base allowed charges
(2) Determination of relative values (A) In general (i) Combination of units for components The Secretary shall develop a methodology for combining the work, practice expense, and malpractice relative value units, determined under subparagraph (C), for each service in a manner to produce a single relative value for that service. Such relative values are subject to adjustment under subparagraph (F)(i) and section 13515(b) of the Omnibus Budget Reconciliation Act of 1993. (ii) Extrapolation The Secretary may use extrapolation and other techniques to determine the number of relative value units for physicians’ services for which specific data are not available and shall take into account recommendations of the Physician Payment Review Commission and the results of consultations with organizations representing physicians who provide such services. (B) Periodic review and adjustments in relative values (i) Periodic review The Secretary, not less often than every 5 years, shall review the relative values established under this paragraph for all physicians’ services. (ii) Adjustments (I) In general The Secretary shall, to the extent the Secretary determines to be necessary and subject to subclause (II) and paragraph (7), adjust the number of such units to take into account changes in medical practice, coding changes, new data on relative value components, or the addition of new procedures. The Secretary shall publish an explanation of the basis for such adjustments. (II) Limitation on annual adjustments Subject to clauses (iv) and (v), the adjustments under subclause (I) for a year may not cause the amount of expenditures under this part for the year to differ by more than $20,000,000 from the amount of expenditures under this part that would have been made if such adjustments had not been made. (iii) Consultation The Secretary, in making adjustments under clause (ii), shall consult with the Medicare Payment Advisory Commission and organizations representing physicians. (iv) Exemption of certain additional expenditures from budget neutrality The additional expenditures attributable to— (I) subparagraph (H) shall not be taken into account in applying clause (ii)(II) for 2004; (II) subparagraph (I) insofar as it relates to a physician fee schedule for 2005 or 2006 shall not be taken into account in applying clause (ii)(II) for drug administration services under the fee schedule for such year for a specialty described in subparagraph (I)(ii)(II); (III) subparagraph (J) insofar as it relates to a physician fee schedule for 2005 or 2006 shall not be taken into account in applying clause (ii)(II) for drug administration services under the fee schedule for such year; (IV) subsection (b)(6) shall not be taken into account in applying clause (ii)(II) for 2010, 2011, or the first 2 months of 2012; (V) subsection (t) shall not be taken into account in applying clause (ii)(II) for 2021, 2022, 2023, or 2024; and (VI) subsection (b)(12) shall not be taken into account in applying clause (ii)(II) for 2024. (v) Exemption of certain reduced expenditures from budget-neutrality calculation The following reduced expenditures, as estimated by the Secretary, shall not be taken into account in applying clause (ii)(II): (I) Reduced payment for multiple imaging procedures Effective for fee schedules established beginning with 2007, reduced expenditures attributable to the multiple procedure payment reduction for imaging under the final rule published by the Secretary in the Federal Register on November 21, 2005 ( 42 CFR 405, et al.) insofar as it relates to the physician fee schedules for 2006 and 2007. (II) OPD payment cap for imaging services Effective for fee schedules established beginning with 2007, reduced expenditures attributable to subsection (b)(4). (III) Change in utilization rate for certain imaging services Effective for fee schedules established beginning with 2011, reduced expenditures attributable to the changes in the utilization rate applicable to 2011 and 2014, as described in the first and second sentence, respectively, of subsection (b)(4)(C). (IV) , (V) Repealed. Pub. L. 111–152, title I, § 1107(2) , Mar. 30, 2010 , 124 Stat. 1050 (VI) Additional reduced payment for multiple imaging procedures Effective for fee schedules established beginning with 2010 (but not applied for services furnished prior to July 1, 2010 ), reduced expenditures attributable to the increase in the multiple procedure payment reduction from 25 to 50 percent (as described in subsection (b)(4)(D)). (VII) Reduced expenditures for multiple therapy services Effective for fee schedules established beginning with 2011, reduced expenditures attributable to the multiple procedure payment reduction for therapy services (as described in subsection (b)(7)). (VIII) Reduced expenditures attributable to application of quality incentives for computed tomography Effective for fee schedules established beginning with 2016, reduced expenditures attributable to the application of the quality incentives for computed tomography under section 1395m(p) of this title (IX) Reductions for misvalued services if target not met Effective for fee schedules beginning with 2016, reduced expenditures attributable to the application of the target recapture amount described in subparagraph (O)(iii). (X) Reduced expenditures attributable to incentives to transition to digital radiography Effective for fee schedules established beginning with 2017, reduced expenditures attributable to subparagraph (A) of subsection (b)(9) and effective for fee schedules established beginning with 2018, reduced expenditures attributable to subparagraph (B) of such subsection. (XI) Discount in payment for professional component of imaging services Effective for fee schedules established beginning with 2017, reduced expenditures attributable to subsection (b)(10). (vi) Alternative application of budget-neutrality adjustment Notwithstanding subsection (d)(9)(A), effective for fee schedules established beginning with 2009, with respect to the 5-year review of work relative value units used in fee schedules for 2007 and 2008, in lieu of continuing to apply budget-neutrality adjustments required under clause (ii) for 2007 and 2008 to work relative value units, the Secretary shall apply such budget-neutrality adjustments to the conversion factor otherwise determined for years beginning with 2009. (C) Computation of relative value units for components For purposes of this section for each physicians’ service— (i) Work relative value units The Secretary shall determine a number of work relative value units for the service or group of services based on the relative resources incorporating physician time and intensity required in furnishing the service or group of services. (ii) Practice expense relative value units The Secretary shall determine a number of practice expense relative value units for the service for years before 1999 equal to the product of— (I) the base allowed charges (as defined in subparagraph (D)) for the service, and (II) the practice expense percentage for the service (as determined under paragraph (3)(C)(ii)), and for years beginning with 1999 based on the relative practice expense resources involved in furnishing the service or group of services. For 1999, such number of units shall be determined based 75 percent on such product and based 25 percent on the relative practice expense resources involved in furnishing the service. For 2000, such number of units shall be determined based 50 percent on such product and based 50 percent on such relative practice expense resources. For 2001, such number of units shall be determined based 25 percent on such product and based 75 percent on such relative practice expense resources. For a subsequent year, such number of units shall be determined based entirely on such relative practice expense resources. (iii) Malpractice relative value units The Secretary shall determine a number of malpractice relative value units for the service or group of services for years before 2000 equal to the product of— (I) the base allowed charges (as defined in subparagraph (D)) for the service or group of services, and (II) the malpractice percentage for the service or group of services (as determined under paragraph (3)(C)(iii)), and for years beginning with 2000 based on the malpractice expense resources involved in furnishing the service or group of services. (D) “Base allowed charges” defined In this paragraph, the term “base allowed charges” means, with respect to a physician’s service, the national average allowed charges for the service under this part for services furnished during 1991, as estimated by the Secretary using the most recent data available. (E) Reduction in practice expense relative value units for certain services (i) In general Subject to clause (ii), the Secretary shall reduce the practice expense relative value units applied to services described in clause (iii) furnished in— (I) 1994, by 25 percent of the number by which the number of practice expense relative value units (determined for 1994 without regard to this subparagraph) exceeds the number of work relative value units determined for 1994, (II) 1995, by an additional 25 percent of such excess, and (III) 1996, by an additional 25 percent of such excess. (ii) Floor on reductions The practice expense relative value units for a physician’s service shall not be reduced under this subparagraph to a number less than 128 percent of the number of work relative value units. (iii) Services covered For purposes of clause (i), the services described in this clause are physicians’ services that are not described in clause (iv) and for which— (I) there are work relative value units, and (II) the number of practice expense relative value units (determined for 1994) exceeds 128 percent of the number of work relative value units (determined for such year). (iv) Excluded services For purposes of clause (iii), the services described in this clause are services which the Secretary determines at least 75 percent of which are provided under this subchapter in an office setting. (F) Budget neutrality adjustments The Secretary— (i) shall reduce the relative values for all services (other than anesthesia services) established under this paragraph (and, in the case of anesthesia services, the conversion factor established by the Secretary for such services) by such percentage as the Secretary determines to be necessary so that, beginning in 1996, the amendment made by section 13514(a) of the Omnibus Budget Reconciliation Act of 1993 would not result in expenditures under this section that exceed the amount of such expenditures that would have been made if such amendment had not been made, and (ii) shall reduce the amounts determined under subsection (a)(2)(B)(ii)(I) by such percentage as the Secretary determines to be required to assure that, taking into account the reductions made under clause (i), the amendment made by section 13514(a) of the Omnibus Budget Reconciliation Act of 1993 would not result in expenditures under this section in 1994 that exceed the amount of such expenditures that would have been made if such amendment had not been made. (G) Adjustments in relative value units for 1998 (i) In general The Secretary shall— (I) subject to clauses (iv) and (v), reduce the practice expense relative value units applied to any services described in clause (ii) furnished in 1998 to a number equal to 110 percent of the number of work relative value units, and (II) increase the practice expense relative value units for office visit procedure codes during 1998 by a uniform percentage which the Secretary estimates will result in an aggregate increase in payments for such services equal to the aggregate decrease in payments by reason of subclause (I). (ii) Services covered For purposes of clause (i), the services described in this clause are physicians’ services that are not described in clause (iii) and for which— (I) there are work relative value units, and (II) the number of practice expense relative value units (determined for 1998) exceeds 110 percent of the number of work relative value units (determined for such year). (iii) Excluded services For purposes of clause (ii), the services described in this clause are services which the Secretary determines at least 75 percent of which are provided under this subchapter in an office setting. (iv) Limitation on aggregate reallocation If the application of clause (i)(I) would result in an aggregate amount of reductions under such clause in excess of $390,000,000, such clause shall be applied by substituting for 110 percent such greater percentage as the Secretary estimates will result in the aggregate amount of such reductions equaling $390,000,000. (v) No reduction for certain services Practice expense relative value units for a procedure performed in an office or in a setting out of an office shall not be reduced under clause (i) if the in-office or out-of-office practice expense relative value, respectively, for the procedure would increase under the proposed rule on resource-based practice expenses issued by the Secretary on June 18, 1997 (62 Federal Register 33158 et seq.). (H) Adjustments in practice expense relative value units for certain drug administration services beginning in 2004 (i) Use of survey data In establishing the physician fee schedule under subsection (b) with respect to payments for services furnished on or after January 1, 2004 , the Secretary shall, in determining practice expense relative value units under this subsection, utilize a survey submitted to the Secretary as of January 1, 2003 , by a physician specialty organization pursuant to section 212 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 if the survey— (I) covers practice expenses for oncology drug administration services; and (II) meets criteria established by the Secretary for acceptance of such surveys. (ii) Pricing of clinical oncology nurses in practice expense methodology If the survey described in clause (i) includes data on wages, salaries, and compensation of clinical oncology nurses, the Secretary shall utilize such data in the methodology for determining practice expense relative value units under subsection (c). (iii) Work relative value units for certain drug administration services In establishing the relative value units under this paragraph for drug administration services described in clause (iv) furnished on or after January 1, 2004 , the Secretary shall establish work relative value units equal to the work relative value units for a level 1 office medical visit for an established patient. (iv) Drug administration services described The drug administration services described in this clause are physicians’ services— (I) which are classified as of October 1, 2003 , within any of the following groups of procedures: therapeutic or diagnostic infusions (excluding chemotherapy); chemotherapy administration services; and therapeutic, prophylactic, or diagnostic injections; (II) for which there are no work relative value units assigned under this subsection as of such date; and (III) for which national relative value units have been assigned under this subsection as of such date. (I) Adjustments in practice expense relative value units for certain drug administration services beginning with 2005 (i) In general In establishing the physician fee schedule under subsection (b) with respect to payments for services furnished on or after January 1, 2005 or 2006, the Secretary shall adjust the practice expense relative value units for such year consistent with clause (ii). (ii) Use of supplemental survey data (I) In general Subject to subclause (II), if a specialty submits to the Secretary by not later than March 1, 2004 , for 2005, or March 1, 2005 , for 2006, data that includes expenses for the administration of drugs and biologicals for which the payment amount is determined pursuant to section 1395u(o) of this title , the Secretary shall use such supplemental survey data in carrying out this subparagraph for the years involved insofar as they are collected and provided by entities and organizations consistent with the criteria established by the Secretary pursuant to section 212(a) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999. (II) Limitation on specialty Subclause (I) shall apply to a specialty only insofar as not less than 40 percent of payments for the specialty under this subchapter in 2002 are attributable to the administration of drugs and biologicals, as determined by the Secretary. (III) Application This clause shall not apply with respect to a survey to which subparagraph (H)(i) applies. (J) Provisions for appropriate reporting and billing for physicians’ services associated with the administration of covered outpatient drugs and biologicals (i) Evaluation of codes The Secretary shall promptly evaluate existing drug administration codes for physicians’ services to ensure accurate reporting and billing for such services, taking into account levels of complexity of the administration and resource consumption. (ii) Use of existing processes In carrying out clause (i), the Secretary shall use existing processes for the consideration of coding changes and, to the extent coding changes are made, shall use such processes in establishing relative values for such services. (iii) Implementation In carrying out clause (i), the Secretary shall consult with representatives of physician specialties affected by the implementation of section 1395w–3a of this title or section 1395w–3b of this title , and shall take such steps within the Secretary’s authority to expedite such considerations under clause (ii). (iv) Subsequent, budget neutral adjustments permitted Nothing in subparagraph (H) or (I) or this subparagraph shall be construed as preventing the Secretary from providing for adjustments in practice expense relative value units under (and consistent with) subparagraph (B) for years after 2004, 2005, or 2006, respectively. (K) Potentially misvalued codes (i) In general The Secretary shall— (I) periodically identify services as being potentially misvalued using criteria specified in clause (ii); and (II) review and make appropriate adjustments to the relative values established under this paragraph for services identified as being potentially misvalued under subclause (I). (ii) Identification of potentially misvalued codes For purposes of identifying potentially misvalued codes pursuant to clause (i)(I), the Secretary shall examine codes (and families of codes as appropriate) based on any or all of the following criteria: (I) Codes that have experienced the fastest growth. (II) Codes that have experienced substantial changes in practice expenses. (III) Codes that describe new technologies or services within an appropriate time period (such as 3 years) after the relative values are initially established for such codes. (IV) Codes which are multiple codes that are frequently billed in conjunction with furnishing a single service. (V) Codes with low relative values, particularly those that are often billed multiple times for a single treatment. (VI) Codes that have not been subject to review since implementation of the fee schedule. (VII) Codes that account for the majority of spending under the physician fee schedule. (VIII) Codes for services that have experienced a substantial change in the hospital length of stay or procedure time. (IX) Codes for which there may be a change in the typical site of service since the code was last valued. (X) Codes for which there is a significant difference in payment for the same service between different sites of service. (XI) Codes for which there may be anomalies in relative values within a family of codes. (XII) Codes for services where there may be efficiencies when a service is furnished at the same time as other services. (XIII) Codes with high intra-service work per unit of time. (XIV) Codes with high practice expense relative value units. (XV) Codes with high cost supplies. (XVI) Codes as determined appropriate by the Secretary. (iii) Review and adjustments (I) The Secretary may use existing processes to receive recommendations on the review and appropriate adjustment of potentially misvalued services described in clause (i)(II). (II) The Secretary may conduct surveys, other data collection activities, studies, or other analyses as the Secretary determines to be appropriate to facilitate the review and appropriate adjustment described in clause (i)(II). (III) The Secretary may use analytic contractors to identify and analyze services identified under clause (i)(I), conduct surveys or collect data, and make recommendations on the review and appropriate adjustment of services described in clause (i)(II). (IV) The Secretary may coordinate the review and appropriate adjustment described in clause (i)(II) with the periodic review described in subparagraph (B). (V) As part of the review and adjustment described in clause (i)(II), including with respect to codes with low relative values described in clause (ii), the Secretary may make appropriate coding revisions (including using existing processes for consideration of coding changes) which may include consolidation of individual services into bundled codes for payment under the fee schedule under subsection (b). (VI) The provisions of subparagraph (B)(ii)(II) and paragraph (7) shall apply to adjustments to relative value units made pursuant to this subparagraph in the same manner as such provisions apply to adjustments under subparagraph (B)(ii)(I). (iv) Treatment of certain radiation therapy services Radiation treatment delivery and related imaging services identified under subsection (b)(11) shall not be considered as potentially misvalued services for purposes of this subparagraph and subparagraph (O) for 2017, 2018, and 2019. (L) Validating relative value units (i) In general The Secretary shall establish a process to validate relative value units under the fee schedule under subsection (b). (ii) Components and elements of work The process described in clause (i) may include validation of work elements (such as time, mental effort and professional judgment, technical skill and physical effort, and stress due to risk) involved with furnishing a service and may include validation of the pre-, post-, and intra-service components of work. (iii) Scope of codes The validation of work relative value units shall include a sampling of codes for services that is the same as the codes listed under subparagraph (K)(ii). (iv) Methods The Secretary may conduct the validation under this subparagraph using methods described in subclauses (I) through (V) of subparagraph (K)(iii) as the Secretary determines to be appropriate. (v) Adjustments The Secretary shall make appropriate adjustments to the work relative value units under the fee schedule under subsection (b). The provisions of subparagraph (B)(ii)(II) shall apply to adjustments to relative value units made pursuant to this subparagraph in the same manner as such provisions apply to adjustments under subparagraph (B)(ii)(II). (M) Authority to collect and use information on physicians’ services in the determination of relative values (i) Collection of information Notwithstanding any other provision of law, the Secretary may collect or obtain information on the resources directly or indirectly related to furnishing services for which payment is made under the fee schedule established under subsection (b). Such information may be collected or obtained from any eligible professional or any other source. (ii) Use of information Notwithstanding any other provision of law, subject to clause (v), the Secretary may (as the Secretary determines appropriate) use information collected or obtained pursuant to clause (i) in the determination of relative values for services under this section. (iii) Types of information The types of information described in clauses (i) and (ii) may, at the Secretary’s discretion, include any or all of the following: (I) Time involved in furnishing services. (II) Amounts and types of practice expense inputs involved with furnishing services. (III) Prices (net of any discounts) for practice expense inputs, which may include paid invoice prices or other documentation or records. (IV) Overhead and accounting information for practices of physicians and other suppliers. (V) Any other element that would improve the valuation of services under this section. (iv) Information collection mechanisms Information may be collected or obtained pursuant to this subparagraph from any or all of the following: (I) Surveys of physicians, other suppliers, providers of services, manufacturers, and vendors. (II) Surgical logs, billing systems, or other practice or facility records. (III) Electronic health records. (IV) Any other mechanism determined appropriate by the Secretary. (v) Transparency of use of information (I) In general Subject to subclauses (II) and (III), if the Secretary uses information collected or obtained under this subparagraph in the determination of relative values under this subsection, the Secretary shall disclose the information source and discuss the use of such information in such determination of relative values through notice and comment rulemaking. (II) Thresholds for use The Secretary may establish thresholds in order to use such information, including the exclusion of information collected or obtained from eligible professionals who use very high resources (as determined by the Secretary) in furnishing a service. (III) Disclosure of information The Secretary shall make aggregate information available under this subparagraph but shall not disclose information in a form or manner that identifies an eligible professional or a group practice, or information collected or obtained pursuant to a nondisclosure agreement. (vi) Incentive to participate The Secretary may provide for such payments under this part to an eligible professional that submits such solicited information under this subparagraph as the Secretary determines appropriate in order to compensate such eligible professional for such submission. Such payments shall be provided in a form and manner specified by the Secretary. (vii) Administration Chapter 35 of title 44 shall not apply to information collected or obtained under this subparagraph. (viii) Definition of eligible professional In this subparagraph, the term “eligible professional” has the meaning given such term in subsection (k)(3)(B). (ix) Funding For purposes of carrying out this subparagraph, in addition to funds otherwise appropriated, the Secretary shall provide for the transfer, from the Federal Supplementary Medical Insurance Trust Fund under section 1395t of this title , of $2,000,000 to the Centers for Medicare & Medicaid Services Program Management Account for each fiscal year beginning with fiscal year 2014. Amounts transferred under the preceding sentence for a fiscal year shall be available until expended. (N) Authority for alternative approaches to establishing practice expense relative values The Secretary may establish or adjust practice expense relative values under this subsection using cost, charge, or other data from suppliers or providers of services, including information collected or obtained under subparagraph (M). (O) Target for relative value adjustments for misvalued services With respect to fee schedules established for each of 2016 through 2018, the following shall apply: (i) Determination of net reduction in expenditures For each year, the Secretary shall determine the estimated net reduction in expenditures under the fee schedule under this section with respect to the year as a result of adjustments to the relative values established under this paragraph for misvalued codes. (ii) Budget neutral redistribution of funds if target met and counting overages towards the target for the succeeding year If the estimated net reduction in expenditures determined under clause (i) for the year is equal to or greater than the target for the year— (I) reduced expenditures attributable to such adjustments shall be redistributed for the year in a budget neutral manner in accordance with subparagraph (B)(ii)(II); and (II) the amount by which such reduced expenditures exceeds the target for the year shall be treated as a reduction in expenditures described in clause (i) for the succeeding year, for purposes of determining whether the target has or has not been met under this subparagraph with respect to that year. (iii) Exemption from budget neutrality if target not met If the estimated net reduction in expenditures determined under clause (i) for the year is less than the target for the year, reduced expenditures in an amount equal to the target recapture amount shall not be taken into account in applying subparagraph (B)(ii)(II) with respect to fee schedules beginning with 2016. (iv) Target recapture amount For purposes of clause (iii), the target recapture amount is, with respect to a year, an amount equal to the difference between— (I) the target for the year; and (II) the estimated net reduction in expenditures determined under clause (i) for the year. (v) Target For purposes of this subparagraph, with respect to a year, the target is calculated as 0.5 percent (or, for 2016, 1.0 percent) of the estimated amount of expenditures under the fee schedule under this section for the year.