 
which these services are currently being furnished in small rural 
hospitals to serve as the baseline for comparing the impact of the 
legislative changes are not available. In addition, we do not maintain 
data that identify services furnished under the physician fee schedule 
in areas where rural hospitals are located. Although there are 
localities designated for payment purposes, there is very little 
correlation between the payment localities (most of which are state-
wide) and areas where small rural hospitals are located.

Payment for Drugs and Biologicals

    The impact of this BBA 1997 provision is shown in Table 5. This 
final rule modifies the current regulatory language regarding drug 
payment to conform to the BBA 1997 changes. Revising the regulation on 
multi-source drugs to include the brand name version of the drug is not 
related to the BBA 1997 drug provision but will have a slight program 
savings.

Private Contracting with Medicare Beneficiaries

    We anticipate that there would be a negligible impact on Medicare 
trust fund payments as a result of the regulation that implements the 
law. The program impact of the provision when it was assessed in the 
legislative process was negligible. The impact on beneficiaries, 
physicians, and practitioners is impossible to assess in any 
quantitative way.
    Specifically, beneficiaries who have had difficulty in finding 
physicians or practitioners to furnish services because the physicians 
or practitioners were dissatisfied with the Medicare payment rates may 
find it easier to acquire care. On the other hand, beneficiaries who 
cannot afford to privately contract with physicians or practitioners 
who opt out of Medicare may have more limited access to care as they 
try to seek care from reduced numbers of physicians and practitioners 
who will accept Medicare payment rules.
    Physicians and practitioners who opt out of Medicare may see 
increased incomes as a result of their ability to charge without regard 
to the Medicare limiting charge. However, to the extent that 
beneficiaries cease to seek treatment from them because they have

[[Page 58901]]

opted out of Medicare, their incomes may decline. Moreover, 
organizations to which physicians and practitioners had reassigned 
Medicare benefits may cease their contracts with them if they opt out 
since the organizations could no longer be paid by Medicare for the 
physician's or practitioner's service. Managed care plans that have a 
contract with Medicare may cease their contractual arrangement with 
physicians and practitioners who opt out of Medicare since the plan 
cannot pay for any of their services to Medicare beneficiaries and, 
hence, their services no longer offer access to care under the plan. 
Similarly, insurance plans other than Medicare can choose to not pay 
for the services provided to any of their enrollees by physicians and 
practitioners who opt out of Medicare, causing the physicians and 
practitioners who opt out further loss of income.

Teleconsultations

    We estimate that the cost of providing consultation services in 
accordance with section 4206 of BBA 1997 will be approximately $20 
million in FY 1999 and approximately $90 million by FY 2003. Note that 
the FY 1999 estimate reflects only a partial year estimate, given the 
January 1, 1999 effective date for teleconsultation coverage. We 
estimate that teleconsultation will cost approximately $275 million for 
the first 5 years of coverage, as indicated below:

                             Medicare costs
                              [In millions]
------------------------------------------------------------------------
   FY 1999        FY 2000        FY 2001        FY 2002        FY 2003
------------------------------------------------------------------------
$20..........           $40            $55            $70           $90
------------------------------------------------------------------------

    This rule would provide for payment exclusively for professional 
consultation with a physician and certain other practitioners via 
interactive telecommunication systems. Section 4206 of BBA 1997 does 
not provide for payment for telephone line fees or any facility fees 
associated with teleconsultation that may be incurred by hospitals 
included in the telemedicine network.
    Further, this rule does not mandate that entities provide 
consultation services via telecommunications. Thus, this final rule 
does not require entities to purchase telemedicine equipment or to 
acquire the telecommunications infrastructure necessary to deliver 
consultation services via telecommunication systems. Therefore, this 
rule does not impose costs associated with starting and operating a 
telemedicine network.
    The benefit changes in this final rule resulting from payment for 
teleconsultation services do not result in additional Medicare 
expenditures of $100 million or more for any single FY through FY 2003. 
We have determined, and we certify, that teleconsultation provisions do 
not have a significant economic impact on a substantial number of small 
entities or a significant impact on the operations of a substantial 
number of small rural hospitals.

H. Impact on Beneficiaries

    Although changes in physicians' payments when the physician fee 
schedule was implemented in 1992 were large, we detected no problems 
with beneficiary access to care. Because there is a 4-year transition 
to the resource-based practice expense system, we anticipate a minimal 
impact on beneficiaries.
    The benefit changes in this final rule resulting from payment for 
teleconsultation services do not result in additional Medicare 
expenditures of $100 million or more for any single FY through FY 2003. 
We have determined, and we certify, that teleconsultation provisions do 
not have a significant economic impact on a substantial number of small 
entities or a significant impact on the operations of a substantial 
number of small rural hospitals.
    Statutory effects that are being implemented by this regulation 
result in specialty impacts exceeding $100 million per year. Therefore, 
this rule is an economically significant rule under Executive Order 
12866, and a major rule under Title 5, United States Code, section 
804(2).
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 405

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

42 CFR Part 410

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

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.

42 CFR Part 414

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

42 CFR Part 415

    Health facilities, Health professions, Medicare and Reporting and 
recordkeeping requirements.

42 CFR Part 424

    Emergency medical services, Health facilities, Health professions, 
Medicare.

42 CFR Part 485

    Grant programs-health, Health facilities, Medicaid, Medicare, 
Reporting and recordkeeping requirements.
    For the reasons set forth in the preamble, 42 CFR chapter IV is 
amended as follows:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

    A. Part 405 is amended as set forth below:
    1. A new subpart D, consisting of Secs. 405.400, 405.405, 405.410, 
405.415, 405.420, 405.425, 405.430, 405.435, 405.440, 405.445, 405.450, 
and 405.455 is added to read as follows:

Subpart D--Private Contracts

Secs.
405.400  Definitions.
405.405  General rules.
405.410  Conditions for properly opting-out of Medicare.
405.415  Requirements of the private contract.
405.420  Requirements of the opt-out affidavit.
405.425  Effects of opting-out of Medicare.
405.430  Failure to properly opt-out.
405.435  Failure to maintain opt-out.
405.440  Emergency and urgent care services.

[[Page 58902]]

405.445  Renewal and early termination of opt-out.
405.450  Appeals.
405.455  Application to Medicare+Choice contracts.

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

Subpart D--Private Contracts


Sec. 405.400  Definitions.

    For purposes of this subpart, the following definitions apply:
    Beneficiary means an individual who is enrolled in Part B of 
Medicare.
    Emergency care services means services furnished to an individual 
for treatment of an ``emergency medical condition'' as that term is 
defined in Sec. 422.2 of this chapter.
    Legal representative means one or more individuals who, as 
determined by applicable State law, has the legal authority to enter 
into the contract with the physician or practitioner on behalf of the 
beneficiary.
    Opt-out means the status of meeting the conditions specified in 
Sec. 405.410.
    Opt-out period means the 2-year period beginning on the effective 
date of the affidavit as specified by Sec. 405.410(c)(1) or 
Sec. 405.410(c)(2), as applicable.
    Participating physician means a ``physician'' as defined in this 
section who has signed an agreement to participate in Part B of 
Medicare.
    Physician means a doctor of medicine or a doctor of osteopathy who 
is currently licensed as that type of doctor in each State in which he 
or she furnishes services to patients.
    Practitioner means a physician assistant, nurse practitioner, 
clinical nurse specialist, certified registered nurse anesthetist, 
certified nurse midwife, clinical psychologist, or clinical social 
worker, who is currently legally authorized to practice in that 
capacity by each State in which he or she furnishes services to 
patients or clients.
    Private contract means a document that meets the criteria specified 
in Sec. 405.415.
    Properly opt-out means to complete, without defect, the 
requirements for opt-out as specified in Sec. 405.410.
    Properly terminate opt-out means to complete, without defect, the 
requirements for terminating opt-out as specified in Sec. 405.445.
    Urgent care services means services furnished to an individual who 
requires services to be furnished within 12 hours in order to avoid the 
likely onset of an emergency medical condition.


Sec. 405.405  General rules.

    (a) A physician or practitioner may enter into one or more private 
contracts with Medicare beneficiaries for the purpose of furnishing 
items or services that would otherwise be covered by Medicare, provided 
the conditions of this subpart are met.
    (b) A physician or practitioner who enters into at least one 
private contract with a Medicare beneficiary under the conditions of 
this subpart, and who submits one or more affidavits in accordance with 
this subpart, opts-out of Medicare for a 2-year period unless the opt-
out is terminated early according to Sec. 405.445. The physician's or 
practitioner's opt-out may be renewed for subsequent 2-year periods.
    (c) Both the private contracts described in paragraph (a) of this 
section and the physician's or practitioner's opt-out described in 
paragraph (b) of this section are null and void if the physician or 
practitioner fails to properly opt-out in accordance with the 
conditions of this subpart.
    (d) Both the private contracts described in paragraph (a) of this 
section and the physician's or practitioner's opt-out described in 
paragraph (b) of this section are null and void for the remainder of 
the opt-out period if the physician or practitioner fails to remain in 
compliance with the conditions of this subpart during the opt-out 
period.
    (e) Services furnished under private contracts meeting the 
requirements of this subpart are not covered services under Medicare, 
and no Medicare payment will be made for such services either directly 
or indirectly, except as permitted in accordance with Sec. 405.435(c).


Sec. 405.410  Conditions for properly opting-out of Medicare.

    The following conditions must be met for a physician or 
practitioner to properly opt-out of Medicare:
    (a) Each private contract between a physician or a practitioner and 
a Medicare beneficiary that is entered into prior to the submission of 
the affidavit described in paragraph (b) of this section must meet the 
specifications of Sec. 405.415.
    (b) The physician or practitioner must submit an affidavit that 
meets the specifications of Sec. 405.420 to each Medicare carrier with 
which he or she would file claims absent completion of opt-out.
    (c) A nonparticipating physician or a practitioner may opt-out of 
Medicare at any time in accordance with the following:
    (1) The 2-year opt-out period begins the date the affidavit meeting 
the requirements of Sec. 405.420 is signed, provided the affidavit is 
filed within 10 days after he or she signs his or her first private 
contract with a Medicare beneficiary.
    (2) If the physician or practitioner does not timely file any 
required affidavit, the 2-year opt-out period begins when the last such 
affidavit is filed. Any private contract entered into before the last 
required affidavit is filed becomes effective upon the filing of the 
last required affidavit and the furnishing of any items or services to 
a Medicare beneficiary under such contract before the last required 
affidavit is filed is subject to standard Medicare rules.
    (d) A participating physician may properly opt-out of Medicare at 
the beginning of any calendar quarter, provided that the affidavit 
described in Sec. 405.420 is submitted to the participating physician's 
Medicare carriers at least 30 days before the beginning of the selected 
calendar quarter. A private contract entered into before the beginning 
of the selected calendar quarter becomes effective at the beginning of 
the selected calendar quarter and the furnishing of any items or 
services to a Medicare beneficiary under such contract before the 
beginning of the selected calendar quarter is subject to standard 
Medicare rules.


Sec. 405.415  Requirements of the private contract.

    A private contract under this subpart must:
    (a) Be in writing and in print sufficiently large to ensure that 
the beneficiary is able to read the contract.
    (b) Clearly state whether the physician or practitioner is excluded 
from Medicare under sections 1128, 1156, or 1892 or any other section 
of the Social Security Act.
    (c) State that the beneficiary or his or her legal representative 
accepts full responsibility for payment of the physician's or 
practitioner's charge for all services furnished by the physician or 
practitioner.
    (d) State that the beneficiary or his or her legal representative 
understands that Medicare limits do not apply to what the physician or 
practitioner may charge for items or services furnished by the 
physician or practitioner.
    (e) State that the beneficiary or his or her legal representative 
agrees not to submit a claim to Medicare or to ask the physician or 
practitioner to submit a claim to Medicare.
    (f) State that the beneficiary or his or her legal representative 
understands

[[Page 58903]]

that Medicare payment will not be made for any items or services 
furnished by the physician or practitioner that would have otherwise 
been covered by Medicare if there was no private contract and a proper 
Medicare claim had been submitted.
    (g) State that the beneficiary or his or her legal representative 
enters into this contract with the knowledge that he or she has the 
right to obtain Medicare-covered items and services from physicians and 
practitioners who have not opted-out of Medicare, and that the 
beneficiary is not compelled to enter into private contracts that apply 
to other Medicare-covered services furnished by other physicians or 
practitioners who have not opted-out.
    (h) State the expected or known effective date and expected or 
known expiration date of the opt-out period.
    (i) State that the beneficiary or his or her legal representative 
understands that Medigap plans do not, and that other supplemental 
plans may elect not to, make payments for items and services not paid 
for by Medicare.
    (j) Be signed by the beneficiary or his or her legal representative 
and by the physician or practitioner.
    (k) Not be entered into by the beneficiary or by the beneficiary's 
legal representative during a time when the beneficiary requires 
emergency care services or urgent care services. (However, a physician 
or practitioner may furnish emergency or urgent care services to a 
Medicare beneficiary in accordance with Sec. 405.440.)
    (l) Be provided (a photocopy is permissible) to the beneficiary or 
to his or her legal representative before items or services are 
furnished to the beneficiary under the terms of the contract.
    (m) Be retained (original signatures of both parties required) by 
the physician or practitioner for the duration of the opt-out period.
    (n) Be made available to HCFA upon request.
    (o) Be entered into for each opt-out period.


Sec. 405.420  Requirements of the opt-out affidavit.

    An affidavit under this subpart must:
    (a) Be in writing and be signed by the physician or practitioner.
    (b) Contain the physician's or practitioner's full name, address, 
telephone number, national provider identifier (NPI) or billing number, 
if one has been assigned, uniform provider identification number (UPIN) 
if one has been assigned, or, if neither an NPI nor a UPIN has been 
assigned, the physician's or practitioner's tax identification number 
(TIN).
    (c) State that, except for emergency or urgent care services (as 
specified in Sec. 405.440), during the opt-out period the physician or 
practitioner will provide services to Medicare beneficiaries only 
through private contracts that meet the criteria of paragraph 
Sec. 405.415 for services that, but for their provision under a private 
contract, would have been Medicare-covered services.
    (d) State that the physician or practitioner will not submit a 
claim to Medicare for any service furnished to a Medicare beneficiary 
during the opt-out period, nor will the physician or practitioner 
permit any entity acting on his or her behalf to submit a claim to 
Medicare for services furnished to a Medicare beneficiary, except as 
specified in Sec. 405.440.
    (e) State that, during the opt-out period, the physician or 
practitioner understands that he or she may receive no direct or 
indirect Medicare payment for services that he or she furnishes to 
Medicare beneficiaries with whom he or she has privately contracted, 
whether as an individual, an employee of an organization, a partner in 
a partnership, under a reassignment of benefits, or as payment for a 
service furnished to a Medicare beneficiary under a Medicare+Choice 
plan.
    (f) State that a physician or practitioner who opts-out of Medicare 
acknowledges that, during the opt-out period, his or her services are 
not covered under Medicare and that no Medicare payment may be made to 
any entity for his or her services, directly or on a capitated basis.
    (g) State a promise by the physician or practitioner to the effect 
that, during the opt-out period, the physician or practitioner agrees 
to be bound by the terms of both the affidavit and the private 
contracts that he or she has entered into.
    (h) Acknowledge that the physician or practitioner recognizes that 
the terms of the affidavit apply to all Medicare-covered items and 
services furnished to Medicare beneficiaries by the physician or 
practitioner during the opt-out period (except for emergency or urgent 
care services furnished to the beneficiaries with whom he or she has 
not previously privately contracted) without regard to any payment 
arrangements the physician or practitioner may make.
    (i) With respect to a physician who has signed a Part B 
participation agreement, acknowledge that such agreement terminates on 
the effective date of the affidavit.
    (j) Acknowledge that the physician or practitioner understands that 
a beneficiary who has not entered into a private contract and who 
requires emergency or urgent care services may not be asked to enter 
into a private contract with respect to receiving such services and 
that the rules of Sec. 405.440 apply if the physician furnishes such 
services.


Sec. 405.425  Effects of opting-out of Medicare.

    If a physician or practitioner opts-out of Medicare in accordance 
with this subpart for the 2-year period for which the opt-out is 
effective, the following results obtain:
    (a) Except as provided in Sec. 405.440, no payment may be made 
directly by Medicare or by any Medicare+Choice plan to the physician or 
practitioner or to any entity to which the physician or practitioner 
reassigns his right to receive payment for services.
    (b) The physician or practitioner may not furnish any item or 
service that would otherwise be covered by Medicare (except for 
emergency or urgent care services) to any Medicare beneficiary except 
through a private contract that meets the requirements of this subpart.
    (c) The physician or practitioner is not subject to the requirement 
to submit a claim for items or services furnished to a Medicare 
beneficiary, as specified in Sec. 424.5(a)(6) of this chapter, except 
as provided in Sec. 405.440.
    (d) The physician or practitioner is prohibited from submitting a 
claim to Medicare for items or services furnished to a Medicare 
beneficiary except as provided in Sec. 405.440.
    (e) In the case of a physician, he or she is not subject to the 
limiting charge provisions of Sec. 414.48 of this chapter, except for 
services provided under Sec. 405.440.
    (f) The physician or practitioner is not subject to the 
prohibition-on-reassignment provisions of Sec. 414.80 of this chapter, 
except for services provided under Sec. 405.440.
    (g) In the case of a practitioner, he or she is not prohibited from 
billing or collecting amounts from beneficiaries (as provided in 42 
U.S.C. 1395u(b)(18)(B)).
    (h) The death of a beneficiary who has entered into a private 
contract (or whose legal representative has done so) does not invoke 
Sec. 424.62 or Sec. 424.64 of this chapter with respect to the 
physician or practitioner with whom the beneficiary (or legal 
representative) has privately contracted.
    (i) The physician or practitioner who has not been excluded under 
sections 1128, 1156, or 1892 of the Social Security Act may order, 
certify the need for, or refer a beneficiary for Medicare-covered items 
and services, provided

[[Page 58904]]

the physician or practitioner is not paid, directly or indirectly, for 
such services (except as provided in Sec. 405.440).
    (j) The physician or practitioner who is excluded under sections 
1128, 1156, or 1892 of the Social Security Act may not order, 
prescribe, or certify the need for Medicare-covered items and services 
except as provided in Sec. 1001.1901 of this title, and must otherwise 
comply with the terms of the exclusion in accordance with 
Sec. 1001.1901 effective with the date of the exclusion.


Sec. 405.430  Failure to properly opt-out.

    (a) A physician or practitioner fails to properly opt-out if--
    (1) Any private contract between the physician or practitioner and 
a Medicare beneficiary, that was entered into before the affidavit 
described in Sec. 405.420 was filed, does not meet the specifications 
of Sec. 405.415; or
    (2) He or she fails to submit the affidavit(s) in accordance with 
Sec. 405.420.
    (b) If a physician or practitioner fails to properly opt-out in 
accordance with paragraph (a) of this section, the following results 
obtain:
    (1) The physician's or practitioner's attempt to opt-out of 
Medicare is nullified, and all of the private contracts between the 
physician or practitioner and Medicare beneficiaries for the two-year 
period covered by the attempted opt-out are deemed null and void.
    (2) The physician or practitioner must submit claims to Medicare 
for all Medicare-covered items and services furnished to Medicare 
beneficiaries, including the items and services furnished under the 
nullified contracts. A nonparticipating physician is subject to the 
limiting charge provisions of Sec. 414.48 of this chapter. A 
participating physician is subject to the limitations on charges of the 
participation agreement he or she signed.
    (3) The practitioner may not reassign any claim except as provided 
in Sec. 424.80 of this chapter.
    (4) The practitioner may neither bill nor collect an amount from 
the beneficiary except for applicable deductible and coinsurance 
amounts.
    (5) The physician or practitioner may make another attempt to 
properly opt-out at any time.


Sec. 405.435  Failure to maintain opt-out.

    (a) A physician or practitioner fails to maintain opt-out under 
this subpart if, during the opt-out period--
    (1) He or she knowingly and willfully--
    (i) Submits a claim for Medicare payment (except as provided in 
Sec. 405.440); or
    (ii) Receives Medicare payment directly or indirectly for Medicare-
covered services furnished to a Medicare beneficiary (except as 
provided in Sec. 405.440).
    (2) He or she fails to enter into private contracts with Medicare 
beneficiaries for the purpose of furnishing items and services that 
would otherwise be covered by Medicare, or enters into contracts that 
fail to meet the specifications of Sec. 405.415; or
    (3) He or she fails to comply with the provisions of Sec. 405.440 
regarding billing for emergency care services or urgent care services; 
or
    (4) He or she fails to retain a copy of each private contract that 
he or she has entered into for the duration of the opt-out period for 
which the contracts are applicable or fails to permit HCFA to inspect 
them upon request.
    (b) If a physician or practitioner fails to maintain opt-out in 
accordance with paragraph (a) of this section, and fails to 
demonstrate, within 45 days of a notice from the carrier of a violation 
of paragraph (a) of this section, that he or she has taken good faith 
efforts to maintain opt-out (including by refunding amounts in excess 
of the charge limits to beneficiaries with whom he or she did not sign 
a private contract), the following results obtain, effective 46 days 
after the date of the notice, but only for the remainder of the opt-out 
period:
    (1) All of the private contracts between the physician or 
practitioner and Medicare beneficiaries are deemed null and void.
    (2) The physician's or practitioner's opt-out of Medicare is 
nullified.
    (3) The physician or practitioner must submit claims to Medicare 
for all Medicare-covered items and services furnished to Medicare 
beneficiaries.
    (4) The physician or practitioner or beneficiary will not receive 
Medicare payment on Medicare claims for the remainder of the opt-out 
period, except as provided in paragraph (c) of this section.
    (5) The physician is subject to the limiting charge provisions of 
Sec. 414.48 of this chapter.
    (6) The practitioner may not reassign any claim except as provided 
in Sec. 424.80 of this chapter.
    (7) The practitioner may neither bill nor collect any amount from 
the beneficiary except for applicable deductible and coinsurance 
amounts.
    (8) The physician or practitioner may not attempt to once more meet 
the criteria for properly opting-out until the 2-year opt-out period 
expires.
    (c) Medicare payment may be made for the claims submitted by a 
beneficiary for the services of an opt-out physician or practitioner 
when the physician or practitioner did not privately contract with the 
beneficiary for services that were not emergency care services or 
urgent care services and that were furnished no later than 15 days 
after the date of a notice by the carrier that the physician or 
practitioner has opted-out of Medicare.


Sec. 405.440  Emergency and urgent care services.

    (a) A physician or practitioner who has opted-out of Medicare under 
this subpart need not enter into a private contract to furnish 
emergency care services or urgent care services to a Medicare 
beneficiary. Accordingly, a physician or practitioner will not be 
determined to have failed to maintain opt-out if he or she furnishes 
emergency care services or urgent care services to a Medicare 
beneficiary with whom the physician or practitioner has not previously 
entered into a private contract, provided the physician or practitioner 
complies with the billing requirements specified in paragraph (b) of 
this section.
    (b) When a physician or practitioner who has not been excluded 
under sections 1128, 1156, or 1892 of the Social Security Act furnishes 
emergency care services or urgent care services to a Medicare 
beneficiary with whom the physician or practitioner has not previously 
entered into a private contract, he or she:
    (1) Must submit a claim to Medicare in accordance with both 42 CFR 
part 424 and Medicare instructions (including but not limited to 
complying with proper coding of emergency or urgent care services 
furnished by physicians and practitioners who have opted-out of 
Medicare).
    (2) May collect no more than--
    (i) The Medicare limiting charge, in the case of a physician; or
    (ii) The deductible and coinsurance, in the case of a practitioner.
    (c) Emergency care services or urgent care services furnished to a 
Medicare beneficiary with whom the physician or practitioner has 
previously entered into a private contract (that is, entered into 
before the onset of the emergency medical condition or urgent medical 
condition), are furnished under the terms of the private contract.
    (d) Medicare may make payment for emergency care services or urgent 
care services furnished by a physician or practitioner who has properly 
opted-out when the services are furnished and the claim for services is 
made in accordance with this section. A physician or practitioner who 
has been excluded

[[Page 58905]]

must comply with the regulations at Sec. 1001.1901 (Scope and effect of 
exclusion) of this title when he or she furnishes emergency services to 
beneficiaries and may not bill and be paid for urgent care services.


Sec. 405.445  Renewal and early termination of opt-out.

    (a) A physician or practitioner may renew opt-out by filing an 
affidavit with each carrier with which he or she would file claims 
absent completion of opt-out, provided the affidavits are filed within 
30 days after the current opt-out period expires.
    (b) To properly terminate opt-out a physician or practitioner must:
    (1) Not have previously opted out of Medicare.
    (2) Notify all Medicare carriers, with which he or she filed an 
affidavit, of the termination of the opt-out no later than 90 days 
after the effective date of the opt-out period.
    (3) Refund to each beneficiary with whom he or she has privately 
contracted all payment collected in excess of:
    (i) The Medicare limiting charge (in the case of physicians); or
    (ii) The deductible and coinsurance (in the case of practitioners).
    (4) Notify all beneficiaries with whom the physician or 
practitioner entered into private contracts of the physician's or 
practitioner's decision to terminate opt-out and of the beneficiaries' 
right to have claims filed on their behalf with Medicare for the 
services furnished during the period between the effective date of the 
opt-out and the effective date of the termination of the opt-out 
period.
    (c) When the physician or practitioner properly terminates opt-out 
in accordance with paragraph (b), he or she will be reinstated in 
Medicare as if there had been no opt-out, and the provision of 
Sec. 405.425 shall not apply unless the physician or practitioner 
subsequently properly opts out.
    (d) A physician or practitioner who has completed opt-out on or 
before January 1, 1999 may terminate opt-out during the 90 days 
following January 1, 1999 if he or she notifies all carriers to whom he 
or she would otherwise submit claims of the intent to terminate opt-out 
and complies with paragraphs (b)(3) and (4) of this section. Paragraph 
(c) of this section applies in these cases.


Sec. 405.450  Appeals.

    (a) A determination by HCFA that a physician or practitioner has 
failed to properly opt-out, failed to maintain opt-out, failed to 
timely renew opt-out, failed to privately contract, or failed to 
properly terminate opt-out is an initial determination for purposes of 
Sec. 405.803.
    (b) A determination by HCFA that no payment can be made to a 
beneficiary for the services of a physician who has opted-out is an 
initial determination for purposes of Sec. 405.803.


Sec. 405.455  Application to Medicare+Choice contracts.

    An organization that has a contract with HCFA to provide one or 
more Medicare+Choice (M+C) plans to beneficiaries (part 422 of this 
chapter):
    (a) Must acquire and maintain information from Medicare carriers on 
physicians and practitioners who have opted-out of Medicare.
    (b) Must make no payment directly or indirectly for Medicare 
covered services furnished to a Medicare beneficiary by a physician or 
practitioner who has opted-out of Medicare.
    (c) May make payment to a physician or practitioner who furnishes 
emergency or urgent care services to a beneficiary who has not 
previously entered into a private contract with the physician or 
practitioner in accordance with Sec. 405.440.

Subpart E--Criteria for Determining Reasonable Charges

    2. The authority citation for part 405, subpart E, continues to 
read as follows:

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

    3. Section 405.517 is revised to read as follows:


Sec. 405.517  Payment for drugs and biologicals that are not paid on a 
cost or prospective payment basis.

    (a) Applicability. Payment for a drug or biological that is not 
paid on a cost or prospective payment basis is determined by the 
standard methodology described in paragraph (b) of this section. 
Examples of when this procedure applies include a drug or biological 
furnished incident to a physician's service, a drug or biological 
furnished by an independent dialysis facility that is not included in 
the ESRD composite rate set forth in Sec. 413.170(c) of this chapter, 
and a drug or biological furnished as part of the durable medical 
equipment benefit.
    (b) Methodology. Payment for a drug or biological described in 
paragraph (a) of this section is based on the lower of the actual 
charge on the Medicare claim for benefits or 95 percent of the national 
average wholesale price of the drug or biological.
    (c) Multiple-source drugs. For multiple-source drugs and 
biologicals, for purposes of this regulation, the average wholesale 
price is defined as the lesser of the median average wholesale price 
for all sources of the generic forms of the drug or biological or the 
lowest average wholesale price of the brand name forms of the drug or 
biological.
    4. A new Sec. 405.520 is added to read as follows:


Sec. 405.520  Payment for a physician assistants, nurse practitioners, 
and clinical nurse specialists' services and services furnished 
incident to their professional services.

    (a) General rule. A physician assistants, nurse practitioners, and 
clinical nurse specialists' services, and services and supplies 
furnished incident to their professional services, are paid in 
accordance with the physician fee schedule. The payment for a physician 
assistants' services may not exceed the limits at Sec. 414.52 of this 
chapter. The payment for a nurse practitioners' and clinical nurse 
specialists' services may not exceed the limits at Sec. 414.56 of this 
chapter.
    (b) Requirements. Medicare payment is made only if all claims for 
payment are made on an assignment-related basis in accordance with 
Sec. 424.55 of this chapter, that sets forth, respectively, the 
conditions for coverage of physician assistants' services, nurse 
practitioners' services and clinical nurse specialists' services, and 
services and supplies furnished incident to their professional 
services.
    (c) Civil money penalties. Any person or entity who knowingly and 
willingly bills a Medicare beneficiary amounts in excess of the 
appropriate coinsurance and deductible is subject to a civil money 
penalty not to exceed $2,000 for each bill or request for payment.

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

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

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

Sec. 410.1  [Amended]

    2. Section 410.1, paragraph (a) is amended by adding the following 
sentence at the end: ``Section 4206 of the Balanced Budget Act of 1997 
sets forth the conditions for payment for professional consultations 
that take place by means of telecommunications systems.''

[[Page 58906]]

Sec. 410.32  [Amended]

    3. In Sec. 410.32(a)(3), the last word, ``section,'' is removed and 
the word ``paragraph'' is added in its place.
    4. A new section 410.59 is added to read as follows:


Sec. 410.59  Outpatient occupational therapy services: Conditions.

    (a) Basic rule. Medicare Part B pays for outpatient occupational 
therapy services if they meet the following conditions:
    (1) They are furnished to a beneficiary while he or she is under 
the care of a physician who is a doctor of medicine, osteopathy, or 
podiatric medicine.
    (2) They are furnished under a written plan of treatment that meets 
the requirements of Sec. 410.61.
    (3) They are furnished--
    (i) By a provider as defined in Sec. 489.2 of this chapter, or by 
others under arrangements with, and under the supervision of, a 
provider; or
    (ii) By or under the personal supervision of an occupational 
therapist in private practice as described in paragraph (c) of this 
section.
    (b) Outpatient occupational therapy services furnished to certain 
inpatients of a hospital or a CAH or SNF. Medicare Part B pays for 
outpatient occupational therapy services furnished to an inpatient of a 
hospital, CAH, or SNF who requires them but who has exhausted or is 
otherwise ineligible for benefit days under Medicare Part A.
    (c) Special provisions for services furnished by occupational 
therapists in private practice.
    (1) Basic qualifications. In order to qualify under Medicare as a 
supplier of outpatient occupational therapy services, each individual 
occupational therapist in private practice must meet the following 
requirements:
    (i) Be legally authorized (if applicable, licensed, certified, or 
registered) to engage in the private practice of occupational therapy 
by the State in which he or she practices, and practice only within the 
scope of his or her license, certification, or registration.
    (ii) Engage in the private practice of occupational therapy on a 
regular basis as an individual, in one of the following practice types:
    (A) An unincorporated solo practice.
    (B) A partnership or unincorporated group practice.
    (C) An unincorporated solo practice, partnership, or group 
practice, a professional corporation or other incorporated occupational 
therapy practice. Private practice does not include any individual 
during the time he or she is working as an employee of a provider.
    (iii) Bill Medicare only for services furnished in his or her 
private practice office space, or in the patient's home. A therapist's 
private practice office space refers to the location(s) where the 
practice is operated, in the State(s) where the therapist (and 
practice, if applicable) is legally authorized to furnish services, 
during the hours that the therapist engages in practice at that 
location. When services are furnished in private practice office space, 
that space must be owned, leased, or rented by the practice and used 
for the exclusive purpose of operating the practice. A patient's home 
does not include any institution that is a hospital, an CAH, or a SNF.
    (iv) Treat individuals who are patients of the practice and for 
whom the practice collects fees for the services furnished.
    (2) Supervision of occupational therapy services. Occupational 
therapy services are performed by, or under the personal supervision 
of, the occupational therapist in private practice. All services not 
performed personally by the therapist must be performed by employees of 
the practice, personally supervised by the therapist, and included in 
the fee for the therapist's services.
    (d) Excluded services. No service is included as an outpatient 
occupational therapy service if it would not be included as an 
inpatient hospital service if furnished to a hospital or CAH inpatient.
    (e) Annual limitation on incurred expenses. (1) Amount of 
limitation. (i) In 1999, 2000, and 2001, no more than $1,500 of 
allowable charges incurred in a calendar year for outpatient 
occupational therapy services are recognized incurred expenses.
    (ii) In 2002 and thereafter, the limitation is determined by 
increasing the limitation in effect in the previous calendar year by 
the increase in the Medicare Economic Index for the current year.
    (2) For purposes of applying the limitation, outpatient 
occupational therapy includes:
    (i) Except as provided in paragraph (e)(3) of this section, 
outpatient occupational therapy services furnished under this section;
    (ii) Outpatient occupational therapy services furnished by a 
comprehensive outpatient rehabilitation facility;
    (iii) Outpatient occupational therapy services furnished by a 
physician or incident to a physician's service;
    (iv) Outpatient occupational therapy services furnished by a nurse 
practitioner, clinical nurse specialist, or physician assistant or 
incident to their services.
    (3) For purposes of applying the limitation, outpatient 
occupational therapy services excludes services furnished by a hospital 
directly or under arrangements.
    5. Section 410.60 is revised to read as follows:


Sec. 410.60  Outpatient physical therapy services: Conditions.

    (a) Basic rule. Medicare Part B pays for outpatient physical 
therapy services if they meet the following conditions:
    (1) They are furnished to a beneficiary while he or she is under 
the care of a physician who is a doctor of medicine, osteopathy, or 
podiatric medicine.
    (2) They are furnished under a written plan of treatment that meets 
the requirements of Sec. 410.61.
    (3) They are furnished--
    (i) By a provider as defined in Sec. 489.2 of this chapter, or by 
others under arrangements with, and under the supervision of, a 
provider; or
    (ii) By or under the personal supervision of a physical therapist 
in private practice as described in paragraph (c) of this section.
    (b) Outpatient physical therapy services furnished to certain 
inpatients of a hospital or a CAH or SNF. Medicare Part B pays for 
outpatient physical therapy services furnished to an inpatient of a 
hospital, CAH, or SNF who requires them but who has exhausted or is 
otherwise +ineligible for benefit days under Medicare Part A.
    (c) Special provisions for services furnished by physical 
therapists in private practice. (1) Basic qualifications. In order to 
qualify under Medicare as a supplier of outpatient physical therapy 
services, each individual physical therapist in private practice must 
meet the following requirements:
    (i) Be legally authorized (if applicable, licensed, certified, or 
registered) to engage in the private practice of physical therapy by 
the State in which he or she practices, and practice only within the 
scope of his or her license, certification, or registration.
    (ii) Engage in the private practice of physical therapy on a 
regular basis as an individual, in one of the following practice types:
    (A) An unincorporated solo practice.
    (B) An unincorporated partnership or unincorporated group practice.
    (C) An unincorporated solo practice, partnership, or group 
practice, or a professional corporation or other incorporated physical 
therapy practice. Private practice does not include any individual 
during the time he or she is working as an employee of a provider.

[[Page 58907]]

    (iii) Bill Medicare only for services furnished in his or her 
private practice office space, or in the patient's home. A therapist's 
private practice office space refers to the location(s) where the 
practice is operated, in the State(s) where the therapist (and 
practice, if applicable) is legally authorized to furnish services, 
during the hours that the therapist engages in practice at that 
location. When services are furnished in private practice office space, 
that space must be owned, leased, or rented by the practice and used 
for the exclusive purpose of operating the practice. A patient's home 
does not include any institution that is a hospital, a CAH, or a SNF.
    (iv) Treat individuals who are patients of the practice and for 
whom the practice collects fees for the services furnished.
    (2) Supervision of physical therapy services. Physical therapy 
services are performed by, or under the personal supervision of, the 
physical therapist in private practice. All services not performed 
personally by the therapist must be performed by employees of the 
practice, personally supervised by the therapist, and included in the 
fee for the therapist's services.
    (d) Excluded services. No service is included as an outpatient 
physical therapy service if it would not be included as an inpatient 
hospital service if furnished to a hospital or CAH inpatient.
    (e) Annual limitation on incurred expenses. (1) Amount of 
limitation. (i) In 1999, 2000, and 2001, no more than $1,500 of 
allowable charges incurred in a calendar year for outpatient physical 
therapy services are recognized incurred expenses.
    (ii) In 2002 and thereafter, the limitation shall be determined by 
increasing the limitation in effect in the previous calendar year by 
the increase in the Medicare Economic Index for the current year.
    (2) For purposes of applying the limitation, outpatient physical 
therapy includes:
    (i) Except as provided in paragraph (e)(3) of this section, 
outpatient physical therapy services furnished under this section;
    (ii) Except as provided in paragraph (e)(3) of this section 
outpatient speech-language pathology services furnished under 
Sec. 410.62;
    (iii) Outpatient physical therapy and speech-language pathology 
services furnished by a comprehensive outpatient rehabilitation 
facility;
    (iv) Outpatient physical therapy and speech-language pathology 
services furnished by a physician or incident to a physician's service;
    (v) Outpatient physical therapy and speech-language pathology 
services furnished by a nurse practitioner, clinical nurse specialist, 
or physician assistant or incident to their services.
    (3) For purposes of applying the limitation, outpatient physical 
therapy excludes services furnished by a hospital or CAH directly or 
under arrangements.
    6. In Sec. 410.61, the section heading and paragraphs (a) through 
(d) are revised to read as follows:


Sec. 410.61  Plan of treatment requirements for outpatient 
rehabilitation services.

    (a) Basic requirement. Outpatient rehabilitation services 
(including services furnished by a qualified physical or occupational 
therapist in private practice), must be furnished under a written plan 
of treatment that meets the requirements of paragraphs (b) through (e) 
of this section.
    (b) Establishment of the plan. The plan is established before 
treatment is begun by one of the following:
    (1) A physician.
    (2) A physical therapist who furnishes the physical therapy 
services.
    (3) A speech-language pathologist who furnishes the speech-language 
pathology services.
    (4) An occupational therapist who furnishes the occupational 
therapy services.
    (5) A nurse practitioner, a clinical nurse specialist, or a 
physician assistant.
    (c) Content of the plan. The plan prescribes the type, amount, 
frequency, and duration of the physical therapy, occupational therapy, 
or speech-language pathology services to be furnished to the 
individual, and indicates the diagnosis and anticipated goals.
    (d) Changes in the plan. Any changes in the plan--
    (1) Are made in writing and signed by one of the following:
    (i) The physician.
    (ii) The physical therapist who furnishes the physical therapy 
services.
    (iii) The occupational therapist who furnishes the physical therapy 
services.
    (iv) The speech-language pathologist who furnishes the speech-
language pathology services.
    (v) A registered professional nurse or a staff physician, in 
accordance with oral orders from the physician, physical therapist, 
occupational therapist, or speech-language pathologist who furnishes 
the services.
    (vi) A nurse practitioner, a clinical nurse specialist, or a 
physician assistant.
    (2) The changes are incorporated in the plan immediately.
* * * * *
    7. In Sec. 410.62, the section heading and paragraph (a)(3) are 
revised and a new paragraph (d) is added to read as follows:


Sec. 410.62  Outpatient speech-language pathology services: Conditions 
and exclusions.

    (a) * * *
    (3) They are furnished by a provider as defined in Sec. 489.2 of 
this chapter or by others under arrangements with, or under the 
supervision of, a provider.
* * * * *
    (d) Limitation. After 1998, outpatient speech-language pathology 
services are subject to the limitation in Sec. 410.60(e).
    8. New Secs. 410.74, 410.75, 410.76, 410.77, and 410.78 are added 
to subpart B to read as follows:

Subpart B--Medical and Other Health Services


Sec. 410.74  Physician assistants' services.

    (a) Basic rule. Medicare Part B covers physician assistants' 
services only if the following conditions are met:
    (1) The services would be covered as physicians' services if 
furnished by a physician (a doctor of medicine or osteopathy, as set 
forth in section 1861(r)(1) of the Act).
    (2) The physician assistant--
    (i) Meets the qualifications set forth in paragraph (c) of this 
section;
    (ii) Is legally authorized to perform the services in the State in 
which they are performed;
    (iii) Performs services that are not otherwise precluded from 
coverage because of a statutory exclusion;
    (iv) Performs the services under the general supervision of a 
physician (The supervising physician need not be physically present 
when the physician assistant is performing the services unless required 
by State law; however, the supervising physician must be immediately 
available to the physician assistant for consultation.);
    (v) Furnishes services that are billed by the employer of a 
physician assistant; and
    (vi) Performs the services--
    (A) In all settings in either rural and urban areas; or
    (B) As an assistant at surgery.
    (b) Services and supplies furnished incident to a physician 
assistant's services. Medicare covers services and supplies (including 
drugs and biologicals that cannot be self-administered) that are 
furnished incident to the physician assistant's services described in 
paragraph (a) of

[[Page 58908]]

this section. These services and supplies are covered only if they--
    (1) Would be covered if furnished by a physician or as incident to 
the professional services of a physician;
    (2) Are the type that are commonly furnished in a physician's 
office and are either furnished without charge or are included in the 
bill for the physician assistants' services;
    (3) Are, although incidental, an integral part of the professional 
service performed by the physician;
    (4) Are performed under the direct supervision of the physician 
assistant (that is, the physician assistant is physically present and 
immediately available); and
    (5) Are performed by the employee of a physician assistant or an 
entity that employs both the physician assistant and the person 
providing the services.
    (c) Qualifications. For Medicare Part B coverage of his or her 
services, a physician assistant must meet all of the following 
conditions:
    (1) Have graduated from a physician assistant educational program 
that is accredited by the National Commission on Accreditation of 
Allied Health Education Programs;
    (2) Have passed the national certification examination of the 
National Commission on Certification of Physician Assistants; and
    (3) Be licensed by the State to practice as a physician assistant.
    (d) Professional services. Physician assistants can be paid for 
professional services only if the services have been professionally 
performed by them and no facility or other provider charges for the 
service or is paid any amount for the furnishing of those professional 
services.
    (1) Supervision of other nonphysician staff by a physician 
assistant does not constitute personal performance of a professional 
service by the physician assistant.
    (2) The services are provided on an assignment-related basis, and 
the physician assistant may not charge a beneficiary for a service not 
payable under this provision. If a beneficiary has made payment for a 
service, the physician assistant must make the appropriate refund to 
the beneficiary.


Sec. 410.75  Nurse practitioners' services.

    (a) Definition. As used in this section, the term ``physician'' 
means a doctor of medicine or osteopathy, as set forth in section 
1861(r)(1) of the Act.
    (b) Qualifications. For Medicare Part B coverage of his or her 
services, a nurse practitioner must--
    (1) Possess a master's degree in nursing;
    (2) Be a registered professional nurse who is authorized by the 
State in which the services are furnished, to practice as a nurse 
practitioner in accordance with State law; and,
    (3) Be certified as a nurse practitioner by the American Nurses 
Credentialing Center or other recognized national certifying bodies 
that have established standards for nurse practitioners as defined in 
paragraphs (b)(1) and (2) of this section.
    (c) Services. Medicare Part B covers nurse practitioners' services 
in all settings in both rural and urban areas, only if the services 
would be covered if furnished by a physician and the nurse 
practitioner--
    (1) Is legally authorized to perform them in the State in which 
they are performed;
    (2) Is not performing services that are otherwise excluded from 
coverage because of one of the statutory exclusions; and
    (3) Performs them while working in collaboration with a physician.
    (i) Collaboration is a process in which a nurse practitioner works 
with one or more physicians to deliver health care services within the 
scope of the practitioner's expertise, with medical direction and 
appropriate supervision as provided for in jointly developed guidelines 
or other mechanisms as provided by the law of the State in which the 
services are performed.
    (ii) In the absence of State law governing collaboration, 
collaboration is a process in which a nurse practitioner has a 
relationship with one or more physicians to deliver health care 
services. Such collaboration is to be evidenced by nurse practitioners 
documenting the nurse practitioners' scope of practice and indicating 
the relationships that they have with physicians to deal with issues 
outside their scope of practice. Nurse practitioners must document this 
collaborative process with physicians.
    (iii) The collaborating physician does not need to be present with 
the nurse practitioner when the services are furnished or to make an 
independent evaluation of each patient who is seen by the nurse 
practitioner.
    (d) Services and supplies incident to a nurse practitioners' 
services. Medicare Part B covers services and supplies (including drugs 
and biologicals that cannot be self-administered) incident to a nurse 
practitioner's services that meet the requirements in paragraph (c) of 
this section. These services and supplies are covered only if they--
    (1) Would be covered if furnished by a physician or as incident to 
the professional services of a physician;
    (2) Are of the type that are commonly furnished in a physician's 
office and are either furnished without charge or are included in the 
bill for the nurse practitioner's services;
    (3) Although incidental, are an integral part of the professional 
service performed by the nurse practitioner; and
    (4) Are performed under the direct supervision of the nurse 
practitioner (that is, the nurse practitioner must be physically 
present and immediately available).
    (e) Professional services. Nurse practitioners can be paid for 
professional services only when the services have been personally 
performed by them and no facility or other provider charges, or is 
paid, any amount for the furnishing of the professional services.
    (1) Supervision of other nonphysician staff by a nurse practitioner 
does not constitute personal performance of a professional service by a 
nurse practitioner.
    (2) The services are provided on an assignment-related basis, and a 
nurse practitioner may not charge a beneficiary for a service not 
payable under this provision. If a beneficiary has made payment for a 
service, the nurse practitioner must make the appropriate refund to the 
beneficiary.


Sec. 410.76  Clinical nurse specialists' services.

    (a) Definition. As used in this section, the term ``physician'' 
means a doctor of medicine or osteopathy, as set forth in section 
1861(r)(1) of the Act.
    (b) Qualifications. For Medicare Part B coverage of his or her 
services, a clinical nurse specialist must--
    (1) Be a registered nurse who is currently licensed to practice in 
the State where he or she practices and be authorized to perform the 
services of a clinical nurse specialist in accordance with State law;
    (2) Have a master's degree in a defined clinical area of nursing 
from an accredited educational institution; and
    (3) Be certified as a clinical nurse specialist by the American 
Nurses Credentialing Center.
    (c) Services. Medicare Part B covers clinical nurse specialists' 
services in all settings in both rural and urban areas only if the 
services would be covered if furnished by a physician and the clinical 
nurse specialist--
    (1) Is legally authorized to perform them in the State in which 
they are performed;
    (2) Is not performing services that are otherwise excluded from 
coverage by one of the statutory exclusions; and
    (3) Performs them while working in collaboration with a physician.

[[Page 58909]]

    (i) Collaboration is a process in which a clinical nurse specialist 
works with one or more physicians to deliver health care services 
within the scope of the practitioner's expertise, with medical 
direction and appropriate supervision as provided for in jointly 
developed guidelines or other mechanisms as provided by the law of the 
State in which the services are performed.
    (ii) In the absence of State law governing collaboration, 
collaboration is a process in which a clinical nurse specialist has a 
relationship with one or more physicians to deliver health care 
services. Such collaboration is to be evidenced by clinical nurse 
specialists documenting the clinical nurse specialists' scope of 
practice and indicating the relationships that they have with 
physicians to deal with issues outside their scope of practice. 
Clinical nurse specialists must document this collaborative process 
with physicians.
    (iii) The collaborating physician does not need to be present with 
the clinical nurse specialist when the services are furnished, or to 
make an independent evaluation of each patient who is seen by the 
clinical nurse specialist.
    (d) Services and supplies furnished incident to clinical nurse 
specialists' services. Medicare Part B covers services and supplies 
(including drugs and biologicals that cannot be self-administered) 
incident to a clinical nurse specialist's services that meet the 
requirements in paragraph (c) of this section. These services and 
supplies are covered only if they--
    (1) Would be covered if furnished by a physician or as incident to 
the professional services of a physician;
    (2) Are of the type that are commonly furnished in a physician's 
office and are either furnished without charge or are included in the 
bill for the clinical nurse specialist's services;
    (3) Although incidental, are an integral part of the professional 
service performed by the clinical nurse specialist; and
    (4) Are performed under the direct supervision of the clinical 
nurse specialist (that is, the clinical nurse specialist must be 
physically present and immediately available).
    (e) Professional services. Clinical nurse specialists can be paid 
for professional services only when the services have been personally 
performed by them and no facility or other provider charges, or is 
paid, any amount for the furnishing of the professional services.
    (1) Supervision of other nonphysician staff by clinical nurse 
specialists does not constitute personal performance of a professional 
service by clinical nurse specialists.
    (2) The services are provided on an assignment-related basis, and a 
clinical nurse specialist may not charge a beneficiary for a service 
not payable under this provision. If a beneficiary has made payment for 
a service, the clinical nurse specialist must make the appropriate 
refund to the beneficiary.


Sec. 410.77  Certified nurse-midwives' services: Qualifications and 
conditions.

    (a) Qualifications. For Medicare coverage of his or her services, a 
certified nurse-midwife must:
    (1) Be a registered nurse who is legally authorized to practice as 
a nurse-midwife in the State where services are performed;
    (2) Have successfully completed a program of study and clinical 
experience for nurse-midwives that is accredited by an accrediting body 
approved by the U.S. Department of Education; and
    (3) Be certified as a nurse-midwife by the American College of 
Nurse-Midwives or the American College of Nurse-Midwives Certification 
Council.
    (b) Services. A certified nurse-midwife's services are services 
furnished by a certified nurse-midwife and services and supplies 
furnished as an incident to the certified nurse-midwife's services 
that--
    (1) Are within the scope of practice authorized by the law of the 
State in which they are furnished and would otherwise be covered if 
furnished by a physician or as an incident to a physician's service; 
and
    (2) Unless required by State law, are provided without regard to 
whether the certified nurse-midwife is under the supervision of, or 
associated with, a physician or other health care provider.
    (c) Incident to services: Basic rule. Medicare covers services and 
supplies furnished incident to the services of a certified nurse-
midwife, including drugs and biologicals that cannot be self-
administered, if the services and supplies meet the following 
conditions:
    (1) They would be covered if furnished by a physician or as 
incident to the professional services of a physician.
    (2) They are of the type that are commonly furnished in a 
physician's office and are either furnished without charge or are 
included in the bill for the certified nurse-midwife's services.
    (3) Although incidental, they are an integral part of the 
professional service performed by the certified nurse-midwife.
    (4) They are furnished under the direct supervision of a certified 
nurse-midwife (that is, the midwife is physically present and 
immediately available).
    (d) Professional services. A nurse-midwife can be paid for 
professional services only when the services have been performed 
personally by the nurse-midwife.
    (1) Supervision of other nonphysician staff by a nurse-midwife does 
not constitute personal performance of a professional service by the 
nurse-midwife.
    (2) The service is provided on an assignment-related basis, and a 
nurse-midwife may not charge a beneficiary for a service not payable 
under this provision. If the beneficiary has made payment for a 
service, the nurse-midwife must make the appropriate refund to the 
beneficiary.
    (3) A nurse-midwife may provide services that he or she is legally 
authorized to perform under State law as a nurse-midwife, if the 
services would otherwise be covered by the Medicare program when 
furnished by a physician or incident to a physicians' professional 
services.


Sec. 410.78  Consultations via telecommunications systems.

    (a) General rule. Medicare Part B pays for professional 
consultations furnished by means of interactive telecommunications 
systems if the following conditions are met:
    (1) The consulting practitioner is any of the following:
    (i) A physician as described in Sec. 410.20.
    (ii) A physician assistant as defined in Sec. 410.74.
    (iii) A nurse practitioner as defined in Sec. 410.75.
    (iv) A clinical nurse specialist as described in Sec. 410.76.
    (v) A nurse-midwife as defined in Sec. 410.77.
    (2) The referring practitioner is any of the following:
    (i) A physician as described in Sec. 410.20.
    (ii) A physician assistant as defined in Sec. 410.74.
    (iii) A nurse practitioner as defined in Sec. 410.75.
    (iv) A clinical nurse specialist as described in Sec. 410.76.
    (v) A nurse-midwife as defined in Sec. 410.77.
    (vi) A clinical psychologist as described at Sec. 410.71.
    (vii) A clinical social worker as defined in Sec. 410.73.
    (3) The services are furnished to a beneficiary residing in a rural 
area as defined in section 1886(d)(2)(D) of the Act, and the area is 
designated as a

[[Page 58910]]

health professional shortage area (HPSA) under section 332(a)(1)(A) of 
the Public Health Service Act (42 U.S.C. 254e(a)(1)(A)). For purposes 
of this requirement, the beneficiary is deemed to be residing in such 
an area if the teleconsultation presentation takes place in such an 
area.
    (4) The medical examination of the beneficiary is under the control 
of the consulting practitioner.
    (5) As a condition of payment, the teleconsultation involves the 
participation of the referring practitioner, or a practitioner 
described in section 1842(b)(18)(C) of the Act (other than a certified 
registered nurse anesthetist or anesthesiologist assistant) who is an 
employee of the referring practitioner, as appropriate to the medical 
needs of the patient and as needed to provide information to and at the 
direction of the consultant.
    (6) The consultation results in a written report that is furnished 
to the referring practitioner.
    (b) Definition. For purposes of this section, interactive 
telecommunications systems means multimedia communications equipment 
that includes, at a minimum, audio and video equipment permitting real-
time consultation among the patient, consultant, and referring 
practitioner, or a practitioner described in section 1842(b)(18)(C) of 
the Act (other than a certified registered nurse anesthetist or 
anesthesiologist assistant) who is an employee of the referring 
practitioner, as appropriate to the medical needs of the patient and as 
needed to provide information to and at the direction of the consulting 
practitioner. Telephones, facsimile machines, and electronic mail 
systems do not meet the definition of interactive telecommunications 
systems.
    9. In Sec. 410.150, the introductory text to paragraph (b) is 
republished, and new paragraphs (b)(15) and (b)(16) are added to read 
as follows:


Sec. 410.150  To whom payment is made.

* * * * *
    (b) Specific rules. Subject to the conditions set forth in 
paragraph (a) of this section, Medicare Part B pays as follows:
* * * * *
    (15) To the qualified employer of a physician assistant for 
professional services furnished by the physician assistant and for 
services and supplies furnished incident to his or her services. 
Payment is made to the employer of a physician assistant regardless of 
whether the physician assistant furnishes services under a W-2, 
employer-employee employment relationship, or whether the physician 
assistant is an independent contractor who receives a 1099 reflecting 
the relationship. Both types of relationships must conform to the 
appropriate guidelines provided by the Internal Revenue Service. A 
qualified employer is not a group of physician assistants that 
incorporate to bill for their services. Payment is made only if no 
facility or other provider charges or is paid any amount for services 
furnished by a physician assistant.
    (16) To a nurse practitioner or clinical nurse specialist for 
professional services furnished by a nurse practitioner or clinical 
nurse specialist in all settings in both rural and nonrural areas and 
for services and supplies furnished incident to those services. Payment 
is made only if no facility or other provider charges, or is paid, any 
amount for the furnishing of the professional services of the nurse 
practitioner or clinical nurse specialist.
* * * * *
    10. In Sec. 410.152, the headings to paragraphs (a) and (a)(1) are 
republished, and paragraph (a)(1)(v) is revised to read as follows:


Sec. 410.152  Amount of payment.

    (a) General provisions--(1) Exclusion from incurred expenses.* * *
    (v) In the case of expenses incurred for outpatient physical 
therapy services including speech-language pathology services, the 
expenses excluded are from the incurred expenses under Sec. 410.60(e). 
In the case of expenses incurred for outpatient occupational therapy 
including speech-language pathology services, the expenses excluded are 
from the incurred expenses under Sec. 410.59(e).
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

    C. Part 413 is amended as set forth below.
    1. The authority citation for part 413 continues to read as 
follows:

    Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social 
Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).

    2. Section 413.125 is amended by designating the existing text as 
paragraph (a) and adding paragraph (b) to read as follows:


Sec. 413.125  Payment for home health agency services.

* * * * *
    (b) The reasonable cost of outpatient rehabilitation services 
furnished by a home health agency to homebound patients who are not 
entitled to home health benefits may not exceed the amounts payable 
under the physician fee schedule for comparable services effective 
January 1, 1999.

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

    D. Part 414 is amended as set forth below:
    1. The authority citation for part 414 continues to read as 
follows:

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

    2. In Sec. 414.1, the introductory text is republished, and the 
following statutory authorities are added in numerical order to read as 
follows:


Sec. 414.1  Basis and scope.

    This part implements the indicated provisions of the following 
sections of the Act:

    1802--Rules for private contracts by Medicare beneficiaries.
    1820--Rules for Medicare reimbursement for telehealth services.
* * * * *
    3. Sections 414.20 through 414.62 are redesignated as Subpart B, 
and a new heading is added to read ``Subpart B--Physicians and Other 
Practitioners''.
    4. In Sec. 414.22, the introductory text to the section is revised 
and the heading to paragraph (b) is republished, and new paragraph 
(b)(5) is added to read as follows:


Sec. 414.22  Relative value units (RVUs).

    HCFA establishes RVUs for physicians' work, practice expense, and 
malpractice insurance.
* * * * *
    (b) Practice expense RVUs. * * *
    (5) For services furnished beginning January 1, 1999, the practice 
expense RVUs are based on 75 percent of the practice expense RVUs 
applicable to services furnished in 1998 and 25 percent of the relative 
practice expense resources involved in furnishing the service. For 
services furnished in 2000, the practice expense RVUs are based on 50 
percent of the practice expense RVUs applicable to services furnished 
in 1998 and 50 percent of the relative practice expense resources 
involved in furnishing the service. For services furnished in 2001, the 
practice expense RVUs are based on 25 percent of the practice expense 
RVUs applicable to services furnished in 1998 and 75 percent of the 
relative practice expense

[[Page 58911]]

resources involved in furnishing the service. For services furnished in 
2002 and subsequent years, the practice expense RVUs are based entirely 
on relative practice expense resources.
    (i) Usually one of two levels of practice expense RVUs per code can 
be applied to each service. The lower practice expense RVUs apply to 
services furnished to hospital, skilled nursing facility, or ambulatory 
surgical center patients. The higher practice expense RVUs apply to 
services performed in a physician's office; services, other than 
evaluation and management services, furnished to patients in a nursing 
facility, in a facility or institution other than a hospital, skilled 
nursing facility, or ambulatory surgical center, or in the home; and 
other services furnished to facility patients for which the facility 
payment does not include physicians' practice costs.
    (ii) Only one practice expense RVU per code can be applied for each 
of the following services: services that have only technical component 
practice expense RVUs or only professional component practice expense 
RVUs; evaluation and management services, such as hospital or nursing 
facility visits, that are furnished exclusively in one setting; and 
major surgical services.
* * * * *
    5. In Sec. 414.32, the heading and paragraph (b) are revised to 
read as follows:


Sec. 414.32  Determining payments for certain physicians' services 
furnished in facility settings.

* * * * *
    (b) General rule. If physicians' services of the type routinely 
furnished in physicians' offices are furnished in facility settings 
before January 1, 1999, the physician fee schedule amount for those 
services is determined by reducing the practice expense RVUs for the 
services by 50 percent. For services furnished on or after January 1, 
1999, the practice expense RVUs are determined in accordance with 
Sec. 414.22(b)(5).
* * * * *
    6. In Sec. 414.34, the section heading is revised, and a new 
paragraph (a)(2)(iii) is added to read as follows:


Sec. 414.34  Payment for services and supplies incident to a 
physician's service.

    (a) Medical supplies. * * *
    (2) * * *
    (iii) It is furnished before January 1, 1999.
* * * * *
    7. In Sec. 414.52, the section heading and introductory text are 
revised, and a new paragraph (d) is added to read as follows:


Sec. 414.52  Payment for physician assistants' services.

    Allowed amounts for the services of a physician assistant furnished 
beginning January 1, 1992 and ending December 31, 1997, may not exceed 
the limits specified in paragraphs (a) through (c) of this section. 
Allowed amounts for the services of a physician assistant furnished 
beginning January 1, 1998, may not exceed the limits specified in 
paragraph (d) of this section.
* * * * *
    (d) For services (other than assistant-at-surgery services) 
furnished beginning January 1, 1998, 85 percent of the physician fee 
schedule amount for the service. For assistant-at-surgery services, 85 
percent of the physician fee schedule amount that would be allowed 
under the physician fee schedule if the assistant-at-surgery service 
were furnished by a physician.
    8. Section 414.56 is revised to read as follows:


Sec. 414.56  Payment for nurse practitioners' and clinical nurse 
specialists' services.

    (a) Rural areas. For services furnished beginning January 1, 1992 
and ending December 31, 1997, allowed amounts for the services of a 
nurse practitioner or a clinical nurse specialist in a rural area (as 
described in section 1861(s)(2)(K)(iii) of the Act) may not exceed the 
following limits:
    (1) For services furnished in a hospital (including assistant-at-
surgery services), 75 percent of the physician fee schedule amount for 
the service.
    (2) For all other services, 85 percent of the physician fee 
schedule amount for the service.
    (b) Non-rural areas. For services furnished beginning January 1, 
1992 and ending December 31, 1997, allowed amounts for the services of 
a nurse practitioner or a clinical nurse specialist in a nursing 
facility may not exceed 85 percent of the physician fee schedule amount 
for the service.
    (c) Beginning January 1, 1998. For services (other than assistant-
at-surgery services) furnished beginning January 1, 1998, allowed 
amounts for the services of a nurse practitioner or clinical nurse 
specialist may not exceed 85 percent of the physician fee schedule 
amount for the service. For assistant-at-surgery services, allowed 
amounts for the services of a nurse practitioner or clinical nurse 
specialist may not exceed 85 percent of the physician fee schedule 
amount that would be allowed under the physician fee schedule if the 
assistant-at-surgery service were furnished by a physician.
    9. Section 414.65 is added to subpart B, to read as follows:


Sec. 414.65  Payment for consultations via interactive 
telecommunications systems.

    (a) Limitations on payment. Medicare payment for a professional 
consultation conducted via interactive telecommunications systems is 
subject to the following limitations:
    (1) The payment may not exceed the current fee schedule amount 
applicable to the consulting practitioner for the health care service 
provided.
    (2) The payment may not include reimbursement for any telephone 
line charges or any facility fees.
    (3) The payment is subject to the coinsurance and deductible 
requirements of sections 1833(a)(1) and (b) of the Act.
    (4) The payment differential of section 1848(a)(3) of the Act 
applies to services furnished by nonparticipating physicians.
    (b) Prohibited billing. The beneficiary may not be billed for any 
telephone line charges or any facility fees.
    (c) Assignment required for nonphysician practitioners. Payment to 
nonphysician practitioners is made only on an assignment-related basis.
    (d) Who may bill for the consultation. Only the consultant 
practitioner may bill for the consultation.
    (e) Sharing of payment. The consultant practitioner must provide to 
the referring practitioner 25 percent of any payments he or she 
receives for the consultation, including any applicable deductible or 
coinsurance amounts.
    (f) Sanctions. A practitioner may be subject to the applicable 
sanctions provided for in chapter V, parts 1001, 1002, and 1003 of this 
title if he or she--
    (1) Knowingly and willfully bills or collects for services in 
violation of the limitations of this section on a repeated basis; or
    (2) Fails to timely correct excess charges by reducing the actual 
charge billed for the service to an amount that does not exceed the 
limiting charge for the service or fails to timely refund excess 
collections.

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

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


[[Page 58912]]


    Authority: Secs. 1102 and 1871 of the Social Security Act (41 
U.S.C. 1302 and 1395hh).

    2. Section 415.110 is revised to read as follows:


Sec. 415.110  Conditions for payment: Medically directed anesthesia 
services.

    (a) General payment rule. Medicare pays for the physician's medical 
direction of anesthesia services for one service or two through four 
concurrent anesthesia services furnished after December 31, 1998, only 
if each of the services meets the condition in Sec. 415.102(a) and the 
following additional conditions:
    (1) For each patient, the physician--
    (i) Performs a pre-anesthetic examination and evaluation;
    (ii) Prescribes the anesthesia plan;
    (iii) Personally participates in the most demanding aspects of the 
anesthesia plan including, if applicable, induction and emergence;
    (iv) Ensures that any procedures in the anesthesia plan that he or 
she does not perform are performed by a qualified individual as defined 
in operating instructions;
    (v) Monitors the course of anesthesia administration at frequent 
intervals;
    (vi) Remains physically present and available for immediate 
diagnosis and treatment of emergencies; and
    (vii) Provides indicated post-anesthesia care.
    (2) The physician directs no more than four anesthesia services 
concurrently and does not perform any other services while he or she is 
directing the single or concurrent services so that one or more of the 
conditions in paragraph (a)(1) of this section are not violated.
    (3) If the physician personally performs the anesthesia service, 
the payment rules in Sec. 414.46(c) of this chapter apply (Physician 
personally performs the anesthesia procedure).
    (b) Medical documentation. The physician alone inclusively 
documents in the patient's medical record that the conditions set forth 
in paragraph (a)(1) of this section have been satisfied, specifically 
documenting that he or she performed the pre-anesthetic exam and 
evaluation, provided the indicated post-anesthesia care, and was 
present during the most demanding procedures, including induction and 
emergence where applicable.

PART 424--CONDITIONS FOR MEDICARE PAYMENT

    F. Part 424 is amended as set forth below:
    1. The authority citation for part 424 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (41 
U.S.C. 1302 and 1395hh).

    2. In Sec. 424.24, paragraphs (c) introductory text, (c)(1)(ii), 
(c)(1)(iii), (c)(3)(i), (c)(3)(ii), (c)(4), (f)(2), and (f)(3) are 
revised to read as follows:


Sec. 424.24  Requirements for medical and other health services 
furnished by providers under Medicare Part B.

* * * * *
    (c) Outpatient physical therapy and speech-language pathology 
services--(1) Content of certification. * * *
    (ii) The services were furnished while the individual was under the 
care of a physician, nurse practitioner, clinical nurse specialist, or 
physician assistant.
    (iii) The services were furnished under a plan of treatment that 
meets the requirements of Sec. 410.61 of this chapter.
* * * * *
    (3) Signature. * * *
    (i) If the plan of treatment is established by a physician, nurse 
practitioner, clinical nurse specialist, or physician assistant, the 
certification must be signed by that physician or nonphysician 
practitioner.
    (ii) If the plan of treatment is established by a physical 
therapist or speech-language pathologist, the certification must be 
signed by a physician or by a nurse practitioner, clinical nurse 
specialist, or physician assistant who has knowledge of the case.
    (4) Recertification--(i) Timing. Recertification statements are 
required at least every 30 days and must be signed by the physician, 
nurse practitioner, clinical nurse specialist, or physician assistant 
who reviews the plan of treatment.
    (ii) Content. The recertification statement must indicate the 
continuing need for physical therapy or speech-language pathology 
services and an estimate of how much longer the services will be 
needed.
    (iii) Signature. Recertifications must be signed by the physician, 
nurse practitioner, clinical nurse specialist, or physician assistant 
who reviews the plan of treatment.
* * * * *
    (f) * * *
    (2) Signature. The certificate must be signed by a physician, nurse 
practioner, clinical nurse specialist, or physician assistant who has 
knowledge of the case.
    (3) Timing. The physician, nurse practioner, clinical nurse 
specialist, or physician assistant may provide certification at the 
time the services are furnished or, if services are provided on a 
continuing basis, either at the beginning or at the end of a series of 
visits.
* * * * *

PART 485--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS

    G. Part 485 is amended as set forth below:
    1. The authority citation for part 485 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (41 
U.S.C. 1302 and 1395hh).

    2. Section 485.705 is revised to read as follows:


Sec. 485.705  Personnel qualifications.

    (a) General qualification requirements. Except as specified in 
paragraphs (b) and (c) of this section, all personnel who are involved 
in the furnishing of outpatient physical therapy, occupational therapy, 
and speech-language pathology services directly by or under 
arrangements with an organization must be legally authorized (licensed 
or, if applicable, certified or registered) to practice by the State in 
which they perform the functions or actions, and must act only within 
the scope of their State license or State certification or 
registration.
    (b) Exception for Federally defined qualifications. The following 
Federally defined qualifications must be met:
    (1) For a physician, the qualifications and conditions as defined 
in section 1861(r) of the Act and the requirements in part 484 of this 
chapter.
    (2) For a speech-language pathologist, the qualifications specified 
in section 1861(11)(1) of the Act and the requirements in part 484 of 
this chapter.
    (c) Exceptions when no State Licensing laws or State certification 
or registration requirements exist. If no State licensing laws or State 
certification or registration requirements exist for the profession, 
the following requirements must be met--
    (1) An administrator is a person who has a bachelor's degree and:
    (i) Has experience or specialized training in the administration of 
health institutions or agencies; or
    (ii) Is qualified and has experience in one of the professional 
health disciplines.
    (2) An occupational therapist must meet the requirements in part 
484 of this chapter.
    (3) An occupational therapy assistant must meet the requirements in 
part 484 of this chapter.
    (4) A physical therapist must meet the requirements in part 484 of 
this chapter.


[[Continued on page 58913]]